A monthly payment IVA will generally last for 5 years. However there are circumstances which could result in the Arrangement being either extended or settled early.
Included in this article:
- How long will a standard IVA last?
- Can the length of the Arrangement increase?
- Is the Arrangement paid faster if you pay more?
- Can an IVA be settled early?
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How long will an Individual Voluntary Arrangement last?
A standard monthly payment IVA will last for 5 years. How long will your credit rating be affected by the IVA? What happens to any unpaid debt once the Arrangement is over? To find out more please visit: http://beatmydebt.com/individual-voluntary-arrangement-frequently-asked-questions/iva-how-long-does-an-iva-last
How long will an IVA last?
The length of a monthly payment IVA is traditionally 5 years. This is not a legally required period. It is simply a standard that has become widely accepted by creditors.
It is possible for a creditor to insist that the length of an Arrangement be extended to 6 or even 7 years. However this will only be agreed if their debt is significant and could cause the proposal to fail if their demands are not met.
A good example of a creditor who will normally demand this type of extension is NRAM (formerly Northern Rock). This is because their “together loan” would normally have been repaid over 10-20 years.
If you can make a cash lump sum available it may be possible to do an IVA without making any monthly payments at all. This is known as a full and final settlement IVA. It is completed as soon as the agreed lump sum is paid.
Can the length of an IVA increase after it is agreed?
Once an IVA is in place the number of payments that must be made into it are fixed. However this is only the case if they are then maintained and the other requirements of the Arrangement met.
If your financial situation becomes worse you may no longer be able to afford the agreed payments. In these circumstances it might be possible to reduce the monthly amount you pay.
However in exchange for being allowed to do this it is likely that the number of payments you have to make will be extended. The extension would usually be an additional 12 months.
If you are a home owner you will normally have to release equity from your property if possible. If there is equity you cannot release your payments may be extended by 12 extra months to compensate.
Is the Arrangement paid faster if you pay more?
If your income increases or your expenses fall during an IVA you may have to increase the amount you pay into the Arrangement each month.
However where this happens it does not mean the Arrangement will be finished any sooner. It will last for exactly the same length of time. You will still have to pay all the remaining number of payments due.
This is because the total amount payable to your creditors in an IVA is not fixed. If you are able to pay more for any reason you will have to do so. But this simply means your creditors are repaid more of their debt overall.
In rare cases if your IVA payments increase you could end up repaying more than you originally owed. This is because where possible you are obliged to pay the total of your debt + fees + interest at 8% pa from the start date of the IVA.
Can an IVA ever be Settled Early?
It is possible to settle an IVA early. You can do this by offering to pay your creditors a one off cash lump sum in exchange for the immediate completion of the Arrangement.
The size of the lump sum required will depend on how much you still have to pay into your IVA. It will also depend on your personal circumstances at the time you make the offer.
It may be possible to settle early for a relatively small sum if you are no longer capable of maintaining the monthly payments. This may be because you have been made redundant or become ill.
If your circumstances have not changed but a third party is willing to lend you money to settle your IVA it is likely that only a small discount off the total of your remaining monthly payments will be given.
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