Full and Final Settlement IVA

Full and Final Settlement IVA

If you cannot afford monthly payments but can make a one off lump sum available a Full and Final Settlement IVA could be for you.

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What is a Full and Final Settlement IVA?

A full and final settlement IVA involves making a single lump sum payment to settle your debts. Unlike a normal IVA there are no ongoing monthly payments. Once the lump sum is paid the Arrangement is completed immediately.

This type of agreement means you are free from your debt as soon as the lump sum is paid. From then on how you spend any money you earn is your decision. There are no further reviews of your circumstances.

If your income increases in the future or you receive a windfall this additional money is yours to keep. It cannot be claimed by your creditors.

Once a full and final IVA is completed your name comes off the Insolvency Register. However your credit rating will still be affected for 6 years.

How much cash is required for a Full and Final Settlement IVA?

There is no fixed amount that has to be paid to achieve a full and final settlement IVA. The amount your creditors will accept as a percentage of your debt depends on your financial circumstances.

If you have no assets and cannot afford any monthly payments to your creditors, the sum required could be as low as 30% of your outstanding debt. In some cases it could be even lower.

Your creditors might accept a relatively small percentage of your debt if the lump sum is coming from a third party. Cash from a third party is only available if creditors accept the IVA. It would not be available if you went bankrupt.

Your creditors will consider accepting a relatively small sum because they would get less if you went bankrupt. In bankruptcy any funds would be swallowed in Official receiver’s fees and they could get nothing.

Where can the lump sum come from to achieve a Full and Final Settlement IVA?

There are a number of ways a lump sum for a full and final settlement IVA can be made available.

The most common is for a friend or family member to lend you the money. Once the IVA is completed, you are then free to repay them what you have borrowed.

Alternatively, you might be able to access a cash lump sum from your pension. You might also have funds available if you have recently received a windfall. For example a redundancy or compensation payment.

If you are a home owner you might be able to release equity from your property. Of course this will depend on the amount of equity available in your home and your ability to maintain the higher mortgage payments going forward.

If your lump sum is coming from a 3rd party, evidence will have to be provided that the money can be made available. In addition money laundering checks such as proof of their identity will be required.

When does the lump sum for a full and final IVA have to be paid?

Generally speaking the lump sum required for a full and final settlement IVA should be available immediately. However, this does not always have to be the case.

It is possible to put the agreement in place based on the funds being paid at some point in the future. It could be stated that the payment will be made within 6 months if there is a legitimate reason for the delay. For example where time is needed to re-mortgage or sell a property.

The benefit of this is that you get immediate protection from your creditors. As soon as the IVA is agreed, their collections actions against you must stop.

Until the lump sum is paid you may be required to make monthly payments into your IVA where surplus income is available. However these payments would cease after the cash is handed over. The argument is that these funds are then required to repay the lump sum that you have borrowed.

Want further help or advice about a full and final settlement IVA? Give us a call (0800 077 6180) or complete the form below and we’ll call you.

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