An Individual Voluntary Arrangement (IVA) is an offer to settle your unsecured debt based on payments that you can afford. The total settlement you offer is generally less than the full amount of debt that you owe. It is normally paid over 60 monthly instalments.

The monthly payment that you make is determined by your disposable income. There is no minimum amount of debt that you must repay. However you will need to be able pay a reasonable amount for your creditors to accept the Arrangement. Generally the minimum disposable income figure you will need to pay is £100 a month.

As such if you have no disposable income or the amount you can afford is simply too low to make the Arrangement work then on the face of it you may think that you will not be able to use this debt solution. However this may not be the case.

Can you use a Lump Sum Settlement IVA

If you have little or no disposable income an IVA may still be possible if instead of monthly payments you can offer a single lump sum settlement.

Lump sum settlement IVAs are common and do not require any monthly disposable income payments. Instead the Arrangement is settled with a one off lump sum payment. Once the payment is made it finishes immediately and you are no longer bound by any of its restrictions.

The lump sum can come from any number of different sources. One possibility is that it can be made available from a third party such as your partner, other family member or friend. In effect they lend or give you the lump sum which you then use to settle the Arrangement.

Alternatively, the lump sum might come from the sale of an asset such as a property or simply the release of equity from a re-mortgage.

BMD Tip: If you do borrow the lump sum from a friend or family member you are at liberty to repay them under your own terms and in your own time after the Arrangement is completed and your other debts are settled.

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Can you start an IVA while you get your lump sum together?

One of the advantages of an IVA is that once it is in place none of your unsecured creditors can take further legal action against you to collect their debt.

For example if you owe money to the Inland Revenue (HMRC) once your Arrangement is in place you are legally protected from them. In addition if you are a home owner your unsecured creditors can no longer take action to secure their debt against your property a charging order.

It is therefore clearly advantageous for you to get the Arrangement in place as soon as possible. But what if it is going to take some time to get your lump sum together?

The answer to this is that your lump sum does not have to be paid straight away. It can be agreed that the lump sum will be paid at a later date giving time for it to be raised. Even though you are making no monthly repayments the Arrangement will still be in place and give you a protective umbrella from your creditors until the time when your lump sum becomes available.

An IVA is possible without monthly payments

The option of paying a lump sum means that starting an IVA without the need to make monthly payments becomes possible. As such if you simply have no disposable income and cannot make monthly payments but you know that a lump sum can be made available you can still use this debt solution.

BMD Tip: This type of Arrangement can be particularly useful if you are planning to sell your house or re-mortgage to raise a necessary lump sum but need time to do this. It can start immediately and then will protect you legally until the re-mortgage or sale has gone through.