Can An IVA (Individual Voluntary Arrangement) Be Settled Early?

An IVA is a government approved legal method of resolving your debt. You may be eligible for this particular scheme if you are experiencing difficulty in meeting your current debt obligations. Can an IVA (Individual Voluntary Arrangement) be settled early? Yes, it can, but there are conditions linked to this.

The flexibility linked to this contract means that once it has started, it is possible for you to settle it with a lump sum payment. Often, creditors will accept a lump sum debt management payment as it is more beneficial to them to receive the cash now rather than having to be patient for the full term of the agreement to get their money. An important point to bear in mind is that the lump sum must be composed of money that your creditors will not already have entitlement to.

The most used method of settling this type of arrangement early is by offering a lump sum that has been provided by either family or friends. Since these individuals are not responsible for your debt, your creditors would not ordinarily have entitlement to funds provided by them.

If you receive money from a large bonus, redundancy payment, lottery win, or an inheritance payment, you will not be able to use these funds to settle the IVA. These are considered to be windfalls, and your creditors will be automatically entitled to this money, in addition to your regular payments. There are however special circumstances where you could use windfalls to settle your debt. This applies if the windfall exceeds the amount of the total debt. It is also applicable if you have been made redundant and you will no longer receive a regular income.

In the event that you own a property with someone else, it is possible that you may be able to release a sum which will combine some of your equity, as well as some of the other party's equity. This amount may be sufficient to settle the arrangement. If you are able to release some of the equity from your own property early in the arrangement, you may be able to settle the amount.

The normal terms would be that you have agreed to release mortgage equity in the final year of the arrangement, however, if the value of the property has increased unexpectedly, your creditors may be willing to accept a settlement rather than having to wait for their money. In view of this, the answer to the question, 'can an IVA (Individual Voluntary Arrangement) be settled early?' is definitely yes, with conditions.