Can You Settle an IVA Early?
An individual voluntary arrangement (IVA) is an attractive solution for many people seeking a way out of seemingly insurmountable debt. It allows for one monthly repayment instead of multiple payments to a variety of creditors, while also providing for your reasonable costs of living. At the conclusion of the IVA (usually five years), the remaining portion of debt is written off.
IVAs can be a great opportunity for creditors to recoup at least some of the monies owed to them, and for the person who is insolvent to get out of debt. As five years is a significant investment of time, you may be wondering can you pay off an IVA early, and what are the implications if you do?
An IVA is a formal debt solution and is legally binding. What happens if your circumstances change during your IVA? Can you pay an IVA off early? Paying off IVA early is certainly possible, but it is important to understand the nuances around this.
Let’s imagine you come into a large sum of money, whether that be through an inheritance, winning the lottery, or a large bonus payment. These are considered a ‘windfall’. Can you pay off an IVA early using a windfall? That depends if your IVA proposal includes a ‘windfall clause’. You must disclose any additional sources of income with your IVA. Other than up to 10% increase on your stated salary, any ‘windfalls’ would be considered an asset and need to be automatically considered in your IVA rather than surplus funds for paying off IVA early.
What if you are made redundant during the life of your IVA? Can you pay your IVA off early using your redundancy payment? According to Citizens Advice, if you are made redundant during your IVA, you can legally keep six months’ worth of your take home pay. If your redundancy payout is greater than that, you will be required to pay some of that towards your IVA. This means that again, the money would be considered an asset that would automatically be part of the IVA.
Another scenario is that a third party, such as a friend or family member, may offer to assist you with paying off IVA early by gifting you the money to do so. According to Debt Charity StepChange.org, this may seem an attractive option to your creditors as this ‘gift’ is not considered an asset under the IVA so may enable you to pay out your IVA early.
Can you settle an IVA early? In many cases, yes you can. If you offer to make a lump sum payment to your creditors, your Insolvency Practitioner will schedule a variation meeting with your creditors to see if your offer is accepted. If it is, your Insolvency Practitioner will start the process of completing your IVA with you paying off IVA early.
Expert Advice for Paying off IVA Early
If you are ready to find out more about IVAs and whether you can pay an IVA off early, contact Irwin Insolvency today for tailored and professional advice on individual voluntary arrangements that you can trust.