Can a lump sum be used to settle an IVA?

An IVA will normally involve making payments towards your debt for five years and include regular reviews of your income. If you have a lump sum, you could settle immediately with nothing more to pay.

An Individual Voluntary Arrangement (IVA) is a solution used by many thousands of people each month to solve their personal debt problems.

The solution is generally based around making monthly payments towards your unsecured debt for a period of five years. During this time interest and late payment charges are frozen and at the end of the agreement any outstanding debt is written off.

In this way, an IVA can result in up to 70% of an individual’s unsecured debt being written off allowing them to continue with their lives debt free.

Full and final settlement IVA

An IVA does not always have to involve five years of payments. An alternative option is to pay off the IVA with a single lump sum amount.

You may be able to get access to a lump sum from various different sources.

This could be from a recently received redundancy pay out, by remortgaging your property or the sale of a property or from family or friends.

The lump sum is paid as a one off amount into the IVA as full and final settlement for the debt leaving you debt free with no further obligation.

The lump sum may not be required immediately but could be accepted up to 6 months after the IVA is in place giving time for cash to be raised.

Considerable advantages

There are some significant advantages of paying an IVA with a lump sum.

• Reduced overall payment – Creditors will often accept slightly less than would have been repaid over the traditional five year arrangement as there is considerable less risk of the IVA not being paid.
• No ongoing financial reviews – Once the IVA is settled with a lump sum, it is completed. Unlike a monthly payment IVA, there are no ongoing reviews of your financial situation. Once the IVA is settled, if your income improves, this is yours to keep.
• No monthly payments – Once the lump sum is accepted, there is no further requirement to make monthly payments. This makes an IVA possible for those with no regular income.

Settling a monthly payment IVA early

If you have already started a monthly payment IVA, you do not have to be tied to a five year payment plan. You can still settle the arrangement early if a lump sum becomes available.

This may happen if you receive a lump sum perhaps through redundancy, the value of your property increases and equity becomes available, or if a family member agrees to lend you a sum of money.

If this happens, you can ask your Insolvency Practitioner (IP) to make an offer of early settlement to your creditors.

Settling your IVA early will often mean that the overall amount that you pay is reduced.

You also gain the considerable advantage that your income is no longer kept under review. As such, any future improvements to your income will not lead to increased monthly IVA payments.

In the right circumstances, using an Individual Voluntary Arrangement is a very good way to resolve a personal debt problem.

Using a lump sum to settle the arrangement early can generate even greater advantages not least that you become immediately free from your unsecured debt and your personal financial circumstances are no longer under review.

As such, if you believe that you may be able to get a lump sum you should give this option serious consideration.

If you are struggling with debt, visit www.BeatMyDebt.com

Our vibrant forum gives free access to industry experts and others who have suffered with debt problems.

Useful guides, calculators and information are also available designed to help you understand how to manage and resolve debt problems.

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