Is it possible to pay an IVA early

14/09/2023
Is it possible to pay an IVA early

You have the option to pay an IVA early rather than continuing with the monthly payments. However the money required can only come from a few particular sources.

Included in this article:

Already in an IVA and need help?

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Can you pay an IVA early?

It is possible to pay an IVA early after the monthly payments have started. As a rule of thumb, the amount you will have to pay must be equivalent to the total number of payments outstanding. So if you pay £180/mth and have 40 months remaining, you will have to pay £180 x 40 = £7200.

You might be able to negotiate a small discount. But you will pay approximately the same as if you had continued with your monthly payments. So what is the point?

The major benefit you will get is that from then on, future increases in your income or windfalls you receive are yours to keep. You can do extra overtime or get a pay rise without having to worry that your IVA payment will increase.

The cash you need normally has to come from a third party. For example your partner, parents or other family member or a friend. Once the Arrangement is completed you are free to pay back what they have lent you.

Struggling to get your head round all of this? We can help. Call us (0800 011 4712) or complete the form at the bottom of this page. The advice is free and confidential.

Could you settle your IVA if you get a windfall?

Normally a windfall such as inheritance cannot be used to pay an IVA early. This is because the money will be simply swallowed by the Arrangement. Your standard monthly payments will continue as normal.

The only time you can pay off an IVA with a windfall is if the amount you have received is very large. The funds would need to be sufficient to settle the outstanding balance of the total original debt plus your IVA company fees and interest.

You can’t use a redundancy payment received after losing your job to pay off your IVA. You will be allowed to keep up to the equivalent of 6 months net pay. Any extra will have to be paid into the Arrangement and you continue making your payments as normal.

A windfall you personally receive will normally have to be paid into your IVA. It can’t be used to pay the Arrangement early.

Using home equity or your pension to pay an IVA early

If you are a home owner it might be possible to pay your IVA early with equity released from your property. There are options to raise the necessary funds by remortgaging or taking a secured loan.

Your current mortgage lender will probably not be able to help. You will need to use a specialist mortgage broker who will work with you to find appropriate lenders.

If you reach the age of 55 during your Arrangement, you might have the option of releasing a lump sum from your personal pension. You can pay your IVA early with cash raised in this way. However it is important you do not take money from your pension without prior agreement from your IVA company.

Interested in remortgaging to settle your IVA? Give us a call (0800 011 4712) or complete the form below.

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52 thoughts on “Is it possible to pay an IVA early”

    PaulaS says:
    28/02/2023 at 17:42

    I would like to pay off my IVA early. If I receive a bonus which would equal the amount I would pay off in the next two years, can I do this?

    Reply
      James Falla says:
      28/02/2023 at 17:51

      Hi PaulaS

      Unfortunately, it is not normally possible to pay your IVA early using a bonus you have received. There are particular rules regarding what happens if you get a bonus during your IVA.

      50% of any bonus received (over 10% of your normal take home pay) will normally have to be paid into your IVA over and above your normal monthly payments. As a result, your creditors will be paid back more of the debt they were originally owed. The remaining 50% is yours to keep. You could offer this to settle the whole IVA but it may not be enough to achieve this.

      You must tell your IVA company immediately if you earn a bonus in any month. Do not wait until your annual review to tell them.

      You can read more about what happens to a bonus in an IVA here: Earning a bonus or overtime in an IVA

      Reply
    Stephanie B says:
    25/04/2023 at 11:54

    Hello, I am in the process of securing a mortgage and would like to pay off my IVA with some of this money, they have said no, can they do that? Thank you.

    Reply
      James Falla says:
      25/04/2023 at 12:09

      Hi Stephanie

      From what you have said, I assume you mean your IVA company has said they will not agree to you paying off your IVA as part of your mortgage deal?

      I’m afraid that given you are in an IVA, you are in the hands of the IVA company. If they will not come to an agreement you are happy with, there is little or nothing you can do.

      The only alternative you could consider is cancelling the IVA and then dealing with your creditors yourself with the money you raise from your mortgage. That said, I am not sure if you would be able to get a mortgage on this basis. In my experience it is unusual for any mortgage company to go ahead with lending unless there is a commitment that any existing IVA (and therefore associated debt) is settled as part of the deal.

      You can find out more about stopping your IVA here: Can I stop my IVA

      Reply
    ToniB says:
    25/04/2023 at 14:51

    can i just ask my IVA company if i can settle the balance early ? using some of my pension pot

    Reply
      James Falla says:
      25/04/2023 at 14:58

      Hi ToniB

      Yes, you can settle your IVA with a lump sum drawn from your pension. Most IVA companies will entertain this option.

      The way to do this is agree how much you will need with your IVA company first. If you are happy, get it in writing. Then you can proceed to make the associated withdrawal from your pension.

      You MUST NOT draw funds from your pension until you have a settlement agreement in writing with your IVA company. If you draw it first, they are within their rights to claim it as a windfall and make you pay it into the IVA plus your ongoing payments.

      You can read more about using your pension to settle an IVA early here: Your pension and an IVA

      Reply
    Stephanie B says:
    25/04/2023 at 15:30

    Hello,

    Thank you for your reply.

    I wondered if I could borrow the money off my parents and then give them the money from the mortgage and pay it off that way?

    Thank you again.
    Stephanie

    Reply
      James Falla says:
      25/04/2023 at 15:34

      Hi Stephanie

      Yes that would work. Settling your IVA first with money from your parents (that you would later pay them back) would be an option.

      The only thing to bare in mind is that it normally takes 3-6 months to settle an IVA and receive your completion certificate. So its not a quick process. But ultimately, once your IVA is completed, you are then free to get a mortgage without having to get any agreement from the IVA company.

      Reply
    Mr Bennett says:
    26/05/2023 at 13:18

    Me and my wife are in iva with ebengate. my wife is 69 and is thinking of retiring. she is due a lump sum I think there is enough to settle the debt but we don’t know. asked ebengate for a figure of how much we would have to pay they said they couldn’t give figure until money in bank

    But if there’s not enough funds my wife won’t retire so we need to know around about how much she will have to pay. we have18 months left on iva she has got to give six months notice so there will be 12 months left yours Mr s j bennett

    Reply
      James Falla says:
      26/05/2023 at 13:31

      Hi Mr Bennett

      The problem your wife faces is that if she does retire and receives a lump sum, this is classed as a windfall. As such all of the money she receives will have to be paid into the IVA. The payments would then continue until the end of the agreement

      The only time the IVA would be completed is if her lump sum was sufficient to pay 100% of the debt you originally owed (less payments already made) plus all the IVA companies fees. After all of this was paid, the IVA would then be completed and any money left over would be returned to her.

      Given this, I believe your wife would be better off not retiring and continuing to pay the IVA for the next 18 months. Once it is completed, she can then retire and you would be able to keep 100% of any lump sum she then received.

      You can read more about what happens if you or your wife gets a windfall in an IVA by clicking on this link: Windfall during IVA

      Reply

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