How To Repay Your IVA Early

If you’ve received a lump sum of money or a windfall during your IVA, you’re probably wondering if you’ll be able to pay it off early. The answer is yes, but there are a few things you need to take into consideration.

Remember that an inheritance or windfall that you’ve received will be classed as an asset in the agreement. For this reason, you must let your supervisor know about the asset as soon as you can.

A third-party such as a close friend or family member may offer to settle your IVA early through a “gift” of money. This may be appealing to your creditors as it won’t be considered an asset in the agreement, and it could enable you to pay off your IVA.

Should your IVA be paid off by a third party, they’ll be required to provide a form of identification. They’ll also have to verify that they understand how the money will be used.

In both of these scenarios, the source of the funds will need to be confirmed. This is a legislative requirement as it must be made sure that the money hasn’t come from an illegal activity such as money laundering.

How Do I Settle My IVA Early?

Lump-Sum payment

The first method of settling your IVA early is with a lump sum amount. An Insolvency Practitioner, or IP, can discuss with you how to make a lump sum offer to your creditors. If they believe your offer is good and it’s likely to be accepted, a variation meeting will be arranged with your creditor.

What happens if your Insolvency Practitioner doesn’t think your offer is reasonable? In that case, they’ll explain why and suggest a different option for you – especially if the money would be considered an asset of the agreement, such as an inheritance or a windfall.

When you make the offer, you’ll discuss with your creditor when the lump sum offer is to be paid. This means you won’t have to make any further monthly payments. If your creditor agrees to this offer, your IVA will end once the payment has been made.

Negotiate with creditors

The next step to paying off your IVA early is to clearly and honestly negotiate with the creditors and notify them of the situation. Most creditors may accept a large payment if you pitch the idea to them in the correct way.

You’ll need to tell them that your financial circumstances have changed and why settling your agreement early will benefit both parties.

Inheritance money

If you receive an inheritance, you could use it to settle your IVA, even with monthly repayments. This is quite common as many people in debt don’t have clear ideas of what to do with an unexpected inheritance, apart from using it to pay off their debts.

If this is the case and you don’t have other major financial responsibilities, it’s a good idea to put your inheritance towards your Individual Voluntary Arrangement.

Sale of an asset

If paying your IVA off early is important to you or if you believe it will benefit you in the long term, you could sell an asset such as a property or a car and use the money to settle it early.

However, make sure it’s an asset that you can live without, not something essential that you need daily.

Will Paying Off My IVA Early Impact My Credit Score?

If you’re paying off your IVA early, you’ll have a head start on rebuilding and improving your credit rating. But, the arrangement will remain on your credit file for six years from the approval date.

It might still affect your ability to take out loans as well. For example, it’s unlikely that you’ll be eligible for a mortgage or any large credit product whilst your IVA remains on your credit file.