Your IVA will put you on a payment plan until you pay your creditors what you owe. But can an IVA be paid off early if you happen to receive some extra money?
The good news is that it is entirely possible to pay your IVA early. Nevertheless, it depends on how much you’re proposing to pay, where the money has come from and your creditors.
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How Can You Repay An IVA Early?
The process is relatively simple: you make an IVA lump sum offer to your creditors, stating that you wish to pay your IVA early. However, things get complicated with regards to how much you need to pay to settle your agreement. No two IVAs are the same, and it is ultimately down to your creditors to decide whether they will accept your lump sum.
Of course, in some situations, you might be able to pay the entirety of your IVA in one go. This could be through money that your family or friends have gifted you to help you get out of debt. Here, creditors are likely to accept as it means they get the money they were offered a lot sooner than expected.
It is possible to repay an IVA early by offering a lump sum that’s less than what you owe. Again, some creditors may accept this because they get the money a lot earlier. But it is up to them to decide whether they will accept this.
Why Might Your Creditors Reject Your Early Repayment Offer?
The obvious reason is that they’re not satisfied with your offer. They would rather stick it out and wait for you to make all of your repayments throughout the agreed period.
Furthermore, creditors might reject an early repayment offer because they’re not entirely happy with where the money has come from. They might find it suspicious that you magically have some extra cash and aren’t satisfied with the proof you’ve provided. For all they know, the money could have been obtained illegally, so they’ll refuse it.
Additionally, the money you’re trying to use could be a windfall or inheritance. Unfortunately, this counts as an asset in your IVA. So it could be declared as soon as you receive the funds, and the money will automatically be paid into the arrangement in full anyway. Adding these funds won’t automatically alter the length of the agreement and your creditors may still make you make payments if there’s still money to be paid.
The majority of the time, early IVA payments are funded by friends or family members that gift you money. However, you can also use a loan to pay off your IVA after a certain period - usually three years. Of course, be sure you speak to your Insolvency Practitioner about this to ensure that getting a loan is the right move for you.What Are The Benefits Of Paying Your IVA Early?
When an IVA is paid off early, it frees you from the shackles of the arrangement. You no longer have to make regular repayments, and you might be able to obtain more credit - if you require it. Effectively, you’ll get your creditors off your back and start to rebuild your finances once more.
There is one crucial thing to remember: your IVA will be listed on your credit report for six years from its approval date. So, if you have some particularly generous friends who can help you pay off your IVA after a year, it will still be there on your credit report for a further five years. As such, you are still going to struggle to obtain credit, particularly if you’re looking for large amounts, like a mortgage.
Still, it is always advantageous to pay for something early if you can afford it. Just be aware that repaying your IVA early won’t always mean that your financial life returns to normal. It depends on the timing of your repayment, but you will almost always have to wait a period before the IVA is cleared from your credit report.
Summary
In conclusion, an IVA can be paid off early and this is a smart decision if you are able to do so. Always consult with your IP before making a decision like this, and they will help you submit an IVA lump sum offer that will appeal to your creditors. From here, you might be able to wave goodbye to your IVA repayments and live free from the terms of the agreement.
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