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Lump Sum IVA

A guide to Full and Final Individual Voluntary Arrangements

When entering into a standard Individual Voluntary Arrangement you agree to make monthly payments for a fixed period of time, at the end of which the rest of your debt is written off. Although this type of arrangement is by far the most common there are occasions when an alternative type of IVA will be more appropriate. One such alternative is a Lump Sum IVA.

Lump Sum IVA - Frequently Asked Questions

What is a Lump Sum IVA?

Lump Sum IVAs - also known as a Full and Final IVA - are a type of Individual Voluntary Arrangement in which instead of making a series of monthly payments you settle your debt with a one off lump sum. In this case you offer to make a large single payment to your creditors who will agree in turn to write off the remaining unpaid debt.

When is a Full and Final IVA suitable?

The conditions in which a Full and Final IVA is most suitable are quite rare. For it to be viable you will need -

• Access to a lump sum
• No realistic way to make monthly payments

Creditors will only accept an IVA proposal if they consider it to be the best option available. Normally this would be an offer to make the highest realistic monthly repayments for sixty months and so guaranteeing your creditors a return over five years. Where you have no ability to generate monthly payments but do have access to a lump sum then a Full and Final can become an option. Often people arranging a single payment IVA have retired, been made redundant or are planning to move abroad.

How can I find a lump sum payment?

There are several ways in which people generate the lump sum for this type of IVA. Common examples include -

• Re-mortgaging of property
• Inheritance
• Sale of assets
• Redundancy payment
• Funds from a third party such as family or friends

What are the advantages of Lump Sum IVAs?

For both you and your creditors a Full and Final IVA can offer a number of benefits. For yourself it allows you to agree to an IVA when otherwise you would be unable and so can help you avoid bankruptcy. The single payment is a route to becoming debt free relatively quickly and will enable you to have some of your debts written off.

Many creditors prefer Lump Sum IVAs over other alternatives. The returns are likely to be higher than if you were instead forced to declare bankruptcy. Since the IVA only needs to be supervised for a year rather than five there is a significant reduction in administration fees. Also some creditors simply prefer to receive a one off payment immediately instead of multiple payments over a longer period of time. 

Will a Lump Sum IVA affect my credit rating?

As with a standard Individual Voluntary Arrangement your credit rating will be affected. A record of the IVA will show on your credit file for six years before it is removed. However since the single payment IVA enables you to be debt free in a short period of time you can at least start improving your credit rating right away.

How can I arrange a Full and Final IVA?

For a Full and Final IVA to go ahead the approval of 75% of your creditors is needed. The offer to pay a lump sum can be made at the start of the IVA process or at any point in an already on going arrangement. If you are already in an Individual Voluntary Arrangement you will need to speak to your supervisor who can put a new proposal to your creditors. If agreed the lump sum simply means that the IVA will be brought to an early conclusion.

Help with Full and Final IVAs

At Spencer Hayes we can assist you on all aspects of arranging a Full and Final IVA. Looking at your finances we can advise you if making a single lump sum payment is the best solution to your debt problems.

To find out more about Lump Sum IVAs and other debt solutions call our debt helpline on 0800 028 4422. Alternatively complete the enquiry form and one of our impartial debt advisors will call you back.

More information

IVA Frequently Asked Questions

Applying for an IVA

Which is better IVA or Bankruptcy?