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IVA Early Settlement — Is It Worth It?

An Individual Voluntary Arrangement (IVA) is a legal method of resolving debt problems. It allows a person to repay a percentage of their unsecured debt to their creditors in affordable monthly instalments over a fixed term, usually around five years.

Once the IVA completes, the remaining debt is written off and you’ll be issued with a certificate of completion. At this point, any balances outstanding on the debts included in your IVA will be written off.

There are occasions when it may be possible to settle your IVA early with a full and final settlement to free yourself from its constraints earlier. However, there are some aspects to consider before paying off your IVA early.

Pros and Cons of Settling an IVA Early


  • You are no longer bound by the constraints of an IVA and are no longer required to provide proof of your income and expenditure each year.
  • Should you receive a pay increase or receive any windfalls after it has settled, the money is yours to keep.
  • You can start to rebuild your credit score. Although it may be a slow process, it allows you a head start before the IVA drops off your credit report.


  • Although you have paid off your IVA early, it will still be listed on your credit report for six years from the date of approval.
  • It may still affect your ability to get credit, and it is unlikely that you will be able to obtain large amounts of credit, such as a mortgage, straight away.

How to Pay off Your IVA Early

You will need to offer your creditors one lump sum and ask them to agree that when this is paid, no more monthly payments will be required from you. If they accept this payment, the IVA can be closed.

If you wish to settle your IVA early, you must propose this to your Insolvency Practitioner (IP)). If the IP feels that the offer is reasonable and likely to be accepted by your creditors, they will arrange a variation meeting; this is proposed when there is to be a change to the  original terms of your arrangement.

Like the original proposal, 75% of your creditors by value have to agree to your lump-sum offer for it to go ahead..

To settle your IVA early, you need to have a good reason for doing so for your creditors to accept. You also need to be clear where the money is coming from so that your creditors can be sure it is coming from a legitimate source and not already included in the IVA, for example, an inheritance. Usually, a lump sum is provided by a third party as a gift for the purpose of allowing you to complete your IVA early. Your IP will need some information from them before they can put forward the variation to your creditors, like their consent, ID and proof of funds. 

How Much Money Is Needed to Settle My IVA Early?

No two IVAs are the same, and the money needed to settle the arrangement will be different for each individual. The amount needed to pay off your IVA early depends entirely on how much is left on the arrangement. As is it up to your creditors, we cannot give you a settlement figure that they will definitely accept, unless you were going to pay them back in full. The best advice is to offer as close to the amount you owe as possible.

For example, if you pay £150 a month and there are 15 months left of your arrangement, and you carry on until the end you will pay a further £2,250. This means you will need to suggest paying as close to this amount as possible so your creditors are not disadvantaged by the early settlement. If you make an offer and your creditors reject it, you will simply continue making your payments into the arrangement as originally agreed. If there has been a significant change in your circumstances, for example, you have lost your job, you can offer a lower sum, but it is up to your creditors whether they accept your offer.

What Funds Can Be Used to Settle Your IVA Early?

In most cases, the money is gifted by a family member or friend. In some circumstances, usually after 3 years of being in your IVA, you can get a loan to pay your IVA off early which also helps to build up your credit score again as well as releasing you from your IVA. This must be something you discuss with your Supervisor and seek independent advice on, as you entered into an IVA to regain control of your finances. Getting a loan to get out of your IVA early shouldn’t put you in a position where you are struggling again.

If you receive a windfall during your IVA, it will normally have to be paid into the arrangement in full. The injection of the extra funds does not automatically reduce the length of the agreement, and you have to continue making your payments 

However, depending on the amount paid in as a lump sum it may reduce the length of the IVA if you are able to pay your creditors back in full, plus your IP fees. If this happens you will not need to have a variation and your IVA can simply be completed. 

If You’re a Home-Owner with an IVA

If you are a homeowner and have equity in your property, you may be required to re-mortgage six months before the end of the arrangement and pay the money released from the re-mortgage into your IVA.

If you have equity of less than £5,000, you would not be required to re-mortgage. If you do have equity over £5,000 and can’t remortgage, you may need to make extra monthly payments into your IVA, extending the term by 12 months.

If you have an IVA with Debt Movement and are thinking about settling it early, or are considering an IVA as a debt solution and would like some more information, contact us today and speak with one of our friendly and professional guides.

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