Explain early IVA pay off

[Pinkpenguin]

<p style=”padding-left: 40px;”>Hi everyone,</p>
I’m looking for an explanation of paying an IVA off early. There are loads of posts but I feel I need to understand it without all the noise of other peoples situations and figures. Hope that makes sense.

Ok, so I have recently been made aware of the option of paying an IVA early. Here’s what I understand,

Even if paid off early it remains on your credit file for 6yrs.
Once paid with a lump sum from maybe a gift there will be no more payments required.

Here’s what I don’t understand,

If the original debt was 30k and it was agreed in the IVA that 15k would be paid back over 5yrs.

What happens if your income goes up, you start to pay more towards the IVA and you meet that 15k agreement before the 5yrs? Do you continue the higher payments or is it paid?

If settled early say at the 3yr mark do they still want yearly reviews for the remaining 2yrs to see if you can afford to repay the entire debt (30k)?

Also with the lump sum gift, same figures as above. Say 5k of the 15k has been paid off through the IVA payments and someone gifts me 10k. Could that 10k be offered to settle early or would they want nearer the amount of the original debt (30k)?

And what is it with the charges if you pay early? My IP fees were all paid in the first 5 months payments so I presumed each payment I made after the 5mths would 100% be going to my creditors. Are there more fees that I’m not aware of?

I am with The Debt Resolution Service if that makes a difference

I really hope somebody understands what I’m asking, if not I will try to clarify.

[Niobe]

Hi,

You will always owe the full amount of your debt until the end of your IVA, if you have pay rises or an inheritance it will go towards your debt.

If you can manage to settle your debt in full plus fees and possibly statutory interest then your IVA will cease but will still be on your record regardless.

If you finish early then that is it – no more reviews.

[Foggy]

Hi There.

First have a read here for a general outline: https://www.theivaforum.co.uk/settling-your-iva-early-with-a-lump-sum/

Then, to answer your specific questions:

What happens if your income goes up, you start to pay more towards the IVA and you meet that 15k agreement before the 5yrs? Do you continue the higher payments or is it paid?

If your income goes up during the IVA then payments are re-assessed and you pay more — the ceiling is the total of the full debt and fees, along with possible statutory interest. If you hit that figure before the 5 years the IVA ends early.

If settled early say at the 3yr mark do they still want yearly reviews for the remaining 2yrs to see if you can afford to repay the entire debt (30k)?

If settled early the IVA stops, once the completion paperwork has been issued  ( usually within 6 months of the final payment ). There are no further reviews or obligations regarding anything after the early ending.

Also with the lump sum gift, same figures as above. Say 5k of the 15k has been paid off through the IVA payments and someone gifts me 10k. Could that 10k be offered to settle early or would they want nearer the amount of the original debt (30k)?

The full and final offer is based on remaining payments, including a possible sum of 12 months payments if you are a homeowner, not the original debt. A settlement is based on remaining original debt balance plus fees and possible interest.  The most common early finish is achieved  by a full and final offer.

And what is it with the charges if you pay early? My IP fees were all paid in the first 5 months payments so I presumed each payment I made after the 5mths would 100% be going to my creditors. Are there more fees that I’m not aware of?

IP charges are split into Nominees fees ( for arranging the IVA ) and Supervisors fees, for ongoing management (usually 15 – 20% of regular payments).  The Nominees fee is usually paid from the early IVA payments and Supervisors fees dealt with as the IVA progresses. Fees quoted at the start are often estimated and subject to revision, but the charging basis should be laid out in the Chairman’s Report of the initial meeting. There are also extra fees ( usually around £300 – £500) for the variation meeting.

[Pinkpenguin]

Thank you both.
In regards to the full and final offer. Am I correct in thinking that offer price must be a minimum of the remaking term of agreed payments?
As in, 20 payments left at £200. I must offer 4k regardless of the original debt (30k)?
or do they only accept an offer that is near to the original debt (30k).
I’m sorry, I just find it all confusing.

[Foggy]

A full and final offer is based on remaining payments at the current monthly rate — basically giving creditors what they would be getting had the IVA gone to term.   If you have 20 payments left of £200 then, yes, the offer would be based on £4k —- BUT — if you are a homeowner you need to factor in a further 12 payments in lieu of equity release.

[Pinkpenguin]

Thank you 😊.

Not a homeowner and no assets.
This really is something that should be highlighted in IVAs.
Wonder why they don’t say ‘this is what they want back so you can pay it as a lump sum of pay over 5 years’.

[Foggy]

They are always hopeful that your situation improves and you might be able to pay extra over and above the original payment x 60.

 

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