Full and Final Settlement IVA's
What is a Lump Sum IVA
Occasionally there are times when a normal 5 year IVA would not be a viable option due to a lack of disposable income, in other words, where an IVA applicant has insufficient funds to enable regular monthly contributions to be paid into an IVA.
Lumps Sum IVA's allow a person the chance of offering a cash Full and Final Settlement to their creditors instead of 5 years worth of payments in the typical manner. For this reason Lump Sum IVA's will generally be the most relevant option when the IVA applicant is using money from a 3rd party, such as a family member or friend.
A Lump Sum IVA consists of just one payment, rather than the typical 5 years worth of contributions found in an ordinary IVA.
Once the required number of creditors accept the agreed funds as full settlement of the debt through the legal structure of an IVA, just like with a normal IVA, the IVA becomes legally binding on all of them.
The IP will wait for the settlement funds to be provided by the IVA applicant and the IVA is considered successfully completed once the settlement funds have been received by the IP, removing the need for any further payments to be made.
The IVA applicant's remaining debts are immediately and legally written-off at this point.
The lump sum can be provided by the applicant or a 3rd party, but it could also take the form of an offer by the IVA applicant to surrender an asset with sufficient cash value that, when sold or 'liquidated', will generate enough money to satisfy creditors demands.
In some cases it may even be a mixture of assets and cash, so long as the ensuing result is agreeable to the creditors.
In essence, if the creditors can be persuaded that the lump sum on offer constitutes a better financial return than they would otherwise receive through the applicant's bankruptcy they should be interested.
For the IVA applicant the benefits to the Full and Final Settlement IVA are obvious, they remove their debt burden in one fell swoop and become debt free instantly the IVA is agreed, benefitting from a sizeable debt write-off in the process.
For the Creditors the benefits of the Full and Final Settlement IVA are two fold, they have the advantage of receiving all their money in one payment, which they prefer, whilst the associated fees of a Lump Sum or Full and Final IVA are significantly lower than a fixed term IVA, which means they get to keep more of the IVA funds. Something else they particularly prefer.
Determining how much you should offer through a Full and Final IVA is unfortunately rather unscientific. The offer ought to be around the equivalent amount to what the creditors would expect to receive from a fixed term IVA, with a slight adjustment down to account for the lower fees.
You could use the slide calculator on the side of this page to give you guidance. Just select the debt you owe and read off the total repayment figure. This should be your bench mark or starting point, but if you would like a better estimate, then give us a call on 0800 856 8569
For further information on Full and Final IVA's call our IVA helpline on 0800 856 8569 and talk to an IVA expert now.
