Contribution based IVA
This type of IVA consist of scheduled payments, or contributions, which run for a fixed term, normally set to 5 years, after which the IVA is consider to have successfully completed.
It's this 'fixed term' of an IVA that creates one of its main advantages.
The Importance Of The Fixed Term
Unlike a Consolidation Loan or a Debt Management Plan, the size of the repayments do not determine the length of the IVA.
IVA contributions are based on affordability and the term of the IVA is fixed.
This means an IVA will complete successfully whether the original debt has been repaid or not.
Creditors are legally bound to write-off any outstanding balances when the IVAs completes, leaving the IVA applicant debt free, even though they may not have repaid all of their original debt.
It's the potential to write-off some of the original debt that gives the IVA option an advantage over a Consolidation Loan or a Debt Management Plan.
Increases to the length of an IVA
There are 2 potential circumstances that could increase the fixed 5 year term of an IVA.
They are:
- A Payment Break: At the Supervisor discretion a 'payment break' can be granted to assist with temporary payment issues. When approved, the IVA is extended by the same amount of months as the break itself. This is to ensure the number of IVA contributions remains as agreed, and that creditors are not disadvantaged by the break being implemented.
- Home Equity: Some homeowner IVAs will be automatically increase from 5 years to 6 years when their share of the home’s equity is determined to be greater than £10,000 at the outset of the IVA.
It's also possible for an IVA to be brought to an early conclusion by means of an early settlement.
Early settlement of an IVA
Whilst the term of the IVA is fixed at the outset, it is possible to seek an early settlement when circumstances permit.
The circumstances that provide the opportunity to offer an early settlement could arise through receipt of a financial windfall, or through an offer to introduce 3rd party funds such as money from a friend or relative.
Creditors will consider an offer of early settlement, particularly when they believe accepting the offer represents their best interests.
Call Us
If you would like to have a chat with an IVA professional, in complete confidence and without obligation, please call our helpline on 0800 856 8569 where one of the IVAorg team is waiting to help you.
