Individual Voluntary Arrangement – Full and Final settlement
An IVA proposal is technically a ‘compromise’ or a deal with your creditors. The deal is that you will make payments from your monthly income, typically for five years. These monies, less the fees for setting up and running the IVA are then paid to your creditors.
Your IVA is an offer in ‘full and final settlement’ of your debts. There will almost certainly be an element of debt forgiveness in the deal you put to your creditors. You pay what you can genuinely afford for five years; your creditors accept this money in full and final settlement of your debts. Creditors will often accept as little as 25p for every Pound you owe. The balance is written off as debt forgiveness; your creditors cannot pursue you for this money after the IVA has been completed.
But remember – an IVA puts you in control. Your offer to your creditors is to suit you, not your creditors.
A typical IVA involves payments from your monthly income for five years. But what if you have equity in your house and you can get a remortgage?
If you can remortgage you may be able to offer a lump sum to your creditors rather than payments from your monthly income for five years, using an IVA to protect you from creditor pressure. Again, your offer will be in full and final settlement of your debts. In this case the IVA might only last three or six months, long enough for you to remortgage and pay the money in to your IVA.
The great thing about an IVA is that it gives you time and protection to sort out your affairs. A full and final settlement means just that – you meet your side of the deal and you walk away debt free.