An IVA usually lasts for 5 years, during which time monthly repayments are made to creditors through an Insolvency Practitioner, but sometimes it is possible to propose an IVA that consists of just one lump sum payment.
This IVA is referred to as a Lump Sum IVA.
To offer a Lump Sums IVA the debtor must qualify for an IVA under the normal criteria.
The debtor must have
-Little or no disposable income to make monthly payments
-Equity from a property, or have a third party that is prepared to introduce a sufficiently high lump sum
NOTE: The lump sum should be at least 25% of the total debts.
The initial stages of the IVA are the same as ever. An Insolvency Practitioner is chosen to act on behalf of the debtor and they gather all the relevant paperwork and details required for the proposal to the creditors. It is likely the Insolvency Practitioner will request the settlement funds be transferred to their client account whilst preparations for the IVA are being made, and they would hold the funds there ready for the transfer to the creditors as soon as the IVA has been agreed.
Once the IVA has been agreed by the creditors in the normal manner, all the benefits of a standard IVA apply, but instead of making monthly contributions for 5 years, the lump sum is transferred to the creditors, and the IVA concludes on receipt of the one payment. As with all successfully completed IVAs, the balance of any debt that hasn't been repaid is written off by the creditors, leaving the debtor debt free. Because the IVA is a binding agreement, the creditors are unable to accept the funds and then change their minds and ask for further repayments. The debt is legally settled.
There are advantages for the creditors too of course. They receive a repayment from a debtor who would have struggled to repay the debt, as there is little if any surplus income. They receive a lump sum immediately rather than having to wait for a long winded return, and also because the IVA finishes so quickly, the fees the creditors have to pay to the Insolvency Practitioner are reduced, leaving them with a higher return from the debt.
A Lump Sum IVA will not always be a suitable solution, but when the circumstances are fitting, it really is a great option.
Apply for a Lump Sum IVA today
Call now on 0800 043 3328 and tell the advisor you are interested in applying for a "lump sum IVA".
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