You can get out of an IVA (Individual Voluntary Arrangement) through various methods, including successful completion, offering an early full and final settlement, or, in certain circumstances, by requesting its termination, or if the arrangement fails.
An Individual Voluntary Arrangement is a formal and legally binding agreement between you and your creditors to pay back your debts over a set period, typically five or six years. Exiting an IVA depends on the specific circumstances and how the agreement concludes.
Ways to Exit Your IVA
There are several primary ways an IVA can come to an end:
1. Successful Completion of Your IVA
This is the most common and desirable way to exit an IVA. It involves:
- Making all agreed payments: You consistently make the monthly payments as outlined in your IVA proposal.
- Fulfilling all terms: You adhere to any other conditions, such as selling assets (like property equity) or contributing windfalls (like inheritance).
- Receiving a Certificate of Completion: Once all terms are met, your Insolvency Practitioner (who acts as your IVA supervisor) will issue a Certificate of Completion. This document legally confirms that you have fulfilled your obligations, and any remaining unsecured debts included in the IVA are formally written off.
Successfully completing your IVA means you are legally discharged from the remaining included debts.
2. Early Settlement or Full and Final Offer
You may be able to exit your IVA early by making a 'full and final' settlement offer to your creditors. This typically involves:
- Lump-sum payment: Offering a single lump sum to your creditors, often sourced from:
- An inheritance
- A gift from a friend or family member
- The sale of an asset not included in the original IVA
- A remortgage or equity release (though this can be complex and depends on the terms of your IVA).
- Supervisor's role: Your IVA supervisor will present this offer to your creditors. They are not obliged to accept it, but if the offer represents a better return than continuing the IVA, they may agree.
- Completion: If accepted, the lump sum is distributed, and your supervisor will issue a Certificate of Completion, ending the IVA early.
3. Debtor-Initiated Termination
While less common and usually not advisable without a clear alternative plan, a debtor can ask their IVA supervisor to terminate the IVA. This usually occurs if:
- Circumstances change: You can no longer afford the payments, or you wish to explore other debt solutions.
- The process: If you request termination, your supervisor will initiate the process. They will then issue a Certificate of Termination. Be aware that this process can take several months, as the timings for the issue of notices and certificates will be set out in the original IVA agreement itself.
- Consequences: If the IVA is terminated this way, any outstanding debts included in the original arrangement that were not paid off will revert to being legally enforceable. This means creditors could pursue you for the full amounts owed, potentially leading to bankruptcy proceedings, County Court Judgments (CCJs), or other enforcement actions.
4. IVA Failure (Supervisor-Initiated Termination)
An IVA can also come to an end if you fail to meet its terms and conditions, leading to its failure. This typically happens if:
- Missed payments: You fail to make your agreed monthly payments without a valid reason or without agreeing to revised terms with your creditors.
- Non-compliance: You don't adhere to other clauses, such as providing requested information or cooperating with the supervisor.
- Supervisor's actions: Your IVA supervisor will usually issue a breach notice and may call a creditors' meeting to discuss the situation. If a resolution cannot be found, the supervisor can terminate the IVA.
- Consequences: Similar to debtor-initiated termination, if your IVA fails, the full amounts of your original debts that were not paid will become payable again. Your creditors are then free to pursue these debts, and it's common for the supervisor to petition for your bankruptcy once the IVA has officially failed. This can have severe consequences for your credit rating and financial future.
Key Considerations for Exiting Your IVA
| Method of Exiting IVA | Description | Typical Outcome | Impact on Debt | Credit File Impact |
|---|---|---|---|---|
| Successful Completion | All agreed payments made over the IVA term. | Positive, debts legally written off. | Remaining debt written off. | Positive, IVA status removed, credit rebuilds over time. |
| Early Settlement | Lump sum offered to creditors to settle remaining debt. | Positive, IVA concluded early. | Remaining debt written off. | Positive, IVA status removed, credit rebuilds over time. |
| Debtor-Initiated Termination | Debtor requests supervisor to end the IVA. | Negative, often leads to further debt problems. | Original debts revert, legally enforceable. | Negative, records IVA failure, severe impact. |
| IVA Failure (Supervisor-Initiated) | Failure to adhere to IVA terms (e.g., missed payments). | Very negative, often leads to bankruptcy. | Original debts revert, legally enforceable. | Very negative, records IVA failure, severe impact. |
Seeking Advice
Before making any decisions about how to exit your IVA, especially if considering early termination or if you are struggling to maintain payments, it's crucial to seek advice. Your IVA supervisor is your primary point of contact and can explain your options and the potential consequences. You can also get free, independent debt advice from organizations like:
These organizations can help you understand all your alternatives and ensure you make the best decision for your financial situation.
