Is an IVA Lump Sum Payment Possible

Is it possible to do an IVA lump sum payment? You can do an IVA based on a single lump sum payment. This means there is no need for multiple, ongoing monthly payments over 5 years.

Find out whether this type of IVA is suitable for you, and how much you will have to pay.

Our experts give advice and support around the entire IVA lump sum payment process. Get in touch today.

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What is a IVA lump sum payment?

A lump sum payment IVA is a type of IVA. However, unlike a standard agreement, it is not based on ongoing monthly payments.

Instead of paying into the Arrangement every month for 5-6 years, it works on the basis that you hand over just one single cash sum.

Once you pay the agreed amount, your IVA is completed straight away. You do not have to make additional monthly payments.

When would you use this option?

You would use this type of IVA where you need the benefits of this solution but you can’t afford to fund ongoing monthly payments. In addition, you can’t choose an alternative option like going bankrupt.

A good example would be where you are a home owner but you have no surplus income each month.

In these circumstances, if you go bankrupt, it could put your property at risk.

Using a lump sum payment IVA means you can protect your home but you do not have to make any further monthly debt payments.

How does an IVA lump sum payment affect your credit rating?

This type of IVA is completed immediately after you make the payment. However, a record of the Arrangement is still added to your credit file.

In the same way as with a standard monthly payment IVA, the record remains on your file for 6 years.

This will negatively affect your credit rating and ability to get new credit just like a standard Arrangement.

How much does the lump sum payment have to be?

The amount of money you will need to make a lump sum payment IVA work largely depends on the amount you owe.

As a rule of thumb, you will need to be able to pay an amount equivalent to 10% of the total unsecured debt in your Arrangement.

That said, there is a minimum amount you will need to pay. Normally this figure is between £8,000 to £10,000.

For this reason, this type of IVA is unlikely to be suitable for you unless your unsecured debts are higher than £10,000.

Where can the money for an IVA lump sum payment come from?

The cash sum you need to achieve a lump sum payment IVA can come from a number of sources:

1. Your own funds
Perhaps you have savings available that you can use.

Alternatively (and possibly more likely) you can use funds you have recently received from a windfall. This could be something like an inheritance or redundancy payment.

2. Funds from a 3^rd party
A 3^rd party such as a family member or friend can provide the money you need.

You are allowed to repay any money lent to you. However, you can’t start doing so until after your IVA is completed.

Money Laundering checks
If a third party is providing the funds you need, they will need to agree to a money laundering check. This will involve them proving their identity with a copy of their passport or driving license.

They will also need to prove the availability of the funds with a copy of a UK bank statement in their name.

When does the lump sum have to be paid?

Ideally, the cash required for your lump sum payment IVA should be available immediately. As such, you must be ready to pay it as soon as your Arrangement is in place.

You will normally have to prove that you have the funds available before your IVA Company presents your IVA proposal to your creditors. Such proof could be in the form of a bank statement showing the balance available.

Can you get an IVA first and pay the lump sum later?

It is possible get a lump sum payment IVA without having the cash you need available immediately.

A provision can be made in the agreement that states you will pay the cash in the future based on a defined time scale. This could be within 3 months / 6 months etc of the start date of the Arrangement.

You might want to do this if it will take some time to raise the required funds but you need to get immediate legal protection from your creditors. 

Criteria to allow the delayed payment of an IVA lump sum payment

With this type of agreement, the following criteria would normally apply:

• You will have to make a reasonable monthly payment into the IVA until the lump sum is paid.
• If the cash is subsequently not paid, you agree that the IVA would then be cancelled. As such, you would still owe your original debt.

Want to learn more about a lump sum payment IVA and whether it is suitable for you? Contact us today and get advice from one of our experts.