How long does an IVA last?
If you’re struggling with your personal finances, you may be interested in an Individual Voluntary Arrangement, or IVA for short. An IVA is a formal agreement that lets you pay back what you can afford, usually over several years, while protecting you from further action by your creditors.
But one of the first questions most people ask is: how long does an IVA actually last? Here, we explore this in more detail.
Typical length of an IVA
The average IVA lasts around five years or 60 months. That’s the standard term for most people. During this time, you make one affordable monthly payment that’s divided between your creditors.
In some cases, an IVA can be shorter or longer depending on your circumstances. For example:
- If you can make a lump-sum payment, your IVA might last just a few months.
- If you miss payments or your income drops, your IVA could be extended, often by up to a year, to help you catch up.
So while five years is the norm, the exact length depends on your situation and how well you can stick to your agreed-upon payments.
What happens if you have an IVA?
If your IVA is approved, on a monthly payment basis (instead of a lump sum or asset sale), you’ll start making regular monthly payments to your Insolvency Practitioner. They’ll then distribute your payments to your creditors on your behalf. Your Insolvency Practitioner will review your situation every year to assess if anything has changed.
For example, if your income increases, you may be asked to pay a little bit more each month. However, if money has become tighter, you may be able to adjust your plan to keep it affordable.
While you have an active IVA, interest and charges on your debts are frozen, and your creditors can’t chase you or take legal action. It gives you space to get your finances back under control without constant pressure.
Can an IVA be extended?
Yes, sometimes it can. There are a few reasons why your IVA might be extended beyond the usual five years:
- Missed payments: If you fall behind, your Insolvency Practitioner might extend the term to make up for it.
- Equity clause: If you’re a homeowner, you might be asked to release equity from your property in the final year. If that’s not possible, your IVA could be extended by up to 12 months instead.
- Payment breaks: If you’ve taken any payment holidays during your IVA (for example, due to illness or job loss), these months might be added to the end.
What happens when your IVA ends?
Once you’ve made your final payment, your Insolvency Practitioner will carry out a final review to make sure everything’s been paid as agreed. You’ll then receive a certificate of completion, confirming that your IVA is officially finished. Any remaining unsecured debt included in the IVA will be written off, and you’ll be free from those obligations.
Can you finish an IVA early?
Yes, it’s impossible to end your IVA early if you can pay a lump sum to settle it. This may come from a bonus at work, an inheritance or a family member. Your Insolvency Practitioner would put the offer to your creditors, and if they agree, your IVA can be completed much sooner.
Are you looking to take out an IVA?
If you’re struggling with debt and would like to explore taking out an IVA, then we would suggest the first step is to seek advice from a team of trusted professionals. Get in touch with Bridge Newland to see how we can help.
Categorised in: Liquidation News
