What happens at the end of an IVA?
Individual Voluntary Arrangements (IVAs) typically take between five and six years to complete. When you first enter into your IVA, the end of the tunnel can feel a lifetime away.
However, the truth is, if you stick to your IVA terms and conditions, time can fly by. That’s why it can be helpful to know exactly what to expect when you come to the end of your IVA, so you can prepare for the process to be formally completed.
In this guide, we explore exactly what happens when an IVA is completed. This will include explaining what an IVA Certificate of Completion is and looking at whether or not IVAs can be paid off early.
What happens when an IVA is completed?
The formal IVA completion process can be broken down into four key stages. These are:
1. Make your final payment
The IVA completion process starts from the moment you make your final payment. However, your IVA is not officially finished until you receive your Certificate of Completion. You may think you’ve made your final payment only to find you have remaining repayments due to payment breaks or additional months added to your initial IVA Proposal. Your IVA cannot be considered complete until your IP has provided final confirmation.
2. Receive IVA Certificate of Completion
The official end of an IVA is signalled by the Certificate of Completion. This will be sent to you by your IP after you have made your final payment and they are satisfied all terms of your IVA Proposal have been adhered to.
What is an IVA Certificate of Completion?
IVA Certificates of Completion act as official evidence that you have complied with all terms outlined in your initial IVA Proposal. They also confirm that you have made your final payment. Once received, you should submit a copy to the major credit reference agencies in the UK. These are Equifax, Experian, and TransUnion. This allows credit reference agencies to update their records, thus starting the process of rehabilitating your credit score.
How long does it take to get an IVA Completion Certificate?
Your IVA Proposal should state how long it will take for your IVA Completion Certificate to arrive. Usually there is a three to six month period of ‘housekeeping’ to allow for all final payments to creditors, final income reviews and administration to be dealt with.
3. Check the Insolvency Register
Three months after you have received your IVA Completion Certificate and informed the credit reference agencies, check the Insolvency Register to make sure your name no longer appears in the register. This can be done on the Insolvency Service website. If your IVA still appears on the Insolvency Register, get in touch with the Insolvency Service to request an update.
4. Start to rebuild
Once the three stages above are complete, the only thing left to do is start to rebuild your financial record. While curating a healthy credit score may take some time – years rather than months – it’s not impossible.
Your IVA itself will stay on your credit file for six years from the moment it is approved. However, by making good financial decisions, using credit sensibly, and following our top tips for improving your credit score, you can progress towards healthy financial independence more quickly.
Can I pay an IVA off early?
Yes, concluding your IVA early may be an option. In order to do this, you need to work with your IP. A ‘Variation meeting’ will be called, and, like the original proposal, 75% of your creditors have to agree to an early settlement before it can proceed.
The most common reason for early settlement is if you come into a sum of money, such as an inheritance or bonus. However, the terms of early settlement can vary greatly from one IVA to another based on specific circumstances and the demands of your creditors.
For this reason, before making the decision to pay your IVA off midway through its term, it’s important to discuss all options with your IP to fully understand the implications. After all, in some circumstances, it might not actually be financially advantageous to settle early. For example, if the costs of settling early – including early redemption fees or lost potential interest on investments – outweigh the benefits of being debt-free sooner, and/or if your IVA terms include penalties for early settlement, it might not be beneficial.
What is an IVA full and final settlement process
An IVA full and final settlement is simply the name given to the process of proposing a one-time repayment to your creditors to settle your debts, typically for a reduced amount. It is a process you and your IP would have to discuss and approve in order to settle your IVA early.
As discussed above, any proposal to end your IVA early must come through your IP. They will negotiate with your creditors on your behalf, through a Variation proposal, if they believe they can achieve a deal that is beneficial to all parties involved.
Of course, in order for the deal to proceed, 75% of your creditors must be in favour of agreeing to your proposed lump sum final settlement payment. As this is likely to be lower than the total outstanding amount, there is no guarantee the Variation proposal will be accepted.
If your creditors do accept your Variation proposal, they will typically agree to write off your remaining debt and your IVA will finish early. However, there are certain limitations and a small number of debts may survive insolvency. Of course, your IP will make you aware of any such circumstances before the IVA is proposed.
It’s important to note that a record of your IVA will also still appear on your credit report for six years from the moment it was initially approved. An early settlement will not change this. What an early settlement can do, however, is remove some of the constraints of a long-term IVA. This includes the removal of the public record of your agreement on the Insolvency Register and the financial freedom that comes with no more monthly repayments.
