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How long does an IVA last?

Posted 09 December 2019

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There's a lot of information out there about IVAs - not all of it accurate! - but we're here to give you the facts.

You can find answers to many of your questions about IVAs in our IVA mythbuster blogpost. In today's post we’re focusing on the question: how long does an IVA last?

How long does an IVA last?

When your IP drafts your IVA Proposal it will include a term, which in most cases is five years. For your IVA to go ahead, it must be agreed by your creditors at a vote. In some cases creditors will ask for modifications - such as increasing the terms to six years to enable them to recover more of what you owe. Your IP should discuss any modifications with you before your IVA is agreed.

IVA-diary

Could my IVA last longer than 5 years?

Yes, there are a number of reasons why your IVA might last longer.

If your creditors have asked for a longer IVA is of course one of them.

It’s also common for homeowners to be asked to extend their IVA for a year, if they are unable to release equity from their property to pay in. Generally, homeowners with more than £5,000 of equity will be asked to try to remortgage. If you're able to release the equity, you'll have to pay it into your IVA. If you are unable to remortgage, your IVA payments will be extended for 12 months.

Your IP might also extend your IVA beyond the standard five years to allow you to catch up on any payments you’ve missed or not made in full or for any payment holidays or breaks you’ve taken.

Finally, your IVA may also be extended if you’ve got ‘additional monies’ that should have been paid into your IVA. For example, if you had a pay rise and didn’t tell your IP, then you will usually need to pay more money into your IVA before it can close, which often means extending it.

Can I end my IVA after less than 5 years?

Paying off an IVA early is possible if you’re able to find the funds to do so. This is called ‘making a lump sum payment’. It might be possible if you receive a compensation payment, an inheritance or a lottery win, or if a friend or family member offers to lend you the money specifically to pay off your IVA. Your IP will help you ask your creditors if they will accept a lump sum. This is what’s called a ‘full and final settlement’ of your IVA.

It may be possible for your IVA to end early if you have a major change in circumstances which means you are unlikely to be able to make further contributions. For example if you are diagnosed with a serious illness leaving you unable to work, your IP can ask your creditors to vote on ending your IVA early.

What happens at the end of an IVA?

Your IP will check that you’ve paid in any additional income. Once they’ve confirmed this, they will send out your IVA completion certificate and completion report. They will usually do this within a few weeks after your last payment.

The IP will let the Insolvency Service know that you’ve completed your IVA. The Insolvency Service will take your details off the Insolvency Register three months after your IVA completes. You can check that your details aren’t on the Insolvency Register anymore. Just search for your name on the register to see if you show up.

The IP will also notify your creditors that your IVA has ended by sending them a ‘final report’. Your creditors should then update your credit history by marking the debts included in your IVA as satisfied. However, you may also like to send copies of your Completion Certificate to the credit reference agencies to help ensure your credit report is accurate.

Once your IVA has ended it is a good time to start saving to begin building up a rainy day fund. This will help you avoid problem debt in the future. Making your IVA payment each month will be a habit by then, so you could pay the same amount into a savings account for a few months to start off your debt-free life on the right foot.

How long does an IVA stay on my credit report?

A record of your IVA remains on your credit file for six years – or 72 months to be precise – from when it starts. So if you’ve completed your IVA in five years (60 months), you will have a further 12 months before your IVA falls off your credit history. It is very likely that your creditors will have issued defaults against you either before your IVA started, or once it did so. The defaults will also stay on your credit history for six years from the date of the default.

Once your IVA and the defaults disappear from your credit history, then your credit score should start to improve. Take a look at this blogpost for our tips on how to improve your credit rating.

Now you know how long an IVA lasts! Are you wondering if an IVA might be right for you? Check out our debt solutions page to get an idea of your options - and then contact us for expert debt advice if you’re ready to take the next step.

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.