IVAs are often praised as an insolvency solution which allows people to clear their debts in a relatively short space of time. What is sometimes unclear, however, is exactly how long an IVA takes to come to an end.
There is no one-size-fits-all timeframe when it comes to IVAs. Exactly how long they last depends on various details, from your individual lifestyle, to the level of payment you can commit to for the length of the agreement.
Below, we outline the main factors determining how long an IVA lasts. First, though, a brief introduction to the Individual Voluntary Arrangement.
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What is an IVA?
An Individual Voluntary Arrangement (IVA) is a debt solution that can be set up to help people manage their money, by making monthly payments to creditors (the company or people they owe money to) over a fixed period of time.
IVAs are available in England, Wales, and Northern Ireland, and represent a legally binding agreement between you and your creditors to pay off your debt.
Because your IVA is legally binding, it needs to be set up by an Insolvency Practitioner (IP). An IP is someone licensed by the Insolvency Practitioners Association to act on behalf of the individual entering the IVA. Their duties include arranging the details of the agreement, ensuring IVA payment, and dealing with creditors directly.
You will usually be assigned an IP by your provider, but they can also be found on the Insolvency Service website.
What is the standard length of an IVA?
IVAs were established under the Insolvency Act of 1986, which states that they can last anywhere from three months to seven years.
That means there is no ‘standard’ answer to the question, ‘How long does an IVA last?’ The amount of time between your first payment and receiving your completion certificate depends largely on how well you keep up with payment, though there are certain instances where creditors can request an extension.
All that being said, most IVAs are advertised as taking 60 months (or five years) to complete. Whether it takes you more or less than the 5 years set out depends on whether you fall behind with payments, or – in certain cases – you are able to pay up your IVA early.
Can IVAs vary in length?
Yes. As mentioned previously, your IVA will usually take five years to pay off in full, but certain circumstances can cause it IVA to take more, or less, time to be completed.
What happens after 5 years of an IVA?
If you have lived within your means and managed to keep up with your payments, your IVA will usually end after a five-year term.
Once you approach your final payment, the closing of your arrangement is actually a fairly simple process. After your final installment has cleared, your provider will:
- Check all the information is in order
- Make arrangements for you to receive your certificate of completion
- Release you from your arrangement
Your completion certificate is the document that proves you have stuck to the terms of your IVA. It may take 4 to 6 weeks to be sent to you, but once you receive it, you can share that information with creditors and officially consider yourself debt free.
Can an IVA take longer than 5 years?
Even though the usual timeframe for an IVA is up to five years, in certain circumstances they can take longer.
Can an IVA last 7 years?
Yes. Under the Insolvency act of 1986, an IVA can take as much as seven years to pay off, though it’s not common. For an IVA to take more than five or six years, there would need to have been some modification to the agreement, like a material change in financial circumstances.
Can an IVA last 10 years?
It’s extremely unlikely. While there are cases of IVAs taking longer than ten years, you should seek debt advice or further information from a debt charity if your IVA term reaches ten years or more.
There are a number of debt charities who can help you regain control of your IVA, for example the Money Advice Service – an independent service set up to help people deal with money problems.
How long will my IVA last if I'm a homeowner?
Owning property can have an effect on the length of your IVA. As a homeowner, you may be required to remortgage your property to increase the amount you pay towards your IVA. This depends on how much equity is in your home.
If a valuation shows that there is more than £5,000 of equity in the property, you will normally be required to release that equity towards your IVA. This usually happens in year 5 of your arrangement.
If your home cannot be remortgaged, however, you will be required to make monthly contributions for an extra 12 months. This means the IVA would last six years rather than the usual five.
Can I pay off my IVA early?
Your IVA can be paid off early with what’s called a ‘full and final settlement’ offer – an offer of a one-off payment to creditors to settle your debts.
You will need to offer creditors a lump sum of money to get a full and final settlement. Below are the most common ways IVA holders come into a lump sum.
The sale of an asset
Often, a lump sum payment comes from the sale of a valuable asset that has not been included in the terms of your IVA.
If you are a home owner, for example, you may choose to sell your home and use the fee received to make an offer to your creditors to end your arrangement before your term is over.
A windfall payment
A windfall is any large amount of money you receive unexpectedly. It might be an inheritance, winning the lottery, or simply a gift. If you receive a windfall during the course of your IVA, you will have to put it towards repaying your debts under what is known as the Windfall Clause.
If the sum you receive is large enough to clear all of your original debts, however, you can make a lump sum payment to your creditors and end your IVA early. After all costs are met, any remaining money will be passed back to you, and the IVA will be considered completed.
How long does an IVA last on your credit report?
Like all debt solutions, an IVA will affect your credit rating. Details of your IVA will stay on your credit file for six years.
During that 6 years, credit reference agencies, or any company performing a routine check, will be able to search your credit file and find evidence that you have used a debt solution.
The good news is that IVAs will be beneficial to your credit history overall. While you may be unable to release funds during the agreement, entering into an IVA shows future lenders you are taking responsibility for your debt payments, and are working towards a debt free life.
Where can I get more advice on IVAs?
If you are struggling with debt you can’t afford are looking for a debt solution, or you just want some free debt advice, we can help.
IVA Plan are specialists in IVAs. Our team of advisers have the knowledge and experience necessary to help you deal with creditors, repay what you owe, and plot your path to a debt free life.