IVA Repayment Periods

One of the major characteristics of an Individual Voluntary Arrangement (IVA) is that the contract generally only lasts for a repayment period of 60 months. However an IVA is a very flexible financial instrument and the length of contract can vary significantly :-

• The Insolvency Act 1986 actually provides for a maximum period of 7 years for an IVA.
• The generally accepted wisdom is that 60 months is the longest practical period an IVA should last. Approximately 90% of IVAs are set up in this way. The debtor makes regular monthly payments from income as per the IVA repayment schedule..
• A ssmall but significant number of IVA's are known as "single payment" or "full and final" IVA's. This type of IVA is fully repaid in one single payment, usually either by equity released from a property or by a member of family introducing funds to help off the debts. Assuming that the debtor does not have any further monthly disposable income to pay a monthly contribution as well then the creditors may accept a single payment IVA.
• An IVA repayment period can be extended with the creditors permission. If the debtor misses a couple of repayments then these can be added on to the end of the IVA.
• An IVA can have its contractual repayment period varied by means of a Variation Order applied for by the supervising Insolvency Practitioner. Often an IVA meant to last for 60 months can be completed early if the debtor can offer funds to the creditors in lieu of the remaining monthly repayments. For instance if the debtors property increases significantly in value during the IVA then the debtor can offer to remortgage, pass on the proceeds to the creditors and complete the IVA within e.g. three or four years.

The general rule of thumb with IVA repayment periods is that the overall financial return to the creditors across the period of the IVA must be better than they would expect to achieve in a bankruptcy situation. The IVA repayment period can be influenced by many factors. For instance if the debtor is due to retire in 3 years time but can afford a greater monthly financial contribution for this shorter period than the 5 year norm then an IVA can be approved over the 3 year period. Likewise a debtor suffering severe financial hardship during an IVA may seek to extend the IVA repayment period, for instance up to 72 months, rather than terminate the IVA and apply for bankruptcy.

Most people with debt problems have some unique circumstances which influence their financial situation. If you are contemplating an IVA and seek confirmation that the type of IVA contract you are contemplating is appropriate then complete our enquiry form or contact us on free phone 0800 043 5 043 for an unbiased opinion.