Full and Final Settlements, Question by Question
What it is, how the offer is judged, and what happens if it is accepted.
What is a full and final IVA settlement?
It is a one-off lump sum offered to settle your IVA in a single payment, instead of continuing your monthly contributions to the end. If your creditors accept the offer, your IVA is treated as completed, and the rest of what you owe is written off, just as it would be at the natural end of the term. It is a recognised way to finish an IVA early.
How does it work?
You, with your supervisor, put a lump-sum offer to your creditors. They consider whether the amount is a fair alternative to the payments they would otherwise receive over the remaining term. The offer is decided at a variation meeting, where creditors vote, much like the meeting that approved your IVA in the first place. If enough agree, the settlement goes through.
Where does the lump sum come from?
Almost always from outside your normal budget. Since your spare income is already committed to the IVA, a full and final lump sum usually comes from a windfall such as an inheritance, a redundancy or pension payment, savings, or money gifted by family who want to help you finish early. Third-party money, especially from relatives, is a very common source.
How much do I need to offer?
Enough to be fair to your creditors. As a guide, the lump sum usually needs to be broadly comparable to what creditors would receive if the IVA continued to the end, and sometimes a little more, to reflect that they are getting their money sooner and giving up the rest. Your supervisor helps you arrive at a figure with a realistic chance of being accepted.
Do creditors have to accept it?
No, it is their choice. A full and final settlement is an offer, not a right, and creditors vote on whether to accept it. If they feel it is too low, they can reject it or ask for more, and your IVA simply continues as before. A well-judged offer, guided by your supervisor, gives you the best chance of acceptance.
What happens if it is accepted?
Your IVA completes. Once the lump sum is paid and the settlement is approved, your IVA is treated as successfully concluded, the remaining qualifying debt is written off, and your monthly payments and restrictions come to an end. You receive a completion certificate, the same as you would at the natural end of the term, just sooner.
Does it remove the IVA from my credit file?
No. A full and final settlement ends your IVA early, which is a positive outcome, but the record still stays on your credit file for six years from the date the IVA started. What it changes is that your payments and the restrictions end sooner, letting you begin rebuilding earlier than you otherwise would have.
Is family money treated differently?
It can be. Where the lump sum is gifted by family or another third party, it is usually offered on the basis that it only becomes available if the settlement is accepted, and that it would not otherwise have come into the IVA. Creditors understand this kind of offer well. Your supervisor will make sure it is presented properly so it is judged fairly.
Should I get advice?
Yes. A full and final settlement is a formal proposal with a creditor vote and a real judgement about value, so it pays to get it right. Alongside your supervisor, a free, impartial adviser can help you weigh up whether settling early is worthwhile and what a fair offer looks like. It costs nothing to check before committing a lump sum.
