How long does an IVA last? IVA FAQ
Summary: How long does an IVA last? When considering an IVA, debtors want to know how length of the IVA (Individual Voluntary Arrangement) and whether this can change. This article seeks to answer these questions.
Flexibility
An IVA is a very flexible debt solution and the length of time they last can vary from a number of weeks to seven years. The Insolvency Act 1986 states that an IVA can last a maximum period of seven years, though in practise most IVA's are shorter.
Full & Final IVA's
These IVA's are proposed on the basis of the debtor having little or no disposable income to offer in an IVA, but do have access to a lump sum to offer. As such the IVA can be completed very quickly and the debt settled. Note however that the fact the debtor has undertaken an IVA remains on the debtor's credit file for the same length as all IVA's, namely six years.
5 year IVA's
The usual length of an IVA is 5 years. As long as payments into the IVA have been regularly made, then it is likely that all remaining debt will be written off at the end of the 5 years. There are occasions where creditors insist upon a sixth year for IVA payments. This could be in lieu of equity in a property that cannot be released, or becomes the sums being offered within the IVA provide such a low dividend to creditors that they expect the length of the IVA to be increased.
Variations
An IVA repayment period can be extended if the creditors require the term to be varied. An example of this happening would be if some IVA payments are missed and have to be added on to the IVA, thus increasing the length.
Why 5 years?
Creditors clearly want as much of their debt back as possible. The debtor can only afford to make a certain level of payment and therefore creditors want this payment to last as long as possible. However it was felt that a cut off point was necessary or the IVA would become unreasonably burdensome on the debtor. Seven years was decided upon as a maximum length but in practise, creditors are satisfied with five (occasionally six years) of repayment.