A ‘Lump Sum’ or Full and Final settlement IVA is a legally binding arrangement with your creditors which allows you to repay a proportion of your debt in a one off lump sum payment.
A Lump Sum IVA consists of just one payment, rather than the typical 60 monthly payments associated with a contributions based IVA. If 75% of creditors, in debt value terms, accept the proposal the IVA becomes legally binding on all and even those that voted against the proposal become legally bound by it. As with all IVA’s, once accepted the creditors must freeze interest, stop any charges being added to the debt and refrain from taking legal action related to the recovery of their debt. As long as you adhere to the agreed terms, the remaining balance of your debt will be written off.
Your Insolvency Practitioner, as one of their duties under the IVA, collects the funds for the settlement on behalf of all the creditors. When all the creditors’ claims have been received and verified, your IP will distribute a proportion of the settlement fund to each creditor, based on a pro-rata payment.
However in order to get your creditors to agree a lump sum IVA you will need to prove to them that it is not possible for you to make any additional monthly payments. Your creditors are not likely to agree to a lump sum payment IVA if they believe that you can also afford to pay monthly payments to them on top of this.
The fees for this type of IVA will be agreed with you up front and fully disclosed before you enter the agreement. This will include the referral fee paid to Money Village by the Insolvency Practitioner if we are involved in the application. The effect on your credit rating and the recording of the agreement on a public register applies as for a regular IVA.
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