What is a Full and Final IVA?

Rather than making regular monthly payments for five to six years, a Full and Final IVA involves offering your creditors a single, one-off lump sum payment to settle your debts.

The lump sum does not necessarily have to repay the full amount originally owed, but the offer must be acceptable to the creditors and comply with the terms of the proposed variation. However, it must provide creditors with a "reasonable return"—which generally means offering them more money than they would get if you were to be made bankrupt or if you continued with standard monthly payments. In return, creditors get a guaranteed, immediate payment, and you become debt-free sooner.

How is a Full and Final IVA Settlement agreed?

1. Get Specialist Advice: Before making any offers, speak with an IVA specialist. They will review your circumstances and help you determine if your lump sum offer is strong enough to be accepted.

2. Drafting the Proposal: Your Insolvency Practitioner (IP) will put together a formal settlement proposal detailing your offer and send it to your creditors.

3. The Creditors' Vote: Just like a standard IVA, your settlement offer must be approved by creditors. You need at least 75% approval (by debt value) from the creditors who choose to vote.

4. Making the Payment: Once accepted, your lump sum is paid into the IVA, and your arrangement is officially closed and marked as 'Completed'.

Important: Completing an IVA early does not normally remove it from your credit file immediately. An IVA remains on your credit file for six years from the date it was approved.

Where Can the Lump Sum Come From?

To offer a Full and Final Settlement, the funds usually need to come from a third party or a windfall. Common accepted sources include:

• Gifts from family members or friends
• An inheritance
• Redundancy or other employment-related payments, subject to the terms of your IVA
• Compensation or legal settlements
• Equity released from remortgaging your property
• Pension lump sum, although pension access can have implications depending on age and circumstances
• Money raised from the sale of assets

You will be required to provide your IP with clear proof of where the funds originated. Full transparency is essential; if creditors suspect you are hiding additional funds, they will likely reject the offer.

If your lump sum is coming from property equity, see our detailed guide to "An IVA and Your Home" to understand how the 2025 Protocol treats your home.

Can I make a full and final offer during an IVA?

Yes. If your circumstances change and you have access to a lump sum, you may be able to propose a variation to your existing IVA.

Your Insolvency Practitioner can prepare the variation and put it to your creditors. The creditors will then decide whether to accept the offer.

Your IVA does not end simply because you make an offer. You should continue complying with the existing terms of your IVA unless and until the variation has been formally approved and the agreed settlement has been paid.

When is a Full and Final Settlement a Good Idea?

Offering a lump sum is often a great strategy for individuals in specific life transitions, such as those who:

• Have experienced a drop in regular income but have access to a one-off sum of money.
• Are nearing retirement age and want the peace of mind of a fresh financial start.
• Have recently been made redundant and received a severance payout.
• Are planning to move abroad (emigrate).
• Can no longer commit to long-term monthly payments but want to avoid declaring bankruptcy.

If you're considering an early settlement because your circumstances have changed, you may also want to read our guide to "Problems with an IVA".

How much should I offer as a full and final settlement?

There is no standard percentage or fixed amount that guarantees creditors will accept a full and final IVA settlement.

Your Insolvency Practitioner will normally consider the amount creditors could reasonably expect to receive if the IVA continued, together with your financial circumstances and the source of the lump sum.

The offer needs to be sufficiently attractive for creditors to agree to the proposed variation. Creditors may also consider what they could receive through an alternative insolvency outcome such as bankruptcy.

Will Creditors Actually Accept It?

Creditors view settlement offers commercially. They are much more likely to vote "yes" if:

• The offer is fair, transparent, and backed by solid evidence of funds.
• The lump sum represents the best financial outcome available to them.
• They would receive less money through bankruptcy or a struggling, ongoing IVA.

Occasionally, creditors might request a slight modification before agreeing—such as asking for a few additional monthly payments alongside the lump sum.

What happens if my full and final IVA offer is rejected?

If creditors do not approve the proposed variation, your existing IVA will normally continue under its existing terms, provided you continue to meet your obligations.

You should speak to your Insolvency Practitioner before making any changes to your payments or relying on the lump sum for another purpose.