How can you get rid of your debt for good?  Sometimes, creditors will accept one lump sum payment in lieu of a traditional IVA (Individual Voluntary Arrangement), in which the payments are spread out over five years.  To qualify for a lump sum, Full and Final IVA, you’ll need to have 25% of the amount of your debt available to present to creditors along with an Insolvency Practitioner’s fee of £5,000.  All the money is required in order to proceed. Therefore settlements are common in cases in which debtors come into a large amount of money at once, such as a family inheritance or savings or when a friend or family member will lend the needed sum.  Some people remortgage their property and considering the money possibly saved on the outstanding debt, this is an excellent idea for those with no savings.  Unsecured loans are not allowed for this process, which is much speedier than a usual IVA—it takes five months rather than five years.

Why would the banks take a deal?  They may just want to get the situation over with and stop monitoring your debt.  Less money now may be more valuable to them than small payments over a period of years that add up to more.

Payments in this arrangement would be made on a ‘pro rata’ basis, with the largest creditor getting the highest percentage of the settlement. The lump sum is passed to the Insolvency Practitioner to distribute to creditors.  At the completion of payment, a notice of full satisfaction of the debt is issued, which you’ll need to send to credit agencies Experian and Equifax.  A year later, you can begin rebuilding your credit.