A Full and Final IVA is a legally binding agreement between you and your unsecured creditors, proposed and supervised by a licensed Insolvency Practitioner (IP). Rather than committing to monthly contributions over several years, you offer a lump sum to your creditors and they vote on whether to accept it. If the proposal is accepted, any debt that the lump sum does not cover is written off permanently. The account is closed. You are not pursued for the remainder.

The same principle applies here as with a standard IVA: the Insolvency Practitioner who proposes and supervises the arrangement is legally obliged to protect creditor interests and maximise returns for them — not to look after you. Having your own adviser, working solely on your side to structure the proposal and calibrate the offer before the IP is formally engaged, is the only way to ensure the arrangement is built around the best outcome for you rather than the best outcome for creditors. Lightside’s role in a Full and Final IVA is exactly that.

A Full and Final IVA is generally the right route when a lump sum is available — from a remortgage, an inheritance, a redundancy payment, or a gift from family or friends — but a straightforward negotiated settlement with individual creditors has not been achievable, or where the legal structure of a formal procedure is needed to bind all creditors simultaneously. Where a lump sum exists and informal settlement has not been secured, a Full and Final IVA provides the enforceability that an informal negotiation cannot.

The lump sum offered does not need to equal the full outstanding debt. The settlement figure will reflect what you can genuinely raise, set against the value of your realisable assets. There cannot be any significant disposable income available — the Full and Final IVA is structured around capital, not income. The offer is assessed on its merits by creditors, who weigh it against what they might otherwise recover.

The same voting threshold applies as in a standard IVA: creditors representing at least 75% of the monetary value of the votes cast must accept the proposal for it to proceed. Once that threshold is met, all unsecured creditors are bound — including those who voted against. In practice, many creditors do not vote at all. If family members or friends are creditors, their vote counts but special voting rules apply.

As with a standard IVA, interest is often stopped while the proposal is being formulated and submitted, and any court action already under way can be suspended during that period. The arrangement is court ratified, though you do not need to attend court. Once approved, the matter can typically be resolved within six months — significantly faster than the five-year commitment of a standard IVA.

Like all IVAs, a Full and Final IVA is only suitable for unsecured debt. Secured debts — mortgages, secured loans — cannot be included, and contractual repayments on those must be maintained throughout. The arrangement appears on the Individual Insolvency Register — a public register maintained by the Insolvency Service and accessible online — and will have a negative impact on your credit file for six years, visible to landlords, employers and lenders.

If a lump sum is available and you want to understand whether a Full and Final IVA is the right way to use it, our Too Much Debt page explains how we approach this.

Advantages

  • Interest is often stopped whilst the proposal is formulated
  • Any court action can also be suspended as the proposal is formulated and submitted
  • All lenders must accept the proposal if the arrangement is accepted by 75% of the monetary amount of the votes cast
  • A percentage of debt is written off, which means you will pay back a lesser amount than if you paid the full balance
  • Once the debt has been settled, you will not be pursued for the remainder of the outstanding debt
  • This is a quick process and matters can be completed within 6 months
  • This is a Court ratified arrangement, although there is no need to attend
  • It is important to have advice based upon your specific circumstances

Disadvantages

  • A lump sum of money is required
  • Lenders have the right to vote for, or against, the proposal and/or seek modification
  • The settlement figure can be up to the value of all realisable assets and there cannot be any disposable income available
  • There will be a negative impact upon your credit file for 6 years and can be viewed by landlords, employers and lenders
  • Information of you being in an IVA is available on a public register, accessed via the internet
  • You must pay a fee for this and fees vary from provider to provider

Important This article provides general information only. During a consultation, Lightside Financial focuses on your specific circumstances, clarifies how a solution would apply to you, and the probability of actions and outcomes are identified specifically to your situation.