If you are in an IVA and considering making an offer of ‘Full and Final Settlement‘ to your creditors, it is quite natural to try and calculate the minimum amount needed to bring the IVA to an early settlement, whilst ensuring the offer is large enough to be acceptable to your creditors.
However, as you can imagine this is rather a difficult calculation considering there are so many potential variables.
Protocol suggests you should talk to your Insolvency Practitioner about the offer you wish to make, even though experience tells us that they will not often be forthcoming with information that can help you.
Many Insolvency Practitioners will not want to provide settlement figures for fear of compromising their impartiality.
They have to be seen as acting in the best interests of both parties and not just the best interests of the debtor and, with this in mind, any offer needs to come in the form of an instruction from the debtor, without any influence from the IP who is acting as the IVA’s supervisor.
Other important factors need to be considered too, such as:
- The Reason. The changes in circumstances surrounding an early settlement offer will define the strength of the offer when compared to the agreement creditors already have in place.
- The Money. Where are the funds for the settlement coming from and would creditors be entitled to those funds through the IVA’s windfall clause in any case, such as redundancy monies or an inheritance.
- Expected Equity. Creditors may be expecting equity from a property to be released as part of the original IVA terms and an early settlement would remove this opportunity for creditors to recover those extra funds.
- HP Payments. Creditors may have been given assurances of future increases to the IVA payments if there is a Hire Purchase Agreement due to come to an end towards the latter stages of the IVA.
Each of these points could have a bearing on the size of the offer that needs to be made and, therefore, factoring in an increase to the offer should be considered when relevant.
As a general rule of thumb, in cases where there are no scheduled increases due to HP agreements, where equity is not a factor and where the money being offered is coming from 3rd party funds (i.e. not your own money) you could use this calculation to find a ‘ball park‘ figure to begin discussions with your IP.
Your Offer = (IVA V.C.s x IVA Months Remaining) - S.F. Remaining
- VCs = Voluntary Contributions
- S.F. = Supervisor Fees
E.G :- If you are paying £300 into your IVA, and have been in your IVA for 24 months, and your IP is drawing £50 p/m Supervisor Fees, then,
Your Offer = (300 x 36) - (50 x 36)
Your Offer = approx £9,000
Please Note, this is not an exact science, and you should look for guidance from your Insolvency Practitioner as to the actual figure you should offer.
Please Note: This calculation does not take into account any scheduled changes to the IVA’s voluntary contributions such as for an HP agreement, or the introduction of equity into the IVA that might have been agreed in the original IVA proposal. It should, therefore, be used for guidance purposes only.
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