5-Year, 6-Year & Full & Final IVAs: Which Applies to You?

When most people think of an IVA, they picture a 5-year monthly repayment plan. But there are actually three distinct IVA timelines - and understanding which applies to you can make a significant difference to your financial planning.

The Standard 5-Year IVA

The most common form of IVA lasts exactly 60 months - five years of fixed monthly payments based on your disposable income. This is the default structure for most people entering an IVA.

Who does a 5-year IVA apply to?

• You are a tenant (renting) with no property equity
• You own a home but have no meaningful equity - or equity is below the minimum release threshold (typically £5,000)
• You own a home and successfully remortgage in year 5 to release the required equity
• Your IVA terms do not include an equity clause (less common)

How the 5-year timeline works

You make 60 equal monthly payments. The amount is set at the start of the IVA based on your income and essential expenditure. It is reviewed annually - if your income rises, payments may increase slightly. If it falls, a variation can reduce them. At the end of month 60, provided you have complied with all IVA terms, you receive your completion certificate and any included debts are written off.

The 6-Year IVA - When Equity Cannot Be Released

If you own a property with significant equity, your IVA proposal will include an equity clause. Around month 54 (year 5), your Insolvency Practitioner will ask you to attempt to remortgage and release a portion of your equity to boost the return to creditors.

For many IVA holders, this remortgage attempt fails - because their credit score is too low, the lender declines, or the costs are disproportionate. When this happens, the IVA extends by 12 months rather than requiring a lump sum.

How the 6-year timeline works

• Months 1-54: Standard IVA payments as normal
• Month 54: IP requests property valuation and mortgage redemption figure
• Month 54-57: Remortgage attempt - you approach lenders or your IP instructs a broker
• If remortgage fails: IP proposes a 12-month extension in lieu of equity release
• Months 61-72: 12 additional monthly payments (at the same amount)
• Month 72: IVA completes - completion certificate issued, remaining debt written off

High equity situations

If you have very high equity - enough to pay all creditors in full - your IP may negotiate a remortgage that fully settles the IVA at month 54, ending it early. This is less common but does happen. The IVA is still recorded for 6 years from the start date, not the early completion date.

The Full & Final IVA - One Payment

A full and final IVA (sometimes called a lump sum IVA) is structured from the outset around a single payment rather than monthly instalments. Instead of 60 months of payments, you make one lump sum payment that satisfies the arrangement in full.

This is ideal if you have a lump sum available - perhaps from a family gift, an inheritance, redundancy pay, or savings - but do not have a reliable ongoing income to support monthly payments.

How a full & final IVA works

• Your IP calculates a lump sum offer that represents a fair return to creditors - typically 25-60p in the £1
• The proposal is presented to creditors for a vote (75% by value must approve)
• Once approved, you pay the agreed sum to your IP
• Your IP distributes funds to creditors, deducts their fee, and issues your completion certificate
• The entire process from proposal to completion can take as little as 4-8 weeks
• The IVA is recorded on your credit file for 6 years from the approval date - not from the (quick) completion date

Credit File Impact - All Three Types

This is one of the most misunderstood aspects of IVA timelines. People sometimes assume that a full and final IVA - because it completes so quickly - clears their credit file quickly too. This is not the case.

The practical implication: from a credit file perspective, all three IVA types are identical. The only advantage of a shorter IVA from a credit standpoint is that you finish your financial obligations sooner and can begin the process of rebuilding your finances earlier.

Which IVA Timeline Is Right for You?

This information is for general guidance only and does not constitute financial or legal advice. An IVA is a formal insolvency solution - fees apply and your credit rating will be affected. Seek independent professional advice before making any decisions.