If you are made redundant during your IVA the options open to you depend on whether you get redundancy money and your prospects of finding a new job.
Included in this article:
- What happens to redundancy money if you are in an IVA?
- What if you get no redundancy payment?
- Can your IVA be settled early with redundancy money?
Want help to start an IVA?
Give us a call: 0800 011 4712 or complete the form below to speak to one of our experts
What happens to redundancy money if you are in an IVA?
After being made redundant it is likely that you will struggle to continue paying your IVA. Whether this is the case or not will depend on two things. First the amount of redundancy money you receive. Second how quickly you can get a new job.
Where you are paid redundancy money it is classed as a windfall. This means you are obliged to pay it into your Arrangement.
You will be allowed to keep the equivalent of 6 months take home pay to maintain your living expenses and IVA payments while you look for a new employment.
If you already have another job lined up and are able to continue paying your IVA you will not be able to keep any of the money you receive. It will all have to be paid into the Arrangement.
If you get a new job but your income has changed your income and expenses will be reviewed. Your ongoing payments could go up or down as a result.
Struggling to get your head round all of this? We can Help. Give us a call (0800 011 4712) or complete the form at the bottom of this page. The advice is free and confidential.
What if you get no redundancy payment?
Given you have only been employed for a short time you could receive little or no redundancy pay. If you are unable able to get a new job quickly your IVA will be at risk.
In these circumstances your IVA company will normally offer you a payment break. This will give you time to find new employment without having to worry about your payments.
Where you are unlikely to find another job in the short or medium term you might have to let your IVA fail. If you are not a home owner bankruptcy could then be the next best option.
If a third party can offer a cash lump sum you could settle your IVA early. Because you can not make further payments the amount required to settle could be less than the amount outstanding.
Can your IVA be settled early with redundancy money?
If you receive a substantial redundancy payment it may be sufficient to settle your IVA.
In order to do this you need sufficient funds to pay 100% of your original debt in full (less the payments you have already made). In addition you will have to pay the total of the Insolvency Practitioner’s outstanding costs and fees.
You may also have to pay interest on the original amount of debt owed at 8% per year for the length of time you were in your IVA. Whether or not this is the case will depend on the terms of your agreement.
Any money left over after the full payment of the debts, fees and interest is yours to keep. The Arrangement will then be completed.
In rare situations, it might be possible to settle your IVA where the redundancy money you have received is not sufficient to pay your debt in full. An example of this is if there is no prospect of you getting another job in the future.
Been made redundant during your IVA? We can Help. Give us a call (0800 011 4712) or complete the form at the bottom of this page. The advice is free and confidential.