Windfall during an IVA

Windfall during an IVA

If you receive a windfall during an IVA you normally have to pay it into the Arrangement. As a result the amount your creditors get back increases.

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What happens to a Windfall during an IVA?

A windfall is any sum of money or asset which becomes payable to you during the course of your IVA. Common examples are inheritance, funds released from the sale of a property or a redundancy payment.

Most compensation payments from claims you make against a third party count as windfalls.

If you receive a windfall the terms of your agreement will state it has to be handed to your Insolvency Practitioner (IP). The funds are then paid into your Arrangement in addition to your normal monthly payments.

Paying a windfall into your IVA doesn’t mean it will be paid off any earlier. You will simply pay back more of your debt then first anticipated. Your creditors get back more of the money they are owed.

Struggling to get your head round 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.

Can you keep any of a Windfall received during an IVA?

The terms and conditions of your IVA will dictate specifically what happens to a windfall. If the total amount you receive is less than £500 you may be able to keep all of it.

However if the amount is more than £500 it will normally have to be paid to your IVA Company in full. They are not obliged to let you keep any of the money.

If you have a specific financial emergency your IP may let you to keep part of the money received to pay for this. However they are not obliged to. You are unlikely to be given part of the cash just because your living expenses budget is tight.

One exception to the windfall rule is if you receive personal injury compensation for pain and suffering. You should be allowed to keep the full amount of this type of award.

Can a Windfall ever be used to settle an IVA early?

Although windfalls normally have to be paid onto your IVA there are some instances when they can be used to settle the Arrangement early. One example of this is where the amount received is large.

The funds may be sufficient to pay 100 percent of your original debt plus outstanding IP fees and statutory interest. If so the Arrangement will be completed immediately. You will be returned any excess.

Another is in the case of redundancy. Generally speaking redundancy money must be paid into your IVA. However if you are no longer able to work your creditors may accept this amount plus what you have already paid in as full settlement.

You should be able to keep the equivalent of 6 months take home pay from any redundancy money you receive. This is to fund your ongoing living expenses and IVA payment.

Is money lent from a Third Party a Windfall?

A third party such as a family member or friend may offer to give or lend you a lump sum to settle your IVA early. In these circumstances the money you receive is not considered a windfall.

This is because you are not entitled to have the money for any other reason than to settle your Arrangement. If your creditors agree your offer then the cash is made available. If they reject it is simply withdrawn.

Generally speaking the lump sum does not have to be handed over until the creditors have accepted the proposal. However to meet money laundering regulations proof will be required of the identity of the person offering it.

Received a windfall during your IVA and need advice? Give us a call (0800 011 4712) or complete the form at the bottom of this page. Its free and confidential.

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38 thoughts on “Windfall during an IVA

    ChrisI says:

    Hi I have received a personal injury pay out following a car crash which has left me with life time pain condition do I have to use this money to pay off my IVA.

      Hi ChrisI

      Given the payment you have received is for pain and suffering (not loss of earnings), your IVA company should let you keep it. You will need to speak to them about it first.

      Given you can keep it, it is then down to you what you do with the funds. If you wish you could use them to settle your IVA early.

      The is more information about how to settle an IVA early here: How to pay an IVA early

    Kerry W says:

    If i sell my house what is the procedure to pay off the iva with the money left over please?

      Hi Kerry

      If you sell your house during an IVA, you will need to inform your IVA company. They will demand that you pay the following out of any equity released from the sale

      – 100% of the original debt you owed (less any payments already made)
      – All the IVA company costs and fees
      – Possibly interest on 100% of the original debt at 8% pa from the start of the IVA

      Any money left over will be yours to keep. You can read more about this by clicking on this link: Can I sell my house during an IVA

      As you can see, it will likely mean that you will end up paying back more than you originally owed.

      In these circumstances, you do have the option of refusing to hand over the funds. Your IVA company is then likely to terminate the agreement and you will still be liable to pay 100% of whatever your debt is outstanding. However, depending on the calculations, this might actually work out cheaper for you.

    Michelle says:

    I am a NHS employee and will soon receive a lump sum payment and a small amount of back pay, as well as a small payrise. Will this be classed as a windfall and will i be expected to repay all the monies to my IVA?

      Hi Michelle

      I believe that any lump sum payments you receive will be treated as a windfall. In other words, if the amount is greater than £500, you will be required to pay the money into your IVA.

      Regarding the pay rise, your IVA company will need to do a review of your Income and Expenses budget. If your monthly surplus income goes up as a result, then as per the terms of your IVA, 50% of the increase will be added to your ongoing IVA payment. You can read more about what happens to a pay rise in an IVA by clicking on this link: Pay increase during an IVA

    Sarahr says:

    I already have an IVA I am looking to see if I have to give them my personal injury settlement I have just been awarded

      Hi Sarahr

      Normally a personal injury payment received during an IVA will be treated as a windfall. In other words, the money received has to be paid to your IVA company.

      The only time this is not the case is if the payment received is specifically for “pain and suffering”. You will need to speak to the solicitor dealing with your case to confirm whether this is the case or not.

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