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; PPI compensation; funds released from the sale of a property or a redundancy payment.

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 the Arrangement on top of your normal monthly payments.

It does not mean that your IVA will be paid off any earlier. You will simply pay back more of your debt then first anticipated and your creditors will have to write off less.

Most compensation payments from claims you make against a third party count as windfalls. This includes claims for personal injury and PPI mis selling.

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.

Depending on the terms of your agreement you may be able to keep the equivalent of 6 months take home pay from any rudundancy money received to support you while looking for a new job.

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.

If your circumstances have not changed the amount required to settle an IVA will normally need to be similar to the total of your outstanding payments. However you might be able to agree a discount of 10-20%.

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18 thoughts on “Windfall during an IVA

    Arthur says:

    What happens if you get a windfall and have paid your ìva off and the creditors have accepted this but you are awaiting the iva completion certificate

      Hi Arthur

      Your IVA is not completed until the completion certificate is issued. As such if you get a windfall before this, the money you receive still has to be paid into the IVA. This is the case even if agreement has already been reached regarding settling your IVA early, or your monthly payments have finished.

      This is why it is so important to get your completion certificate as soon as possible after paying off your IVA.

    Allison says:

    If you receive compensation for pain and suffering the statement above says you should be entitled to keep that type of compensation, is there legislation to that affect or is it a case by case decision taken by the IP?

      Hi Allison

      There is no specific legislation regarding this that I am aware of. It is based on the specific wording of the terms and conditions of your IVA and the interpretation of such by your IP. Technically in most cases compensation received for pain and suffering is a windfall. However most IPs I am aware of will not demand such payments simply because the cash is needed to assist with rehabilitation. That said, in situations where there are clearly no rehabilitation costs, it might be possible that the windfall clause will be applied (although I think this would be extremely rare).

    Charlie says:

    Will be allowed to keep my government self-employed grant from covid-19 if I am in an iva?

      Hi Charlie

      Yes. Your application for a self employed Covid 19 grant can go ahead as normal. This money is treated as business income, not a windfall. As such when you do your annual review and present your business income and expenses, the grant simply forms part of the income stream.

    Becci says:

    Ive settled my IVA today. Of i get a better paid job between now and my completion certificate coming, can they take my additional wages? Bearing in mind ive been on 70% wages since last March so my income is a lot less for the year.

      Hi Becci

      You are still bound to the terms of your IVA until you get your completion certificate. As such in theory, if you get a new job before your get it, you should tell your IVA company and it could affect what you need to pay.

      Ultimately it is up to the IVA company to decide what to do. But it is possible that they could ask you to pay more. Ideally I would advise that you do not take a better paid job before you have your certificate and everything is done and dusted.

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