Windfall during an IVA

19/06/2023
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”

    Martin says:
    24/04/2018 at 11:08

    Hello.
    I am in an IVA. I am receiving a refund from ppi of £300. I could really do with keeping it. Do I have to tell my IVA company about it? I am in such a dilemma about doing the right thing….

    Reply
      James Falla says:
      24/04/2018 at 11:19

      Hi Martin
      If you receive a PPI compensation payment during an IVA it is considered to be a windfall. As such you will normally have to hand it over to your IVA company. However because the payment you are due is less than £500 you might be able to keep it. Many IVAs will have a clause in their terms and conditions stating that windfalls received of less than £500 can be retained by the debtor.

      I suggest that you review your terms and conditions to check this out. If it is there you should still tell your IVA company about the windfall but you will be able to keep it.

      If you cannot find the clause then speak to your IVA company about it and see what they say. If you get the money and do not tell them they are likely to find out anyway when they look at your bank statements at your next annual review.

      Reply
    Anwar says:
    10/04/2019 at 18:56

    Hi

    I started an IVA last year. My son is going to be 18 this year. He has a child trust fund account in his name which I have been managing. Will these savings have to be paid into my IVA. They are not mine they are for my son.

    Reply
      James Falla says:
      10/04/2019 at 19:02

      Hi Anwar

      You do not have to worry about your son’s trust fund. This money belongs to him and not you. As such when he turns 18 he can take the cash and do what ever he wants with it. It will not have to be paid into your IVA.

      Reply
    Simon says:
    17/05/2019 at 11:55

    Hi

    I was wondering if you could provide me with some advice. I entered an IVA nearly 2 years ago following my losing my job due to incapacity following a road traffic accident. My employers terminated my contract without making reasonable adjustments so I began employment tribunal proceedings against them for disability discrimination. After discussion with my solicitors, I pursued my ex-employers for discrimination and injury to feelings only; any loss of earnings are to be pursued against the party who caused my injury in the road traffic accident and this matter is still ongoing.

    I have this week agreed a settlement of the tribunal claim before the hearing, primarily because I do not have the funds to engage counsel to represent me at the hearing.

    As the claim (and therefore settlement) does not include an element of loss of earnings, would the compensation I receive be classed as a windfall and therefore payable into the IVA?

    I would be grateful for your thoughts and advice.

    Reply
      James Falla says:
      17/05/2019 at 18:01

      Hi Simon

      Given all the compensation you are due to receive is for “pain and suffering” on the face of it this would avoid the windfall clause in an IVA and you should be able to keep the money. However it will depend on the specific terms of your IVA.

      I recommend that you speak to your IVA company and explain what the money you have received is for. They will then let you know if you can keep it or not. If they say you have to hand it to them then you should ask them to confirm the specific clause in your terms and conditions that states this.

      Reply
    Neil says:
    11/02/2020 at 09:41

    Hello

    I have received my RAF pension just weeks before my IVA completion certificate is due.,I borrowed money from my mother to pay the last year’s IVA payments and also borrowed money to pay for business overheads namely a car and insurance.So the bulk of this windfall is owed to my mother.Will the IP see it this way?

    Reply
      James Falla says:
      11/02/2020 at 10:16

      Hi Neil

      Sorry to be the bearer of bad news but I am afraid your IP is unlikely to let you keep this windfall. The IVA rules are very clear when it comes to pension windfalls. If a lump sum from a pension is received during an IVA it is a windfall and must be paid into your IVA for the benefit of your creditors. Your IVA company is unlikely to deviate from this unless it would be likely to leave you in significant financial hardship.

      That said you should certainly ask your IP and see what they say. However I would be fairly sure based on what you have said that they will want this windfall handed to them.

      Unfortunately you are only likely to get any of the funds if there is anything left after the repayment of your original debt in full (less payments already made) plus the IPs fees plus interest.

      Its a real shame you could not delay this pension until after getting your completion certificate.

      Reply
    Sharon says:
    11/03/2020 at 13:19

    if Someone was in an IVA and was due an inheritance payout which they have declined to accept until after there IVA has been completed, are they still liable to pay the IVA company this windfall?

    Reply
      James Falla says:
      13/03/2020 at 11:57

      Hi Sharon

      The answer is yes. Because the inheritance became due during the IVA any money received should still be paid to the IVA company even after the completion. This is because the payment is an after acquired asset (the opportunity for it to be paid existed while the IVA was in place).

      That said in this situation the IVA company would not find out about the payment unless the solicitor dealing with the probate informs them. If the inheritance is paid after the record of the IVA has come off your credit file there would be no public record so the solicitor may not identify that there was an IVA.

      Reply

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