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What happens to a Windfall during an IVA?
Money Advice, Debt Advice & Debt Help

What happens to a Windfall during an IVA?

What happens to a Windfall during an IVA?

A windfall received during an IVA normally has to be paid into the Arrangement. It is unlikely to result in the agreement being paid off earlier.

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What is a windfall?

A windfall is any sum of money you receive during your IVA over and above your expected income. If you get any money like this 100% of it will normally have to be paid into the Arrangement.

Common examples of windfalls are an inheritance payment, lottery win or compensation for mis selling or personal injury. Equity released from the sale of a property would also fit into this category.

If a third party offers to lend you money to settle your IVA this is not a windfall. This is because the money would not otherwise be yours. It is only available if your creditors agree to take it in settlement of the Arrangement.

If you earn overtime or get a bonus from your employer this is generally not classed as a windfall. In these circumstances you will normally be able to keep 50% of the extra money you have received.

Can a windfall be used to pay off an IVA early?

Although any windfall you receive has to be paid into your IVA this does not mean the Arrangement will be paid off sooner. The result is simply that a higher portion of the debt you originally owed is repaid.

After the cash you have received is handed over your ongoing payments continue as normal. The outstanding amount you are required to pay is not reduced.

Having said that there are circumstances where a windfall could result in an IVA being paid off early. One of these is if the amount received is so large that the total outstanding debt is paid in full together with fees and interest.

Although a redundancy payment is classed as a windfall it may be possible to use this cash to settle an IVA early. This will depend on how likely you are to be able to get a new job.

Is it ever possible to keep cash received during an IVA?

If the windfall you have received is less than £500 you may be able to keep this money. Given your IVA is based on the standard Protocol terms and conditions receipts of less than £500 do not have to be handed over.

Where the windfall is over £500 generally speaking you have to pay the whole amount into the Arrangement. However depending on the attitude of your Insolvency Practitioner (IP) you might be able to keep the first £500.

In addition if you have a financial emergency meaning that your health or the IVA itself is at risk you might be allowed to keep more. For example if you need to carry out vital repairs to the car you need to get to work.

You must not spend any part of a windfall you have received without your IP’s prior agreement. If they ask you to hand it over after it has already been spent your whole Arrangement could be put at risk.

Can you keep windfalls received after your IVA is Completed?

The IVA Windfall rules remain in place until your IVA is formally completed. They are only lifted once you have received your Completion Certificate. This will normally be 6-8 weeks after you have made your final payment.

You might get a cash lump sum after you have made your last payment but before you receive your Certificate. If this happens it still has to be paid into the Arrangement.

After you have your Completion Certificate almost all cash sums you get from then on will be yours to keep. You will not have to hand them over to your IVA company.

There are a few windfalls that still have to be paid into your IVA after you have a completion certificate. Examples include compensation paid for wrongdoing which happened before or during your IVA.

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    63 thoughts on “What happens to a Windfall during an IVA?

    1. Issy says:

      Hi my original debt was 10k , I’ve been in my Iva for 3 years paying 100 per month , last year I paid £6500 in through a windfall , during Iva some debt have been settled due to refunds , my question can I ask for a fptd basis from my Iva ?

      1. Hi Issy

        Sorry, I am not sure what you mean by “fptd”. Can you clarify.


    2. Issy says:

      Hi , sorry I mean can I ask my creditors to settle my Iva with funds paid to date ?

      1. Hi Issy

        Thank for the clarification. Generally speaking the answer to this is no. The only time an IVA would be settled early is if additional amounts paid in mean that the total original debt you owed plus all the IVA company costs and fees are paid in full. In some IVAs interest on the original debt can also be added.

        I assume when you started IVA, the expectation was that you would pay £100/mth for 5 years (60 months). As a result you would have paid £6000 in total with the remaining £4k written off. However it is very important to remember that the amount you pay into an IVA during its existence will increase if your income rises or you get windfalls which have to be paid in.

        If you get a relatively large windfall, this can easily mean that if you stay in the IVA, you will end up paying more back than you originally owed (100% of the original debt + costs and fees). I do speak to a lot of people who find themselves in this position. As such they often decide to let their IVA fail rather than handing over the windfall and deal with their debt in a different way. However you should never do this without getting advice first. I am always happy to speak to and advise anyone who finds themselves in this position.

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