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

    1. Emma says:

      Hi

      I claimed PPI on an EGG Loan before the deadline. It had taken until January for them to make a decision because of the volume they had to get through.

      I entered an IVA in November does the funds have to go to them as if the PPI timescales had be adhered to I would of received those funds before I entered the IVA

      1. Hi Emma

        Sorry but any money you receive as a result of this PPI claim is a windfall and will have to be paid into your IVA. It does not matter that the claim was started before you entered into the Arrangement. If the money is paid over while your IVA is in place it is a windfall.

        It is possible that the bank paying the money will actually check to see if you are in an IVA before they hand over the finds. If they find out they are likely to make the payment direct to your IVA company.

        You would only have been able to keep the money if it had been paid prior to your IVA starting. However then any funds you had in your account would have been taken into consideration in the IVA proposal.

    2. Greg says:

      Hi

      I’ve about 15 months left of my iva. Currently paying about £472 per month. I have recently just heard that an agreement has been reached regarding a pay rise between the union and the govt. It could be somewhere around £3000 after tax. This is back pay owed from sept 2017 and Sept 2018 respectively. Will all of this need to go into the iva?

      1. Hi Greg

        I believe your IVA company will treat this as a simple windfall. As such 100% of the money you receive will have to be paid into the your IVA.

        That said the money is in lieu of a pay rise. As such, had you just received the monthly pay increase as normal, you would have only had to pay 50% of any extra monthly surplus income generated as a result. As such you might be able to argue that your IVA company should let you keep half of the amount. I am not sure whether they will see it like that but it is certainly worth a try.

        It is also important to understand that if your ongoing monthly income increases, then you will need to carry out a review of your income and expenses budget. Your ongoing payments may also increase if your expenses have not changed.

    3. Denise says:

      Hi James my Iva completed in May 2015. Lloyd’s bank have just writing to say I’ve been awarded just over £11000 in ppi . However they say they have sent to my Iva company/supervisor. After all this time do they still keep that money or am I entitled to any or all of it?

      1. Hi Denis

        In March 17 the court of appeal ruled that PPI awarded for a debt should still be paid to the IVA company. This is regardless of whether or not the IVA is completed or whether the debt itself was included in the IVA or not. As such Lloyds have acted correctly by passing the compensation awarded to you to your old IVA company.

        You will need to contact your old IVA provider to discuss whether you are entitled to any of it. However the general rule is you are not unless the payment now means that your total original debt + fees & interest has been paid.

    4. Dave says:

      Can my iva company take my self employed government grant, I needed it to pay bills and my iva

      1. Hi Dave

        I would hope most IVA companies will take a practical approach to this and treat the grant as business income and not a windfall. After all the grant is to supplement the fall in your business income due to Covid 19.

        The first grants issued by the government were for the period Mar-May 20. As such the correct way of dealing with this is to treat it in the same way as you would any other business income. Simply split the grant between March-May in your income records when you do your tax return and annual review with your IVA company.

    5. Javan says:

      Hi
      The wife and I are currently in an IVA at £75 per month and we are 41 month in our 60 months of payments. This is a small amount and as circumstances have changed we are wanting to end the IVA. If the money we get is greater than what we owe on the IVA can it pay it off or could we end up paying more than we owed as a whole.
      Your advise is greatly appreciated
      Regards
      Javan

      1. Hi Javan

        I assume that you anticipate that you will get a windfall of some sort? If so, as the article above states, the money you get will have to be paid to your IVA company. If the sum you receive is significant then the answer to your question is yes, you can end up paying more back than you originally owed.

        The maximum your IVA company can take from your windfall is calculated as follows:

        – Up to 100% of the debt you originally owed (less the payments you have already made). So in your case this is a further £1425 (19 x £75)
        – 100% of the IVA company fees and costs (normally around £2000-3000 but you will have to check with your specific company)
        – interest charged at 8% per year on your total original debt from the start date of the IVA

        The fact is that this situation is very rare because most people do not get windfalls during their IVA. However when it happens, it understandably seems really unfair.

        The only way round it is normally to cancel your whole IVA and then pay your outstanding debt yourself once you get the windfall. However there are various implications of doing this you need to be aware of before making your decision. You should not cancel your IVA without first getting advice. If you want to chat it through please contact me at Beat My Debt.

    6. Keeley says:

      Hi,
      I am currently on maternity leave and will be on unpaid leave for the last 3 months. I am due to return in April. My work have decided to issue my enhanced maternity pay (12 weeks half pay) once I have returned for 12 weeks rather than in this period while I need the money most. Does this count as a windfall? I did not think it did as it is maternity pay. Would I need to give this to the IVA.

      1. Hi Keeley

        Standard maternity pay is not normally treated as a windfall as it is paid each month that you are on maternity. I have never heard of an employer ‘holding back’ standard maternity pay. It sounds as though this is something over and above the standard that they pay you as a kind of return to work bonus?

        This is unusual so I can’t say for sure. If I am right, I think there is a risk that your IVA company will treat it as a bonus rather than standard maternity and could claim it for your IVA.

        To be honest in these unusual situations every IVA company will interpret the rules differently. As such to be 100% sure I would contact your IVA company, explain the situation and ask them to confirm how they will treat this money.

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