A windfall received during an IVA normally has to be paid into the Arrangement. However it is unlikely to result in the agreement being paid off earlier.
- What is a Windfall?
- Can the money be used to pay an IVA early?
- Is it possible to keep any of the cash?
- When do the IVA Windfall rules end?
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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 possible to keep a Windfall 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.
When do the IVA Windfall rules end?
The IVA Windfall rules remain in place until your IVA until it 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.
If you receive cash after you have made your last payment but before you receive your Certificate it is still a windfall. As such it must still be paid into the Arrangement.
These rules are particularly relevant in regards to PPI. If you receive this type of compensation after your monthly payments have finished but before you have your Certificate it is a windfall and must be treated as such.
After you have your Completion Certificate any windfalls you receive from then on should be yours to keep. Even if the sum is large your creditors are no longer entitled to it.
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