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.
Included in this article:
- What is a Windfall?
- Can the money be used to pay an IVA early?
- Is it ever possible to keep any of the cash?
- Can you keep a Windfall after your IVA is completed?
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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.
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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.
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Hi. My husband has an IVA and I am due to receive an insurance payout for a car accident I was involved in over 2 years ago. I have read on other websites that the IVA can’t touch the part of the insurance compensation for pain and suffering only for loss of earnings. Is this right?
Hello Jill,
If you are not in the IVA and you get a windfall such as an insurance payout or any other form of compensation then this is yours to keep. It is only windfalls that your Husband receives in his name that would have to be paid into the Arrangement. Anything that you receive in your name is not at risk.
On the other hand if it was your husband who was in the accident and the payment was due to him then yes he could keep anything paid as a result of pain and suffering. However he would have to have to hand over the element received due to loss of earnings.
If I enter into and IVA then 3 years down the line I inherited a sum of money that could pay off the total I owed before entering the IVA, is the amount I’ve paid off for the first 3 years of the IVA deducted from the total??
Hi Kei
The answer is yes. The total you would have to repay is the total of the original debt included in your IVA less the payments you have already made.
However remember the IVA company are also allowed to add their fees and also interest charged at 8% pa from the start date of the IVA. Given this it is likely that you will repay more than you originally owed.
Any funds remaining from your inheritance you can of course keep these.
hi ive been in a iva for just over a year. Someone broke into my home over new year and stole items which were left to my children when their dads mum dies last year. Im expecting to get some of the money back from this and put it away for when they are older as the money should be theirs. Can my iva touch this
Hi Zoe
If you have a break in and make an insurance claim against stolen goods any money you receive is not generally considered a windfall. You would normally be allowed to keep the funds and would not have to be pay them into your IVA. The reasoning for this is that you are simply replacing the items you lost which were never part of the IVA agreement.
The items you are talking about were actually never yours. In effect you were simply storing them in your home. As such money received from the insurance company for these is not yours and could never be taken by your IVA.