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,
I started IVA in July 2016. In August 2016 I had a traffic accident and as a result I lost my job in December 2017 (unfit for work). I am on ESA since December 2016 and even though I got all the benefits, I continued to pay my IVA from my benefits and have paid 36 out of 72 monthly IVA payments so far.
I have applied for compensation re the accident and am likely to get around £70,000-£80,000 (after solicitors costs and paying back benefit pre payments etc). I am still unable to work, I am on NHS waiting list for a surgery and CBT counselling. The expected waiting time for a surgery is 1 Year and must be followed by a physiotherapy for about 6-9 months. CBT counselling lasts about 9 months too. Meaning I will be able to return to job in about 2-3 years the earliest.
How do I stand on keeping the compensation? Will I be forced to pay all of the remaining balance on my IVA even though I’ve kept paying it when I could not really afford to? If I have to pay it all, what’s the point of the monthly payments then? FYI so far only a few quid, yes about £200 has been paid towards the debt, the rest the IVA fees swallowed and the debt is about £24000.
How it can be justified to take nearly full debt of me, when I and my family have been on a breadline since the accident. I have no prospect of finding a job and no income plus still being treated for physical and mental illness? Is anything can be done in this situation? Thanks
Hi Peter
Sorry to hear about your situation. Remember any compensation you receive for “pain and suffering” should be yours to keep. Only money awarded for loss of earnings can be considered a windfall by your IVA. As such it is important for you to get a breakdown of the reasons for the payment from your solicitor.
Legally speaking any amount out of the total you receive which is related to loss of earnings is a windfall and should be paid into your IVA in full. If this means that you end up repaying your total debt then this is what you signed up for.
That said yours do seem to be very specific circumstances. As you say you are unlikely to be able to work again in the short to medium term and have considerable ongoing rehabilitation costs. In these situations your IVA company does have discretion to help you out.
I would have thought there would be a strong case for them speaking to your creditors and negotiating to settle your IVA with a smaller sum. This would then leave you with the maximum funds to try to get your life back on track.
I sincerely hope your IP takes this attitude.
I have made the final payment on my IVA back in August this year and it is still in the completions process.
I was made aware that I am due a sizeable tax rebate from HMRC.
Does this money have to be paid in to the IVA ?
Hi Russell
Regardless of when you made your final payment your IVA is not over until you get your completion certificate. As such legally speaking any windfalls you receive before the date stated on the completion certificate still have to be paid into the IVA.
Given this I would say you will have to hand over this tax rebate to your IVA company. Also I assume the rebate is for the tax year 2018/19. As such it would have been for a period when you were certainly paying your IVA and so there can really be no argument that it should be treated as a windfall and paid in.
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
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.