If you get an inheritance during an IVA you may not be able to keep these funds. The money will first be used to pay off your debt.
Included in this article:
- What happens if you get inheritance during an IVA?
- Can you keep any of the money?
- Will your IVA be paid off early?
- Should you delay starting an IVA?
Want help to start an IVA? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts.
What happens if you get inheritance during an IVA?
Inheritance is categorised as a windfall. If you receive a windfall payment while you are in an IVA this must be paid into the Arrangement for the benefit of your creditors.
As a result your creditors will receive more overall and have to write off less of your debts. You will still have to continue with your agreed monthly payments.
You cannot hide the fact that you will receive inheritance from your IVA company. The solicitor dealing with the estate is legally obliged to inform your Insolvency Practitioner.
Struggling to get your head round all of this? We can help. Call us (0800 077 6180) or complete the form below. The advice is free and confidential.
Can you keep any of the inheritance money?
One of the most common questions about an inheritance payment received during an IVA is whether you will be able to keep any of the money to help pay for urgent expenditures.
The rules say you should pay all the inheritance money you receive into the Arrangement. However your insolvency practitioner does have the discretion to allow you to keep some of the money. This could be if they feel you have a reasonable requirement.
You might really need some cash to repair your car or perhaps your boiler at home. It is possible that your IP will allow you to retain the necessary cash to pay for this. However this is by no means certain and will depend on the individual circumstances surrounding your situation.
You must not spend any of your inheritance money before getting agreement with your IP. This could lead to the failure of your IVA.
Will your IVA be paid off early if you get inheritance?
Normally when inheritance money is paid into an IVA the agreement is not paid off any faster. You will have to keep on making your regular payments until the end of the Arrangement.
The extra inheritance money will simply increase the amount that is paid back towards your debts overall. The amount written off is reduced.
The only time your IVA would be completed early is if the amount received is very large. There would have to be sufficient to pay off the total of your original debt (less the payments you already made) plus the insolvency practitioners fees plus interest charged at 8% pa on the debt from the start date of the Arrangement.
In these circumstances the Arrangement would then come to an end immediately and there would be no requirement for you to continue making your monthly payments.
Should you delay starting an IVA if I know I will get inheritance?
If you receive an inheritance payment before you start an IVA it will be yours to keep and you can do what you want with the money. As such, you can use some or all of it to pay for pressing expenditures if you wish.
The one thing you must not do if you are still planning to start an IVA is pay off any of your creditors (especially friends and family). This would be considered a preferential payment and could mean your remaining creditors reject the IVA proposal.
If you think you will inherit some money but are not exactly sure when, you might want to delay starting an IVA. However you will still be under pressure from your creditors. In this situation you could use a Debt Management Plan (DMP) to manage your debts temporarily while you wait for the inheritance payment.
Received inheritance during your IVA and need help? Call us (0800 077 6180) or complete the form below. The advice is free and confidential.
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Thanks James
You have been so helpful I couldn’t thank you enough for this information
Cheers
Chris
Good morning
Father dies intestate.
Estate to be split equally between 3 siblings.
The administrator is a beneficiary – sibling 1 – resides in the main asset and refusing to leave without a court order. Sibling 2 has a DRO which is to be revoked. Sibling 3 has a joint IVA. Both 2&3 are on means tested benefits which raises the question concerning DWP deprivation of assets rulings.
As I understand it siblings 2 & 3 cannot refuse or vary an inheritance for both Insolvency and benefit complications but can the Insolvency Service force the sale of the property in order to satisfy the creditors.
Any advice would be appreciated
Hi MichT
In regards to the sibling with the DRO. When they inherit, given the amount they receive is greater than £2000, the DRO will be revoked. They will then be back in the same position they were in at the start. They will be obliged to pay their debts in full or agree a settlement with their creditors. The insolvency service will not be involved with this and can’t force the sale of the property.
The situation is different in regards to the sibling in an IVA. They must tell their IVA company. The IVA company is entitled to claim the full amount of inheritance received as a windfall. The IVA company will pay off the full amount of the debt owed (less payments already made), plus the total of their fees and costs and in some cases interest on the original debt. If there are remaining funds after these payments, these will be returned to the sibling who will then be debt free.
The sibling with the IVA is legally obliged to tell their IVA company about the inheritance. If they do not and it comes to light later, the IVA company will be obliged to fail the IVA unless the funds as subsequently handed over. The IVA company is not able to take any action to force the sale of the property. However once it is eventually sold they will require payment of the funds as described.
Hi thank you for this. It confirms my suspicions.
Sadly sibling 1 (single) is going to make things difficult by not moving out unless they are taken to court. I understand their wanting to stay in the property its their home, however the funds they would receive is more than enough to relocate.
The system doesn’t help in situations like theirs it could take yrs for sibling 1 to be removed from the property meanwhile 2&3 are in limbo one continuing to pay a regular monthly amount for the duration of the IVA and still having to hand over their share to clear debts remaining, the other having DRO revoked & back to square on. Neither are disputing the need to pay their debts.
Intestate needs to be finite all assets to be disposed of, provision is made for spouses & those who feel they’ve been unfairly treated by using financial provision or proprietary estoppel (not happening in this case) it makes things clearer for both the administrator and the beneficiaries it also give assurance to the beneficiaries and Insolvency Services that they will receive their portion quicker with no obstacles allowing them to settle their debts sooner.
Some will probably say its not no1 fault 2&3 got into difficulties & they’re right but it’s not 2&3 fault 1 chose to remain living with parents despite owning their own home at one point, being in work with reasonable pay enabling them to live to a better standard due to not paying parents anything. In effect 1 has already had their share +.
Just a thought is it worth sibling 3 going bankrupt still 3 yrs left on IVA.
I’m surprised by the anger towards the parents because they didn’t write a will. 2&3 would rather they had even if they gave everything to sibling 1 at least everyone knows where they stand 3 continues paying monthly fee & 2 get their DRO finalised.
PLEASE ANYONE READING THIS GET YOUR WILL SORTED stopping the heartache it causes between family members alone makes it worth doing.
Thank you for your help it is very much appreciated