What Happens To A Windfall If You Are In An IVA

If your circumstances change during your IVA: If you receive a windfall during your IVA, you will normally have to pay the money into the Arrangement.

But does this mean that your IVA will be finished sooner? And are there any circumstances where you can keep the funds?

Use this guide to get all the information you need about receiving windfalls during an IVA.

What Happens To A Windfall If You Are In An IVA Contents

What is a windfall in an IVA?

In an IVA, a windfall refers to any cash lump sum you receive from a third party.

These types of payments can come in many shapes and sizes. Some examples of the most common types are as follows:

• An inheritance payment
• Funds from sale of a property
• A compensation payment
• Lottery winnings

Not all cash sums you receive are windfalls. If a family member gives you money to help you pay for your monthly living expenses, this would not fall into the category.

You do not have to treat a bonus payment the same way as a windfall.

If you get a bonus from work, you can keep the equivalent of 10% of your normal monthly take home pay. Then you only have to pay 50% of the remaining balance into your IVA.

Do you have to pay a windfall into your IVA?

During your IVA, you will normally have to pay any money you get – which is classed as a windfall – to your IVA Company.

You should tell them within 14 days of receiving the money. Normally you will have to hand over 100% of the balance.

Trying to hide the payment you have received is not an option. Your IVA company will discover it when they go through your bank statements during your annual review.

You can make a decision not to hand over the money. However, the likely consequence of this is that your IVA Company will fail the Arrangement.

If you are happy to allow your IVA to fail, you can decide to keep a windfall you have received. You will then have to make your own arrangements to pay off your remaining debt.

Do you have to pay a redundancy payment into your IVA?

If you lose your job and receive a redundancy payment, this is not treated in the same way as a standard windfall.

You don’t have to pay all the money you get into your IVA. It is given special consideration.

You will be allowed to keep the equivalent of 6 months take home pay. From this you will need to maintain your monthly living expenses and ongoing IVA payment.

Only any remaining balance will go to your IVA.

If you start working within 6 months, you may have to hand over any amount of your redundancy pay you still have.

Will your IVA be paid off faster if you get a windfall?

After you have paid your windfall into your IVA, you might expect that this will mean it is paid off faster. Unfortunately this is not the case.

The Arrangement does not become shorter.

You have to keep making your monthly payments as normal. These will continue for the standard number of months remaining.

This is because the only effect of this extra cash going into your IVA is that you pay back more overall. It does not shorten or reduce the number of remaining payments in any way.

Can you ever pay off your IVA early with a windfall?

There is only one time that you can pay off your IVA early with a windfall.

This is where the amount you have been given is large enough to cover 100% of your original debt – less the payments you have already made. On top of this, there must be sufficient money to pay the costs and fees associated with the IVA.

In this situation, the Arrangement will end straight away because there is nothing more to pay. As such, your IVA would be officially completed.

Your IVA Company will then hand back any remaining money to you.

Can you ever keep a windfall during an IVA?

If you receive less than £500, you should be able to keep all of this money.

Although you should still report it to your IVA Company, they will not normally be interested.

Following on from this, many IVA Companies will take the view that you can keep the first £500 of any windfall you receive.

For example:

If you receive £5000, you keep the first £500. Only the remaining £4,500 goes to your IVA Company.

However, this position is generally an unwritten rule. As such, it will be down your specific Company whether they act in this way or demand you hand over the entire amount.  

What happens if you receive money after your IVA is over?

Any windfall you receive after you have finished your IVA is yours to keep.

Therefore it is important to understand clearly when your IVA is actually over.

You may think you have finished the Arrangement after you have made your final agreed payment. However, this is not the case.

Your IVA is not actually legally over until you have received a written confirmation from your IVA Company. This document is usually known as a Completion Certificate (although it might be in the form of letter).

In reality, it is often a number of months between you making your last IVA payment and actually getting your completion certificate.

If you get a windfall during this time, then you are still bound by the terms of the Arrangement. In other words you would still have to pay the money to your IVA company.