Redundancy

[a_c]

What would happen if I had an IVA and was made redundant?

I have income protection insurance so I would still be getting a steady income for at least 12 months. Also, I would get a large redundancy payout which would probably cover the cost of the IVA for several years.

Thanks,

Andy

[chris_]

Redundancy payments are to allow you to live while seeking alternative employment and are not classed as 'extra' income with regards your IVA - however I presume (one of the experts should be able to shed more light on this)that if the payments are huge and you get immediate employment elsewhere, then at the end of the year when you do your annual review then this 'excess/left over' could then be classed as surplus disposable income - couldn't it?

[MelanieGiles]

Hi ac

Chris is absolutely correct in that redundancy money is compensation for loss of office and should firstly be used to supplement your loss of income. However, if you were to find a new job before the money had been exhausted, then you would be required to hand over the balance as a windfall.

Given that you also have income protection insurance for the first year, this makes the "windfall" likelihood more probable.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[a_c]

Hi Melanie,

How does the 'windfall' legislation work?

If I was made redundant I would receive over £20K. If I was in an IVA would this reduce the balance of the IVA by this amount, or would it simply be given to the creditors leaving me with the remaining balance of the IVA to pay myself?

Thanks,

Andy

[MelanieGiles]

Hi ac

Windfalls are payabel into the IVA on top of the monthly payments you will continue to make. This will only reduce the IVA term if you ever are in a position to pay your debts and the costs of the IVA in full - ie return a dividend of 100p in the £.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[a_c]

So would I be better off living off the redundancy money, not claiming on the insurance policy and not looking for another job for 12 months? Would this still be treated as a steady income?

Thanks,

Andy

[MelanieGiles]

I do not think that would be very sensible - putting your career on hold for 12 months just to avoid paying the money to creditors would not help your longer term prospects, and if you have an insurance policy in place, which has been funded at creditors expense - ie as the monthly instalments were treated as allowable expenditure, then your IP will expect you to claim on it.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[a_c]

This gets more and more complicated!

I took out the income protection policy to replace the repayment insurance I had with my mortgage company because it was much much cheaper. I am now thinking that I should replace the income protection insurance with insurance specifically linked to my mortgage payments, i.e. the money goes straight to my mortgage provider.

This way presumeably the redundancy pay wouldn't be treated as a windfall until I found another job. Is this correct?

I really appreciate your help.

Thanks,

Andy

[MelanieGiles]

If you had mortgage protection insurance, which paid your mortgage whilst you were unemployted, and used your redundancy money to fund the remaining household expenses including your IVA contributions, then you would only have to hand over the balance of redundancy monies when you found another job.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk