Receiving a windfall when in an IVA IVA Issue
Summary: This article explains the implications for an IVA (Individual Voluntary Arrangement) of receiving a windfall.
What is a windfall?
A windfall in this context is an unexpected lump sum payment. Typically this would be a redundancy payout, a critical illness insurance payout, an inheritance or a win of some sort.
Do I need to disclose it?
In an IVA it is part of the agreement that you will make your IVA supervisor aware of such a windfall. A Debt Management Plan by contrast, is an informal arrangement and the debtor is not under the same obligation. The whole debt is being repaid in a DMP, but in an IVA creditors have a fixed window of opportunity to recover as much of their debt as is deemed affordable by the debtor. A windfall will certainly affect the debtor's ability to repay their debts.
Will I pay all of it to the IVBA?
You will certainly need to make the supervisor aware of all the facts of the windfall. Of course if your windfall is substantial then you will simply be asked to pay the whole debt plus the Insolvency Practitioners fee for setting up and managing the IVA. However, when the lump sum is not that large the individual circumstances will need to be explored. In general, a win or an inheritance will need to be made available to the IVA. In a situation of redundancy or sickness payout the regular income may be affected. If for example someone in an IVA was made redundant, received some redundancy payout and faced 2 months of unemployment before a new job was found, it may be considered reasonable to keep enough of the redundancy money to allow for other expenses to be met. In this case the rest of the redundancy payout would be offered to the IVA.
Inheriting an asset
Again, this is relevant to an IVA. The most obvious inheritance would involve a house. This would be considered an asset and would provide the person in the IVA to pay off some or all of their debt. The house or other asset may need to be sold in order to raise funds to help clear the debt, or it may be that someone else could buy a share of the house in order to keep the property and clear the whole IVA through a lump sum payment. As ever with changing circumstances it is important that the supervisor is informed before any action is taken