Has her IVA has been extended by 12 months to accomodate the exclusion of the property ?
I imagine that the sudden acquisition of £25k will be regarded as a windfall by her IP and will be payable, at least in part, to her IVA.
As for how much --- the ceiling on IVA repayments is the remaining balance of the full original debt, plus fees and possible statutory interest (which is sometimes already excluded and, if not, a request can be made to have it excluded, which is often - but not always - accepted).
So, the original debt was £12k. Fees, depending on which firm used, would be about £4k and statutory interest at 8% p.a. would come in about roughly £900 a year. So we are looking at £16k less the £3k already paid --- £13k plus possible interest.
Statutory interest, if not already excluded, does not usually apply to settlements made from equity release. Whether this will apply in this case will depend on how your IP has treated the excluded property.
All of the above are merely my thoughts out loud. Only her IP can give her a definitive answer and this should be discussed with him or her to avoid any nasty surprises later on.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014 http://foggy.blogs.iva.co.uk