Live IVA and potential compensation windfall

findingthisdifficult

I'm asking this on behalf of someone so not 100% sure on the details.

If there is a small amount (less than £10k for example) left on an IVA and the debtor receives notice that they may be entitled to compensation which exceeds the amount left on the IVA, can they just pay off the IVA and the rest of the compensation is theirs? or does the IVA balance go up meaning all the compensation gets eaten up in the IVA?

Sorry if that's not clear, as I say I don't have all of the details.

fatbelly

Depends on exactly what the windfall is but if the windfall covers all the debts plus the IP fees plus statutory interest then the IVA completes and the debtor can keep what is left over.

Lump sums need to be discussed with your IVA firm. There will very often be a clause in your IVA which means that some or all of it has to be paid into your IVA. If the amount that will be paid in exceeds the total of your debts that are included in the IVA plus the IVA fees plus statutory interest on the debts, then your IVA will be completed early. If it isn’t large enough for that, your creditors will expect you to carry on with the normal monthly payments.
If you have a windfall payment which doesn’t have to be paid into your IVA – this could, for example, be some form of legal compensation – then it is your choice what you want to do with it. or it could be your partner who is getting the lump sum – that doesn’t have to go into your IVA. You could just carry on making the normal payments or you could offer to settle the IVA early, probably having to pay close to the remaining monthly payments 

findingthisdifficult

I'll ask them to check out the clauses in their IVA paperwork, the compensation is criminal injury compensation, I'm not sure if that's exempt or not?

If they can raise funds (via gift from friend or family) to clear the remaining IVA before compensation is received, would that make a difference? 

phillw

findingthisdifficult said:

I'll ask them to check out the clauses in their IVA paperwork, the compensation is criminal injury compensation, I'm not sure if that's exempt or not? 

https://www.nelsonslaw.co.uk/personal-injury-settlement-iva/

fatbelly

findingthisdifficult said:

I'll ask them to check out the clauses in their IVA paperwork, the compensation is criminal injury compensation, I'm not sure if that's exempt or not?

It could be partially exempt - it should be broken down into elements.

mwarby

findingthisdifficult said:

If they can raise funds (via gift from friend or family) to clear the remaining IVA before compensation is received, would that make a difference? 

You can propose a full and final settlement of an IVA at any stage, however its up to the creditors as to whether they accept this, it will take months, and its only once you get the completion certificate are you safe from windfalls being claimed.

I can see two issues though, it may come down to when the windfall was due, rather than when it was paid(ie you can't just delay a legacy being paid until after the IVA). The other issue is that if the windfall isn't mentioned, your misleading your IP and creditors, this could end badly. If the windfall is mentioned and the windfall isnt exempt the creditors will want to see at least some of it, or the full and final isnt very attractive.

findingthisdifficult

Thanks for your help all, I'll share your responses with the person I asked on behalf of and let them proceed from here.