IVA/inheritance

castle96

Hi, some advice please. 1 son has an IVA just, £250k. My sister and I have estates c £1M TO LEAVE EQUALLY TO MY 3 SONS. I keep hearing the fact that "81%" can be "written off" with an IVA (correct??). When we inherited from our parents, I know that a bancruptcy search was done on us. (I assume that had we been, then the first call on our funds would have been to creditors ?). Would this also apply to any residual IVA amount? Is an executor of our wills duty bound to do an IVA check ?? This is worrying us greatly. IWe do not want to cut son1 out of our wills, but we do not want our money being wasted. Thanks for any help

mjm3346

Presumably to minimise IHT etc you have a financial adviser so speak to them  - but in any event how would the money be being wasted if it is paying off his debt?

sourcrates

The bankruptcy search would be to see if you were currently bankrupt, if the person dies after you are discharged, then the Official Receiver (OR) has no rights to money, assets or property that you come into after discharge from bankruptcy.

Similar rules apply to an IVA, however within that arrangement, there is no provision for seizure of assets, in fact an IVA specifically protects assets, so once successfully completed, that is the end of the matter, the Insolvency Service (IS) has no rights to money or assets you gain or inherit after receipt of your completion certificate.

If they inherited the money whilst the IVA was still live, then that would be a different matter, and would require negotiations with the IS, but typically the full amount of outstanding debt, plus any interest and charges that would have been payable, plus IP costs to set up the arrangement, as well as any other fee applicable to the IVA, would all become due for payment.

Anything left over would be theirs to keep.

castle96

mjm3346 said:

Presumably to minimise IHT etc you have a financial adviser so speak to them  - but in any event how would the money be being wasted if it is paying off his debt?

Not 'worried' about IHT. It would be wasted, if my money goes to his creditors!..........

Not 'worried' about IHT. It would be wasted, if my money goes to his creditors!..........

castle96

sourcrates said:

The bankruptcy search would be to see if you were currently bankrupt, if the person dies after you are discharged, then the Official Receiver (OR) has no rights to money, assets or property that you come into after discharge from bankruptcy.

Similar rules apply to an IVA, however within that arrangement, there is no provision for seizure of assets, in fact an IVA specifically protects assets, so once successfully completed, that is the end of the matter, the Insolvency Service (IS) has no rights to money or assets you gain or inherit after receipt of your completion certificate.

If they inherited the money whilst the IVA was still live, then that would be a different matter, and would require negotiations with the IS, but typically the full amount of outstanding debt, plus any interest and charges that would have been payable, plus IP costs to set up the arrangement, as well as any other fee applicable to the IVA, would all become due for payment.

Anything left over would be theirs to keep.

So I have no need to disinherit him? once IVA is completted. Any idea how long an IVA takes? Dated 1 mth ago 

fatbelly

Generally an IVA is set up to last 5 years though increasingly they are being set at 6 years from the outset.

If the debtor owns property with equity then they are required to try to release that equity in the fifth year and if this is not possible, a sixth year is added.

castle96

Having looked further, any inheritance would be siezed (during IVA

RAS

Slightly more nuanced than that. 

Any inheritance that was for a sum lower than the remaining IVA debt would have to be surrendered to the IP.

If the inheritance exceeded the remaining debt AND the IVA/IP fees, the beneficiary would get the remainder.

There certainly have been cases on MSE of people having to pay back more than the original debt, because the IP takes their fees out first. Uncomfortable if the IVA is for say £200k, but that is possible for people to get sold an IVA for as little as £8k, in which case the fees could exceed the value of the debt, doubling the original sum to be paid back.

Why did your son go for an IVA rather than bankruptcy?

castle96

"Why did your son go for an IVA rather than bankruptcy?"  Good Q. I don't know (ltd contact!). Why ? Would that have beeb better? Would it write of the entire debt??

sourcrates

castle96 said:

Having looked further, any inheritance would be siezed (during IVA

As I said before, whilst the IVA was active, yes that is correct.

Once completed, then no, they have no further rights over assets.

Timing is everything in life.