If I get windfall

[suz]

Thinking of IVA. example if I owe 88,000 and say paying 575 amonth. debt down to 32,000. If I get windfall, inheretence of say 80,000. Can I just pay off the 32,000?

[freelili]

I believe the answer is no. You would have to pay the origional debt plus interest minus what you have already paid. I am sure one of the experts will correct me if I am wrong

LILY

[thebear29uk]

Hi Suz

Welcome to the forum. Like Lily I'm not an expert but we both post regularly and have asked these questions ourselves or read expert replies to other posts.

In your example you would pay £34500 in payments over 5 years. The debt of £88,000 would have IP fees of approx £8000 added making total owed £96000. You would therefore be paying approx 36p in the pound.

All IVAs have a clause which says that all windfalls (inheritance, lottery etc.) have to be paid into the IVA up to full balance owed. If this was to happen at the end of the second year you would have paid 24 x £575 = £13800 and your IP fees for the remaining 3 years would no longer be needed. However you may be liable for statutory interest at 8% (I think) and the IP would need to arrange a new creditors meeting to propose the variation.

If I've worked this out correctly you may well end up paying the whole of £80,000 into the IVA and you would be paying the whole debt off plus interest plus 2 years IP fees, Nominee fees and variation fees.

I'm sorry if this is not what you want to hear but I may be in the same postion at some point in the next 5 years and I've said from the outset that I want to pay my creditors back as much as possible.

One other thing to consider. I dont know if your figures were hypothetical or relate to your circumstances but if they are correct you need to think about who your creditors are. Northern Rock and HSBC seem to want 40p in the £ although this doesn't mean you wouldn't get an IVA approved. You would need to speak to an IP about that.

Regards

Dave

[MelanieGiles]

Hi Suz

Although I am an expert, I cannot fault the advice which has been given by the earlier two posters. Just to add that you will face the same issue under bankruptcy proceedings as well - but only up until the date you are discharged which is usually automatic after the first year.

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

[suz]

Going br would seem the best option then.
What happens if after one year (discharged from BR) I then get a windfall or a relative dies and I get an inheretance. Can any money be claimed then?

Suz

[MelanieGiles]

Suz

I cannot say whether it is or isn't. If you can afford £575 per month, then an IVA is definately possible, but maybe you find that the thought of a five year repayment programme is not the right way forward for you. You really need to have a good think about the pros and cons of each option, and as I say to all of my clients think about the future rather than the past - and work towards the solution that gets you where you want to be the quickest.

If you receive a windfall after your discharge from bankruptcy, it is yours to keep.

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

[jamesfalla]

Suz

The advice given here is quite right. If you declare bankruptcy, you will normally be discharged after 12 months. Any windfalls you receive after you are discharged are 100% yours to keep. Therefore with bankruptcy, you are only at risk of having to give over windfalls for 1 year max. This is in contrast to the IVA where you will risk having to give up any windfalls received across the full 5 years of the agreement.

Rememeber, in bankruptcy, if you have significant disposable income, you may still be asked to pay and income payment order which means you will have to make payments towards your debt for 3 years (2 years after you are discharged). However, these are likely to be less than the payments you would make each month in an IVA.

As such, if you have no property or specific job to protect, financially Bankruptcy is the best solution hands down

James Falla

Expert in IVA, Bankruptcy and informal Debt Management solutions for over 10 years.

For more information visit www.jamesfalla.com and visit my blog at: http://jamesfalla.blogs.iva.co.uk

[suz]

Worried, spoke to a legal expert who says that there could be a restriction order?? on my bakruptcy as I live with my Mother. Can you help on this?

[MelanieGiles]

Hi Suz

Have James and I appropriately answered this in your other post about gambling?

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