This guide will explain what an IVA windfall clause is and outline what happens if you don't declare any money received. This article is designed to help those who have received a windfall during an IVA by talking you through the steps you should follow.
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a formal debt solution available in England, Wales, and Northern Ireland. It allows you to repay your unsecured debt in manageable monthly payments over a fixed period (typically five years).
IVAs must be managed by an Insolvency Practitioner (IP), who will become your supervisor once your arrangement is approved. Their job is to act as the middleman between you and your creditors (the people you owe money to), ensuring all pre-agreed conditions are met and mitigating any problems that arise.
Because an IVA is a legally binding agreement, your creditors will agree to freeze all contact, interest, charges, and legal action for the duration of your arrangement. If you comply with the terms of your IVA, any remaining debts will be written off after five years.
To be approved for an IVA, the creditors to which you owe the majority of your original debt must approve your proposal. Once this happens, all of your eligible creditors will be entered into a legally binding agreement.
Like most debt solutions, an IVA will be visible on your credit report and the Individual Insolvency Register for six years from the date it is approved. This will harm your credit score and make it difficult to get approved for most forms of credit, including a loan, mortgage, phone contract, and bank account.
The IVA Protocol is a set of industry standards and rules that exist to ensure all IVAs are handled in a way that is fair, transparent, and consistent. An updated IVA Protocol was introduced in 2025 to provide greater protection for consumers choosing to enter an IVA.
Start your enquiry with our support
Start my enquiryWhat is a financial windfall?
A financial windfall is the term used to describe situations where you come into an unexpected and large sum of money. It doesn't matter if the total is £500 or £500,000; if it hasn't come from your normal salary or day-to-day work, it will usually be classed as a windfall.
Examples of windfalls include cash or properties left by relatives (inheritance), payouts from legal settlements, lottery wins, some pension payments, insurance payouts, competition winnings, and monetary gifts from friends or family members. Compensation designated for pain and suffering is usually excluded from being classed as a windfall for an IVA.
Dealing with a financial windfall requires careful planning and consideration, regardless of your current financial situation. However, if you're in an IVA agreement, it's important to familiarise yourself with the rules regarding windfalls to avoid breaching the terms of your arrangement.
Your IP will decide how much of the windfall should go towards your IVA, but if it is over a certain amount (usually £500), you'll be expected to put 100% towards your arrangement.
What is an IVA windfall clause?
Receiving a large sum of money out of the blue can be exciting, but unfortunately the rules are slightly different when you're in an IVA.
An IVA windfall clause is a section of an IVA proposal that outlines how windfall payments must be dealt with. It is a legally binding rule stating that you must report any sudden and unexpected money you receive during your IVA directly to your IP immediately.
If you're unsure if a windfall needs to be declared, the best thing to do is to talk to your IP. They'll be able to talk you through the specifics of your arrangement and help you take the correct steps to ensure you pay the right amount into your IVA.
Remember, your IVA supervisor is there to help you, not penalise you. If you have any questions during your IVA, don't hesitate to get in touch. It's always better to ask first than to just assume and later find out you've breached the terms of your arrangement.
How much unsecured debt do you have?
Is a redundancy payment classed as a windfall?
Losing your job while you're in an IVA can be scary, but it's important to note that it can happen to anyone.
The first thing you should do if you're in this position is to inform your IP that your circumstances have changed. They will tell you what your next steps should be and explain what you should do if you've received any other correspondence, such as threatening letters from enforcement officers.
You must also inform your IP if any other significant changes occur during your IVA, such as a new job, new home, or substantial income change.
If you received any redundancy pay when you were laid off, it may be exempt from being classed as a windfall, and you should be allowed to keep up to six months' of your regular take-home pay. This is to ensure you're able to continue paying your rent or mortgage and bills while you look for another job.
For example, if your usual monthly take-home pay is £1,500, you'll be allowed to keep £6,000 of your redundancy settlement (6 x 1500).
However, any money over this amount must go towards your IVA, and you'll need to pay any leftover redundancy money into your IVA if you find new employment within six months.
Can a windfall allow me to finish my IVA payments early?
It's a common misconception that a windfall during your IVA can allow you to pay off more of your debt and therefore be discharged from your arrangement before the standard five-year period. However, this depends on how much money you receive.
For most IVAs, you should be able to finish your arrangement early if the funds are enough to pay off 100% of your outstanding debt, including any additional interest or charges.
However, if the lump sum payment isn't enough to clear 100% of your debt, it must still go towards your IVA, but you must continue making your regular monthly repayments. The extra money left over simply goes towards clearing more of your debt, not shortening your IVA term.
What happens if I keep an undeclared windfall hidden from my IVA?
It can be tempting to keep a windfall to yourself while you're in an IVA, especially if it's for a large amount and your arrangement has meant you've been living on a tight budget. However, there can be severe consequences for failing to declare any large sums of money received during an IVA.
Your IP has a legal duty to investigate your financial affairs while you're in an IVA. This means that they can discover any finances you've hidden by accessing your bank statements during your annual reviews, requesting information from HMRC, or contacting your creditors or credit reference agencies.
If your IP finds out that you've purposely hidden a windfall payment from them, they can cancel your IVA for being in breach of its terms, demand you repay the full amount of your debt, and potentially even take legal action against you.
Your IP may also initiate bankruptcy proceedings against you after your IVA fails, which is when they essentially force you into bankruptcy.
In short, it's never worth the risk.
We’ve helped more than 300,000 people find a solution
As part of the UK Debt Expert Group
Can I keep a windfall I receive after my IVA has ended?
Once you've made your final payment and you've been discharged from your IVA, any windfalls you receive will be yours to keep.
However, it's important to note that your IVA is not officially over until a completion certificate is issued, and this process can take several months. Therefore, if you receive a windfall between making your final payment and receiving your completion certificate, your IVA windfall clause will apply, as you're still bound by the terms of your arrangement.
If you successfully completed your IVA more than three months ago and you've still not received your completion certificate, contact your supervisor. They will be able to chase up any outstanding paperwork and let you know when you should expect it.
Conclusion
Receiving a windfall can be exciting, but if you're in an IVA, there are strict rules around how the money should be dealt with. In most cases, you'll need to put it towards your debt by paying it into your IVA. How much you need to pay into your IVA, however, is up to your IP.
If you've received a windfall during an IVA and you're unsure about what your next steps should be, don't hesitate to reach out for free debt advice. A debt advisor should be able to review your financial circumstances and provide guidance to help you move forward.
If you've yet to decide on the best debt solution for you, it's worth doing your research on how IVAs work as well as into alternative options to find out how windfall payments are dealt with. For example, if you're in an informal debt solution, such as a Debt Management Plan (DMP), you won't have as many protections, but you are not legally required to hand over any windfalls you receive.
