Advice for people in IVAs are facing redundancy, posted by the head of ClearDebt’s IVA Supervisory Team.
“I am in an IVA and I have just been made redundant”- a state of affairs that will undoubtedly cause panic. Tylah Thompson, Head of ClearDebt’s Supervisory Team, discusses the implications for people in an IVA who are facing redundancy.
Tylah has worked in the finance sector since 2004 and along with her team she manages the process of client communication and documentation once an IVA is in place.
With the news reporting higher and higher redundancy figures it looks as if this could be a situation a number of ClearDebt and Abacus clients could find themselves in.
From my perspective as the IVA supervisory manager I will try to lessen the strain of this stressful situation by explaining what you can expect and how your redundancy will affect your IVA.
There is usually one of two avenues to take when a client has been made redundant that depend on the circumstances of the case and the circumstances of the individual’s redundancy.
It is important to note that any lump sum received in the event of redundancy is considered a windfall under the terms of an IVA however this does not necessarily mean 100% of it will come into the IVA, unless you have been able to find employment immediately.
IVA covered by Waiver of Contributions
As soon as we are notified of your redundancy, the first thing we will look at is whether you are covered by our Waiver of Contribution (WOC) policy. This policy is designed to protect the IVA payments in the event of sickness, accident or involuntary unemployment, not all IVA clients will have this policy depending on when your IVA was approved.
If you do have the policy running alongside your IVA, we then need to check whether or not you will be covered in line with the criteria.
Our WOC is called IVA Protect.
Providing the claim is successful, IVA payments should be covered for up to 12 months.
If you are in receipt of a redundancy lump sum, and your IVA payments will be covered until you find alternative work, you will be able to keep in the region of six months worth of essential living costs to ease your time out of work and introduce the remaining balance. However if you enter work within those six months, the surplus of those funds will be expected to be paid into the IVA.
If the redundancy lump sum is less than six months worth of essential costs, then you will be able to retain those funds but also bear in mind that if employment is found quickly, you may have an amount to introduce into your IVA.
What happens when you are not covered by WOC?
Again, the route that we take also depends on your individual circumstances.
The first thing we look at is whether there has been a redundancy lump sum provided.
If there has been no redundancy lump sum issued, the Supervisor can arrange a payment break for a period of six months. With IVA Protocol cases, this payment break does not have to be put to or agreed by your creditors but older cases will require creditors’ consent. Creditors are usually very understanding in these situations and tend to agree to payment breaks of this nature with no issues.
If a redundancy lump sum has been received, then you will be allowed to retain the equivalent of six months net income, and from this also maintain contributions to your IVA, the surplus expected to be introduced into the IVA.
Now the period of six months is mentioned a lot, and sometimes we find that clients have not been able to find suitable employment within this time. In these situations we usually refer back to creditors to report or request an extension payment break of a further 3 to 6 months.
Large lump sums
Now occasionally, a client may receive such a large lump sum as part of a redundancy package that will enable them to pay their debts in full, including interest and fees in which case the Supervisor can usually close the IVA and issue certificate of completion and notify creditors of the satisfied IVA.
Similarly, if a large lump sum has been introduced into the IVA, raising the amount that is being returned to creditors, and it has been proven that the client can not gain another position paying the same level of salary, therefore jeopardising the affordability of the IVA, then in those circumstances, the Supervisor may be willing to put forward a proposal asking creditors to consider settlement based on funds paid into the IVA at that time.
As can be seen, there is no rule that fits all cases but what I have mentioned above is generally what happens in the majority of cases.
If you have any questions or concerns about this, then please contact an advisor. Alternatively you can post a question on the ClearDebt community.