An IVA can be a good solution to ending your debts once and for all.
However, what is not a good idea is to hide any excess money from your IVA and plan on saving it.
If you’re planning on hiding assets from your practitioner and want to learn about the legal repercussions, keep on reading as I’ve compiled a guide on this topic.
Let’s dive right in.
Should You Hide Money From IVA?
Entering an Individual Voluntary Arrangement (IVA) usually means that you agree to pay any money in your bank account in excess of your living costs (that you may need to live your normal everyday life) to the insolvency practitioner at the end of every month.
These monthly payments usually continue for five years. The exact duration may vary according to your debt management plan. At the end of this duration, any remaining debt in your name is written off and the agreement ends.
During the five years that the IVA continues, a licensed insolvency practitioner keeps a close eye on your finances to give you debt advice and to plan how exactly your creditors should be paid back.
It is not a good idea to hide money from your IVA as the probability of you getting caught are very high and you will probably end up going completely bankrupt and losing the finances you were trying to hide in the first place.
Why Should You Not Hide Assets From IVA
Hiding inheritance from IVA is also not a good idea as he/she usually has a close eye on your finances. They will find out about the money whether or not you tell them about it. Remember, it is their job to deal with your creditors directly and provide a debt solution.
If some extra cash comes your way and you decide to hide it, when you’re caught you can possibly end up going bankrupt and losing that money anyway.
What Happens If You Hide Money From IVA?
An IVA is governed by the court. You are required by law to notify your practitioner of any income that comes your way. If you don’t do that, you could go to jail and risk losing your assets as well.
Moreover, if your agreement ends up failing, you could be forced into bankruptcy and would end up losing all of your money.
Can I be Taken to Court For Hiding Money From My IVA?
Yes, an IVA is governed directly by the court and it is a fraud to hide money from them. Any such attempt will not go ignored and you will be taken to court over the dispute. You may even need to hire a third party to deal with such a situation (if it arises), which means extra cost.
In any circumstance, hiding your assets from the IVA means bad news. It is better to just pay the lump sum IVA debt with the extra cash instead of trying to hide it and risk going bankrupt.
Failure of IVA
Sometimes your creditors stop considering your IVA an agreement. This is called failure of your IVA.
One way of an IVA failing is when you can no longer make the minimum payments agreed with your lenders and your creditors won’t accept any lower payments. This means that all your debts still stand and your creditors can take action against you for those debts.
On top of that, you will still have to pay your practitioner his fees for the services he has performed so far. When your IVA fails, the practitioner can either make you bankrupt himself or your creditors will do it individually.
There’s only one way to avoid failure of your IVA, and that is to pay the minimum amounts on time so that your creditors are paid and your debts can finally come to an end.
The Windfall Clause in IVA
There is usually a windfall clause in your IVA. A windfall is an unexpected inflow of extra cash that you gain, for instance, by winning a lottery, or inheriting something during your IVA.
You should have to report any windfall cash that you get to your practitioner as soon as possible so he can handle your finances accordingly.
If there’s a windfall clause in your IVA, it means that all of this extra cash must go to your IVA and you will have to pay it all to your practitioner.
If this amount is larger than your remaining debt, you will have to pay the debt in full plus the fees of your practitioner and the statutory interest on your debt. If this amount is less than your debt, all of it must go towards paying your remaining debt.
However, if the windfall is under £500, it usually does not have to be paid to your IVA.
Frequently Asked Questions (FAQs)
Will I Lose My Car If I Have An IVA?
If you enter an IVA, you will probably be allowed to retain your car provided that it is necessary for you to travel to work and for your family use. This is only applicable if the car’s value is not excessive i.e. it is not a luxury.
Does Hiding Assets Dissolve my IVA?
Hiding your assets from your IVA is extremely difficult and if you are caught doing so, you will risk failure of your IVA. If your agreement fails, your practitioner will no longer help you and you will have to directly deal with your creditors to pay them back.
Does All Your Income Go Into Paying An IVA?
No, you are always allowed to keep your living expenses and necessary tax payments (such as council tax payments) when you enter an IVA. Only the amount excessive of your minimum living expense will go into paying your IVA.
Is it Okay to Hide Money Before an IVA?
Hiding your assets before an IVA is illegal and also very difficult to do. When an IVA begins, your practitioner performs a complete financial review of your assets and will most probably find out about the cash you are trying to hide.
Once that money is found, it will go into paying your IVA.
Who Can you Contact To Know More About The Whole Process?
If you plan on entering an IVA and want to know more about the whole legal process involved, be sure to check out Wilmott Turner Financial Services and ask professionals about the whole process.
Can I Have A Savings Account With An IVA?
Yes, you can save extra cash on your hands during an IVA. However, the way to do this is to cut the cost of your living and save some cash from there. Any amount of cash in excess of your predetermined living expense will go to your IVA.
It takes a lot of work dealing with one creditor, let alone several.
An IVA is a good solution if you’re unable to pay your debt in full and are tired of dealing with multiple creditors.
If you have more questions, you can always reach out on the given email address for more debt advice.