Don’t let the title of this article fool you! You cannot legally keep a lump sum which comes to you by way of a liquidated inheritance while you are in an Individual Voluntary Arrangement (IVA). Even failure to disclose to your supervisor the information that you have received such a lump sum is fraud and a criminal offence. You could go to prison for keeping your good news to yourself!
Should you be fortunate enough to receive an inheritance you may think that there is light at the end of your debt tunnel. Hold on though. You must first consider your obligations to your creditors before you use your liquidated inheritance – which we shall call the lump sum. Firstly, you have to inform the supervisor of your IVA of your good fortune as soon as you become aware of it – this may even before you receive a red cent of your inheritance. Your supervisor is obliged to keep your creditors informed of your substantially changed circumstances and will advise you what to do.
The lump sum is a windfall and the terms of your IVA proposal will spell out how such a windfall is to be treated. You will normally be required to contribute the full amount of any windfall into your IVA. Should you have a legitimate reason for retaining part of the lump sum, your supervisor may agree to convene a Meeting of Creditors to consider such a matter. Such a reason might be that you have just lost your job or that you require an urgent medical procedure to be carried out.
Your supervisor can invite your creditors to consider a variation to your IVA, which takes into account your changed circumstances and your reasons for wanting to retain part (or even all) of your lump sum. In the event that you have lost your employment, the variation proposal may even seek creditors’ agreement to accept all or some of the lump sum in full and final settlement of your IVA, even where the dividend is lower than the estimated dividend in your original IVA proposal.
In a nutshell then, an inheritance which, when liquidated, amounts to a lump sum is a windfall and you will not be allowed to keep any part of it without the express permission of your creditors. You are legally bound to disclose your good fortune to your supervisor and it may even lead to a happy ending for you as well as for your creditors.