Redundancy during an IVA

Losing your job can be an emotional and financial shock and it helps to know what to do if you find yourself in this situation and you’re in an Individual Voluntary Arrangement (IVA). Redundancy doesn’t automatically mean your IVA will fail. There are steps you can take and we’re here to help you through it.

What happens to my IVA if I’m made redundant?

Your IVA was set up based on your circumstances at the time – and we understand that things can change. A typical IVA lasts around five years and, during that time, unexpected life events like redundancy can happen.

If you’re made redundant:

You must contact your Insolvency Practitioner (IP) as soon as possible.
Your IP can help you understand your options and avoid IVA failure.
You may be eligible for a payment break, a variation to your IVA or another solution.

What if I receive a redundancy payout?

If you’ve been in your job for a while, you might receive a redundancy payout. Here’s how that works under IVA rules:

You’re allowed to keep the equivalent of six months’ net wages – this is to help cover your living costs while you look for a new job and continue making IVA payments.
Any amount above that may need to be paid into your IVA – this is because a redundancy payment is classed as a “windfall” and your creditors are entitled to some of it under your IVA terms.
If you find new employment within six months, any unused portion of your redundancy fund (after living expenses and IVA contributions) may also need to be paid into the IVA.

It might not feel fair to give up your redundancy money but remember your IVA is helping you avoid bankruptcy, protect your home and write off unaffordable debt – which can add up to thousands of pounds over time.

What if I don’t get a large redundancy payment?

If your payout is small or you weren’t entitled to one:

You may be eligible for an immediate payment break of up to six months.
This gives you breathing room to search for work without your IVA failing.

Your IP can approve this break without needing creditor approval.

What if I can’t find work within six months?

If you haven’t secured a new job after six months, your IP may:

Suggest a longer payment break.
Propose a variation to reduce your monthly payments.

If your finances have changed significantly, this may involve a new proposal being sent to your creditors.

Could I use my redundancy payout to end my IVA early?

In some cases, yes.

If your redundancy payout is large enough, your IP may suggest using it to offer a Full and Final Settlement to your creditors.

This is often worth considering if:

You’re struggling to find work.
You’re approaching retirement age.
You want to avoid further financial uncertainty.

Your IP will handle the proposal and check whether your creditors are likely to accept the offer.

Can my IVA fail because of redundancy?

Technically yes, but not automatically. If your new circumstances require a major reduction in payments, you’ll need to request a variation. Creditors may or may not approve it.

However, your IP can offer payment breaks to help bridge the gap and you’ll always have the chance to explore alternative debt solutions if needed.

What should I do first?

If you’ve been made redundant – or you think it’s on the horizon – the best thing you can do is get in touch with your IP straightaway. They’ll help you:

Understand how redundancy affects your IVA.
Plan ahead to protect your finances and your family.
Explore a Full and Final Settlement or other solutions if needed.

Get in touch

Whether you’re already in an IVA or just exploring your debt options, we’ve helped thousands of people through similar situations. We’ll listen, understand and guide you toward the right solution – without judgment or pressure.

Get debt help online or call us on 0800 316 1833 for a confidential conversation.

FAQs

What if I become seriously ill?

Please contact us as soon as possible. We know these conversations can feel difficult – but you’re not alone, and our dedicated Vulnerability Team is here to support you with care and practical guidance.

Your Insolvency Practitioner (IP) may speak to your creditors and request early completion of your IVA on compassionate grounds.

What happens if I come into money during my IVA?

If you receive a financial windfall – such as inheritance, compensation or lottery winnings – you’ll usually need to pay all of it into your IVA.

Because your creditors have agreed to write off part of your debt at the end of your IVA, any extra funds must be considered.

If the amount’s large, you may be able to offer an early Full and Final settlement.

If friends or family want to help with a lump sum, creditors may accept it as a settlement offer. It doesn’t have to cover everything you owe, but it must be fair and reasonable.

Can I settle my IVA early?

Yes – you can ask to offer a lump sum as a Full and Final settlement.

Your creditors will vote on the offer at a Variation Meeting.
Even if accepted, your IVA stays on your credit file for six years from the original start date.
It remains on the Insolvency Register for three months after completion or termination.

Early settlement can give flexibility, but you’ll still need to rebuild your credit after it completes.

Can I add debts to my IVA?

Because an IVA is a legally binding agreement, adding new debts can be difficult.

Forgotten debts: If a debt was missed at the start, it may still be possible to add it. Sometimes a second Creditors’ Meeting is required if the debt is significant.
New debts: If you’ve taken on new borrowing since your IVA began, contact us immediately. We’ll explain your options and what this means for your arrangement.

Can an IVA affect citizenship?

Your IVA will appear on the Insolvency Register, which may be visible during a citizenship assessment. It doesn’t automatically prevent approval – and in many cases, it reflects that you’re actively managing your debts responsibly.