Redundancy And Your IVA

Losing your job can be an emotional and financial shock – especially if you’re in an Individual Voluntary Arrangement (IVA). However, 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 need 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 creditors are unlikely to push for bankruptcy – it’s usually not in their best interests.

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 likely – 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 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.

Call us on 0800 316 1833, chat live at www.payplan.com or message us on WhatsApp.