Compensation and Your IVA, Question by Question
Why treatment varies, and how each type of payout is handled.
What happens if I receive compensation during an IVA?
It depends on the kind of compensation. Some payouts are treated as windfalls and paid into your IVA; others, notably personal injury awards, can usually be kept. The common thread is that you must always declare compensation to your supervisor and let them decide how it is treated, rather than assuming or spending it. Getting this right protects your arrangement.
What about PPI or car finance refunds?
Financial mis-selling refunds are normally paid in. Compensation for mis-sold products, such as PPI, packaged bank accounts or car finance commission, is treated as a windfall and generally goes into your IVA for your creditors. These payouts can be substantial. You must declare them, and if the refund relates to a debt that is in your IVA, your supervisor will take that into account when working out what is due.
Is personal injury compensation different?
Yes, it is usually protected. Compensation awarded for personal injury, the pain, suffering and loss you experienced, is generally treated as an exception, and you should normally be allowed to keep the full amount. The reasoning is that this money is meant to compensate you personally, often for future care or losses, rather than to repay debts. Even so, you must declare it so your supervisor can confirm the position.
Do I have to declare compensation?
Yes, every time. Whatever the type, you must tell your supervisor about a compensation payment, certainly anything over £500. Declaring it lets them apply the right treatment, paying in a mis-selling refund, or confirming you can keep a personal injury award. Not declaring it is a breach of your IVA. Supervisors can also spot undeclared sums when they review your bank statements.
Do I have to pay it into the IVA?
For windfall-type compensation, usually yes. Mis-selling and most third-party claim payouts over £500 are normally paid into your IVA in full, up to what is needed to cover your debts and the costs. Personal injury awards are the main exception you can usually keep. As with any windfall, you never pay back more than your original debt plus fees, and a large enough payout can finish the IVA early.
What if it relates to a debt in my IVA?
Then it is taken into account. Where compensation, such as a refund of charges or mis-sold insurance, relates to a debt that is included in your IVA, your supervisor will factor this in when calculating what should be contributed. This avoids double-counting. The detail can get technical, which is exactly why declaring it and letting your supervisor do the calculation is the safe approach.
What happens if it arrives after my IVA ends?
It may still be due. Because of how IVAs work, compensation that arose from something before or during your IVA, like a mis-selling claim, can still be owed to the arrangement even if the money arrives after it has finished, unless your creditors have already been paid in full. This is a well-established principle, so do not assume a late payout is automatically yours. Check the position.
Can I challenge how it's treated?
Yes, if you think it is wrong. If your supervisor treats a payment as a windfall when you believe it should be protected, for example a critical illness or personal injury sum you need for care, you can ask them to reconsider, providing evidence. There are routes to escalate a genuine dispute. A free adviser can help you make the case. The key first step is always to declare and discuss, not to withhold.
Should I get advice?
Yes, compensation is one of the trickier areas. Because treatment varies so much by type, a free, impartial adviser can explain how your particular payout is likely to be handled and help if you need to challenge a decision. Above all, do not spend compensation before speaking to your supervisor, as that can breach your IVA. A free conversation first can save a lot of difficulty later.
