What happens if you inherit money when you are in debt management or one of the three forms of insolvency: Debt Relief Order (DRO), bankruptcy or IVA? The answers are surprisingly different…
Inheriting in a DMP
This is the easiest case. Any money you inherit comes to you, not to your creditors or your DMP firm. It doesn’t matter if the person dies before your DMP started or during your DMP.
Of course, it will often be a very good idea to use some or all of this money to settle as much of your debts as possible! And you could consider making full and final settlements on your debts. But it’s your choice what happens.
Inheriting in an IVA
When you are in an IVA (so usually five or six years) you have to notify your IVA firm if you inherit money or an asset such as part of a house.
This inheritance is called an after-acquired asset as you acquired it after your IVA began. It forms part of your IVA and it will have to be paid to your IVA firm up to the amount needed to complete your IVA.
You may be hoping you can pay all the rest of your IVA monthly payments in a lump sum from the inheritance. But to complete your IVA early you have to repay all your debts in full plus the IVA fees plus (sometimes, this depends on the terms of your IVA) 8% interest on the debts.
If the inheritance isn’t enough to complete your IVA, your IVA continues with the normal monthly payments. If the inheritance is more than enough, the surplus is returned to you.
The solicitor or executor will often deal directly with your IVA firm. If an inheritance is given directly to you, you do have to hand this over. If you don’t tell your IVA about an inheritance or don’t comply with what the IVA firm says, this is one of the rare occasions when the IVA firm is likely to make you bankrupt.
Inheriting in bankruptcy
I have looked at this in detail here, but briefly:
You usually get discharged from bankruptcy after a year. If the death occurs before this, the inheritance has to be paid to the Official Receiver. When there is enough to pay all your creditors and the Official Receiver’s costs (which can be high) any surplus is returned to you and your bankruptcy can be cancelled – this is called being annulled.
If the death occurs after you are discharged all the money comes to you. It can’t be taken even if you are one of the small number of people (less than 1 in 5) making monthly payments under an IPA after bankruptcy.
Inheriting in a DRO
After reading the above, you may think in a DRO the inheritance will go to the Official Receiver… It doesn’t – it all comes to you! But, if the inheritance is over £1,000 your DRO may be cancelled and if it is over £2000 it is very likely that it will be cancelled – you will then have to sort out your debts. See What happens if I get more money in a DRO?
This is fine if you have inherited a lot, you can use the money to clear your debts.
But the difficult case is when you have only inherited a few thousand and your debts are a lot more. Here you may be able to use full and final settlement offers, but if you are still going to be left with debts you can’t repay, you may find that your DRO is ended but you are still left with debts. You have two options. You can either:
- “disclaim” the inheritance by informing the executor of the estate in writing. If you do this, you should take a copy of the letter and send it to the DRO Unit. If you disclaim an inheritance, the money will be divided up according to what the Will says, you can’t say who your share should go to; or
- take the money, have your DRO revoked, perhaps spend some of it on urgent expenses and then go bankrupt.
Some common questions about inheriting and insolvency
Can I refuse the bequest or vary the Will?
For bankruptcy and an IVA, the answer is No: the death has resulted in you gaining an asset, you can’t choose to give it away by refusing it or varying the Will. For a DRO you can disclaim the bequest, but you can’t vary the Will.
What if I don’t get the money for a while?
It doesn’t matter when you get the money, what matters is when you became entitled to it, ie the date of the death. So there is no advantage in asking the executor to go slow with getting probate through.
How will the Official Receiver / IVA firm know?
You are obliged to tell them. And if you don’t the executor/solicitor should do a check on the insolvency register.
Is there any way round this?
Not after the death. Before then you can suggest the person changes their will to leave the money in trust/to your partner/to your children. It can be a difficult conversation to have if the person doesn’t know you have big money problems.
My mum is pretty old, what should I do?
That’s difficult. Some very old people can live a lot longer, or all their money may end up going in care fees. If you expect to inherit within a year or two, you probably should opt for a DMP instead. If it may be longer, it’s not good to put off insolvency if that is the right option for you because of something that may happen at some time. The trickiest decision is going for an IVA where you are taking a risk for 5 or 6 years – in bankruptcy and a DRO there is only a risk for a year.
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Robert Halstead says
Hi Sara,
Thanks for this great article.
One minor point – although I am not an expert, I believe it is possible to disclaim an inheritance, which may be an option for those with a DRO when the inheritance is not enough to pay off the debts but will take them above the asset limit. This is covered briefly here: http://www.thisismoney.co.uk/money/experts/article-2918385/Can-share-father-s-estate-children-instead.html
The Insolvency Service has said that when an inheritance is disclaimed it will have no effect on the DRO. They also pointed out that only inheritances can be disclaimed – it is not possible to refuse a PPI award for example.
Sara (Debt Camel) says
Thanks, Robert – I have changed the article above to reflect this!
Craig Hallsworth says
Hi I’m currently under an IVA I’m clear on April the first this year. My father has just died days ago and I have received a letter from them asking for details. What sort of actions shall I expect. Can they claim against estate and how successful is this. The estate will be going into a long probate.
Sara (Debt Camel) says
Hi Craig, I am sorry to hear about your father and that the answer to your question is not going to be good news.
It doesn’t matter how long probate takes, your IVA company will expect any inheritance you get to be paid into the IVA I am afraid. If it is larger than the amount of debts in your IVA plus the IVA fees, any surplus will be returned to you.
steve says
my father has just passed away, im 8 months into a £26k IVA , £112 a month so paying back 16p in the pound to creditors, i know i will receive 25% of whats left over in the will money wise + 25% of some land next to the house which hasnt been sold yet, i know i have to declare all that but my kids will also benefit from the will as they are named as well, can i use their money to offer full & final settlement of the IVA like all remaining payments but in one go.
Sara (Debt Camel) says
No.
(a) you need to tell your IVA firm now about your inheritance, even though you don’t yet know when or how much you will get. This then needs to be paid into your IVA to settle your debts in full plus the IVA fees. There is no way of nipping in before this step with a full & final settlement offer.
(b) money being left to your kids is anyway not your money. You would need to take legal advice about using it for anything where you are the main gainer, such as paying off your debts.
steve says
thanks for that sara but i meant hand over the 25% money and then when the land is sold hand that over as well, but after that offer a full & final settlement from a third party.
Sara (Debt Camel) says
ah ok, so the 25% of cash plus the land isn’t likely to be enough. There still remains the problem that your kids’ inheritance is their money, not yours… you would have to take legal advice as to whether you could use their money to settle your IVA and your IVA firm may need to see a copy of that advice.
Jake says
My Granfather died February of this year. My IVA finished in May of this year, I had a letter from the solicitor in September informing me that my grandfather has left me some money, just over 15,000.
Am I required ti infor my insolvency practitioner?
Thanks.
Sara (Debt Camel) says
Yes I am afraid that you do have to tell your IP.
Theresa says
Hi there, I am looking to get a dro because I have £17000 of debt. I owe 8 creditors, am on benefits and have had a debt management plan running for the past 8 years, I originally owed over £35000 so have paid off half of the original debt. Howevere last year I was left £6.5k in my Mother’s will, but all of this was spent in a few months, purchasing white goods, furnishing and carpeting my empty council house, I did not use any to pay off any debt. I was going to get a dro prior to this but was then informed because of the inheritance I couldn’t proceed. Is it possible I can now proceed as it is over a year since the inheritance and it was used shortly afterwards. Thankyou..Theresa
Sara (Debt Camel) says
Yes you can.
Worst case is that you get a Debt Relief Restriction Order (DRRO) but you probably wouldn’t care if you do… the debt adviser that sets your DRO up will explain what a DRRO is. And its implications.
Who did you speak to before about a DRO?
James says
Hi can you help
I am an administrator for my fathers estate which has to be dealt with via probate as no will was made.
The issue I have is that my sister was under a DRO at the date of my father death. No information is forthcoming from her and at time the insolvency register had her name posted under order when checked.
Some time has elapsed since then and she is no longer on the register I have made checks via land registry and they now come up as clear ?
The issue I have is that as an administrator I could be liable to creditors if I make payment to her and not to the creditors first ?
I don’t want to liable for her debits and she is not forthcoming with any information when asked ?
I understand it is the responsibility of the administrator to make checks and I have done so….but no record has come up on her.
If I make a payment out of the estate to her will she be responsible or I to her creditors?
Sara (Debt Camel) says
I am sorry I cannot give you legal advice on your liability as an executor. I suggest you consult a solicitor.
Sharon says
Hi did you find an answer to this? As I’m in a similar situation.
barbara theobold says
hi both my self and husband went into an iva in feb this year,my brother died in march leaving all his assest to me solely.
i have notifed payplan about this.sent the documents they asked for,my debt wasnt very big round £10,000,00 i prepared to pay mine in full.my hosband owers larger aount on his around £20,000.00 am i obliged to use my inheritence to pay husbands iva of..can i ask them to get a reduced rate on husband one,,
also do i have to give them all the inheritence it over £120,000.00 or just the figure they work out for me on a f7 payment,,
any help would be appreciated.
kind regards babs
Sara (Debt Camel) says
Yes you will need to pay your debts, plus the IVA fees in full. Payplan should have told you how much this is. They will not take all your inheritance, only what is needed to settle your IVA in full.
You should not have to use your windfall to repay your husband’s IVA in full. I can’t say it is totally impossible as an IVA could have some unusual wording, but it would not be normal at all for your inheritance to have to be used against his debts. You could offer a full and final settlement of what the rest of his IVA payments would be.
Are you buying or renting?
barbara theobold says
we own our own house but we are both disabled my husband had to finish work two years ago with ill health,
we also have our two young grandaughter living permantly with us now as well.
im waiting on payplan to get back to regarding the fees.
just panicked they would want all the money given to them
i have got things for the girls ect to pay outof it .
Sara (Debt Camel) says
I hope you don’t have any reason to be worried here. How long ago did you send the details to Payplan?
Do you have a mortgage?
barbara theobold says
hi only yesterday waiting on reply.
we own the house outright
Sara (Debt Camel) says
OK, well you have to give them a week or so to sort out the figures.
Do you have the inheritance money now or is it with the executors? Do you have urgent need for any of the money in weeks rather than months?
Barbara theobold says
Yes I have the money now. Have got some things I need to pay out of it I but not a lot of it.
Can I keep the money and just pay them the amount they tell me. I’m really not wanting them to have all of it. Can I refuse as I don’t owe that much in full
i was the executor, it was my brother that died i am his next of kin everything went to me. i sold the house hence the money,
Sara (Debt Camel) says
I suggest that you tell Payplan that you have some urgent expenses which you need to pay for from the inheritance, list what they are, and ask them to confirm that this will not be a problem as the inheritance is so much larger than your IVA debts and fees.
Barbara theobold says
I will do thank you. Would I be able to keep the money and just pay mine of. Or do they have to have it as I’m very reluctant to do this as my debt is small in comparison to the inheritance. Sorry to keep asking you
Sara (Debt Camel) says
I don’t know what your IVA says. Standard ones include terms that say:
– you have to tell your IVA firm about any “after-acquired property” (that is any assets you get after your IVA starts such as this inheritance), which you have already done
– you need your IVA firm to agree in writing before you dispose of any assets, which includes these after-acquired assets
– the IVA firm may claim (that is make you give them) any after-acquired assets
– after-acquired assets must only be realised to the extent necessary to repay the IVA debts in full and the IVA fees.
Given the inheritance is so much more than your IVA debts, I can’t see why Payplan would want to take it all and sit on for months while they work out the final figures. I do expect them to be reasonable about this. I am just saying, put yourself in the clear by telling them what you need to spend money urgently on.
Come back if you have any problems with this!
Scott Dunn says
Dear Sarah,
I lent my brother 4k in 2013, and we signed a loan agreement in that he would an amount each month till paid in full. in short he did not and still owes me the money.
Our mother died in January 2017 and she felt so annoyed at his reluctance to pay me left his share of 4 k to me in the will which was documented. when the assets were released it came out light my brother had bigger debt problems and was declared bankrupt in October 2017, and that his share ( Orignially £16800-4000) , was then taken by the official receiver much to my annoyance.
i have asked the OR what I will get back but thyme are painfully slow in getting back to me and it seems grossly unfair i am competing against major utilities and banks for a meagre share £16800 . please can you give me any advice as it seems so unfair and we had no inclination the brother was bankrupt at the time.
scott Dunn
Sara (Debt Camel) says
Hi Scott,
can I double check the dates in case there was a typo – your mother died in the January before your brother went bankrupt in October?
I am wondering if there was some problem with the way your mum’s will was worded, otherwise I am not sure why the executor (who was it?) passed the money that should have gone to you to the OR.
When was the money sent to the OR?
Tristan says
Hi.
I went bankrupt in October last year. January my mother was diagnosed with terminal cancer.
She is fading fast and is unlikely to live much longer. I have no brothers or sisters, she has very little in savings (around 1k), her funeral plan is all paid for.
With mums cancer, it has metastasised to her brain and as such, there have been talks about making me Lasting power of attorney.
I have read I can’t undergo this as an discharged bankruptee. Is this correct and, if so, who takes charge of her affairs? In a bit of a panic here.
Sara (Debt Camel) says
I’m sorry to hear about your mum. It is correct you can’t have a LPA over property and financial affairs before you are discharged in October. Her affairs don’t sound complicated, is there something that is particularly concerning you? Is there a Macmillan centre at the hospital she goes to – they are often very good at sorting out practical situations.
Tristan says
Not that she went to. I will try and contact them. She is getting a refund from a funeral plan that she paid into, and has about 1k in a deposit account which was supposed to be paying for house clearers and for an extra month’s rent to buy extra time to clear the place. There’s a lot of stuff and I’m disabled so sorting through will take time. I’m worried that the money is going to be swallowed up by her overdraft and credit card. I’m on benefits as it is so can’t afford this myself. Our solicitor friend has made a letter making me executor only a couple of weeks ago before she was taken in. She is currently non compus mentus either so can’t make anyone else POA. I feel this bankruptcy whilst, in the short term was the right thing to do, on reflection has caused more longer lasting damage.
Tristan says
I should explain, the funeral plan was about 6 months away from being paid off, but the plan didn’t meet her requirements so she chose a different funeral home, the same ones who buried my father. The refund is due to hit her account in just over a week, but it’s likely she won’t be able to pay the new funeral home now herself.
Sara (Debt Camel) says
The funeral won’t be a problem. Funeral costs are the top priority for an estate to cover, they come before any debt repayments. Tell the bank and they will release the money from her account to you to pay for the funeral.
Steve says
I have been in an IVA since July 2018 my mum passed away in December 2017 leaving a will that stated that her property to be sold and devided between the family,its taken over a year to sell but looks like the money will be distributed soon,do I have to hand this money over to my IVA firm because technically the inheritance was made when my mum passed away before I entered into the IVA.
Sara (Debt Camel) says
yes sorry you do – the right to inherit this money was an asset you possessed at the start of your IVA – you should tell your IVA firm about this as soon as possible. If this is a substantial amount of money you were given very bad advice to start an IVA.
David says
Hi,
I am in the process of applying for a dro through pay plan. My debts are around 10k and I am 55 in September with an old personal pension worth about 9k. Will my pension be safe if the dro is granted before I have access to my pension. I am also a carer for my disabled wife and receive carers allowance. My wife gets esa for both of us and pip for herself. Any help would be appreciated.
Sara (Debt Camel) says
Hi David, if you are under 55 on the day your DRO is approved, your pension should be safe. See https://debtcamel.co.uk/is-your-pension-safe-in-a-dro/ for more details.
Doug says
Hello,
My partner is originally from Finland. She has lived here in the UK for almost 20 years and she now has a DRO which should end in October this year. Her great aunt has recently passed away and has left my partner 1/6 of the house she owned (in finland). We have no idea what the value of the house will be, nor if it would cover the DRO. The other issue is that any money would be paid into her old Finnish bank account, which she cannot access from the UK. What should we do?
Sara (Debt Camel) says
The article above says what her options are. She needs to choose between:
– taking the inheritance (it would seem likely there is some way of getting the money from the sale of the house paid to her in the UK?), having her DRO fail, then using the inheritance to settle the debt,s or
– disclaiming the inheritance if this is possible under Finnish law.
I suggest she urgently needs to find out roughly what the house may be worth, whether the other 5 people intend to sell it, and to talk to the adviser that set up her DRO about her options.
Lauren says
Hi,
I’m wondering if someone can help, I have informed my IVA that I will be receiving an inheritance soon. It Started out as £33k total debt when I started but to clear the IVA will cost around £48k, does this seem right? I’m more than happy to pay fully what I owe to the creditors but an additional £15k seems a bit much? They also don’t seem to have taken off any of the contributions I have already paid, is this normal to be making my usual £250 a month payment but for that to not be taken off the final settlement amount? If so, I dont really understand the point of me making payments when I know the inheritance is coming if it’s just going to get ‘lost’.
Also, Does the Solicitor HAVE to pay it straight to the IVA? I’d rather they pay to my account and I pay what’s needed to the IVA. I will fully disclose the amount I get (which is enough to pay the final settlement any way) so why do they need more?
thank you :)
Sara (Debt Camel) says
Ask your IVA firm for a statement of your account showing how the £48k figure was arrived at. Your monthly contributions should have been taken into account. But the IVA firm will have added on its fees and possibly statutory interest.
I suggest you ask the solicitor about payment of the money.
Elvin says
Hi.i hope some one could help me.my wife was diagnose with breast cancer and had her surgery two weeks ago.im just wondering if the money that we can get from her critical illness insurance will be taken all by the IVA?
Thank you
Sara (Debt Camel) says
I think yiu will need to talk to your IVA firm. I would hope they and her creditors would be sympathetic, it may say be possible to use some of the money to make a final settlement offer to her IVA.
Jo says
I am in the process of taking up an IVA (I haven’t signed anything yet but it is in the closing stages of doing so). The debts that have been passed to this company are all in my name (the one debt that was in my partners name was taken out of the equation – we are not married btw) and so for that reason I’m guessing this IVA is solely in my name. They did not want to see his bank statements but they did ask for proof of his self employed earnings. His father died last year and he is expecting to receive some inheritance shortly which is slightly more than the total of my debts. I have not mentioned this to the IVA company as I was worried they would want my partners money to repay my debts as I feel it would be wrong of them to take his money to repay my debts (especially as we are not married) but I don’t want to be dishonest. Can you advise if I should declare it at this stage (so I can back out if need be) or wait to see the paperwork (so before I sign it)and then see if there are any clauses in the wording of it.
Sara (Debt Camel) says
His inheritance should not affect your IVA but I would suggest telling the IVA firm about this now, in writing (email is fine) and asking them to confirm this.
Can I ask a few questions? Are you buying or renting? Your partner’s earnings – are they stable? Are you happy you would be able to pay the IVA payments if his income dropped?
Have you looked at reclaiming any PPI on your debts, the current ones and any that have been paid off?
Do you have any payday loans or other high cost credit in your current debts?
Jo says
I am renting and my partners earnings are stable for now. Unfortunately they havent always been stable but I am confidant I can keep to my repayments if he falls on hard times. I have not tried to reclaim PPI on the current debtsbut I did successfully claim for an old debt that I cleared. I dont have any payday loans but do have high charging credit cards.
Anthony says
Hi
I have just entered an IVA and my nan passed away. I am due some inheritance but not sure on the amount. I’m aware that I can request to keep some of that inheritence for specific reasons but do you know what would be considered acceptable reasons?
Sara (Debt Camel) says
If you are sorting out your nan’s affairs, then the funeral costs have first claim on the estate.
But if you are just getting some share of what is left, then you would have to make out a specific reason for keeping some of it. Perhaps priority debts such as rent arrears or mortgage arrears? or if you have car finance ending soon?
Danny Pearce says
I am in an IVA but am expecting to receive an inheritance in the next year. I have no idea how much this is going to be but I would like to pay off my IVA when I get it. Would I owe my IVA amount or the original total of debt? Different sites say different things. The solicitor is dealing with my IP directly but I can’t get a definitive answer.
Sara (Debt Camel) says
You will owe the full amount of your debts plus the IVA fees. Plus some IVAs say statutory interest at 8% of the original debts.
Sara (Debt Camel) says
The really irritating thing is that even if you pay off every penny, the IVA still stays on your credit record for the full 6 years.
Lawrence says
Hi
I am just over 2 years into an IVA which was around £43K … the payments back totalled around £27K and to date I have paid back around £11300. My mother has just died and left my brother and I her house from which tehre will be plenty of funds to pay back the IVA ..
My question is: To settle the IVA in full (as quoted in earlier text), do I need to pay back the total of £43K (The original debt less my current payments of around £11300 therefore around £31700) or do I have to pay the agreed figure in the IVA of £27K (less my payments to date of around £11300 therefore around £15700)?
Hopefully you can see why I ask? Either way the amount from the house should be around £60K so I have it covered but would be nice to have more left over!
Thanks
Lawrence
Sara (Debt Camel) says
You have to settle the full amount of your original debts, plus the IVA fees. (And for some IVAs – it depends on the terms of yours – you may need to also pay statutory interest on your debts at 8% per year.)
Chris k says
Hi
I know I’m a bit late to this party but this site seems to give a lot of knowledge and hopefully can answer my question that the CAB couldn’t seem to answer.
So today 16/12/2019 I have applied for my first and ONLY debt relief order, never getting in to this predicament ever again.. But everything has been submitted and I meet all the criteria and my VAB advisor who put it through seemed really confident it would go through which is great but still got to wait for that official confirmation.. Hopefully it doesn’t take too long! But my question is I am currently in receipt of universal credit £317pcm, I am left with about £12 each month after paying for everything etc but I do suffer from mental health problems and it’s got worse lately and universal credit have advised me to apply for limited capability for work which I believe would be an extra £336 per month on top of my universal credit which would make it at around £653pcm.. I am left with £12 a month BUT I am having to borrow from family and sometimes friends to help me get through because I have more to pay out than what I’m left. I would also very much like to use that money IF I got it to have driving lessons so that I can be more independent etc.. Would this increase in benefits affect my DRO at all?
Thank you
Sara (Debt Camel) says
You normally get a DRO confirmed in a few days. See https://debtcamel.co.uk/dro-applications-faqs/. It’s pretty rare for there to be a problem so fingers crossed you hear soon.
I am not a benefits expert but it sounds as though you are being advised to apply for the limited capability for work related activity element (LCWRA).
Getting an increase in benefits if your only income is from benefits will not in itself affect your DRO. Yes you will have more income, but you will also be allowed more expenses in recognition of your health problems.
The only time this does matter is if you get a lump sum of backdated benefits. This https://www.entitledto.co.uk/help/Universal_Credit_Work_Capability_Assessment says
“In most cases, the LCWRA element is awarded after a 3 month waiting period beginning on the day you provide medical evidence. If it takes longer than 3 months to carry out your Work Capability Assessment the element you are awarded will be backdated to this point and you will be paid any amount owing.” That sounds to me as though any backdating is likely to be small.
But if you get more than £1000 in backdated benefits, you can simply apply for bankruptcy. It’s a nuisance but apart from another form to fill out, it’s much the same as a DRO. So I would say apply for the maximum benefits you can! And if this gives a large backdated payment and your DRO is revoked, just apply for bankruptcy.
lisa Nicholls says
Hi went bankrupt in 2009 I just been left some money do I have to pay any of the bankruptcy after all these years and was discharged after the year
Sara (Debt Camel) says
No you don’t. If you would like this confirmed, you can call the Insolvency Service’s Enquiry line here: https://www.gov.uk/the-insolvency-service
lia says
I’m in nearly £40k worth of debt.
£14k ish mbna cc
£15k ish over 2 Barclays ccs
£5k ish Tesco loan
£4k overdraft
£1k on PayPal cc and Next credit account.
I have 3 kids under 5, youngest is 9months. 2011 to 2016 I owned a business but turnover was v low it failed in 2016 leaving me with the tesco loan to clear and no money coming in :(
In 2014 my mum remortgaged her house and we used the funds to build an extension for me and partner to live in, so I don’t own a house but pay my mum monthly for the mortgage bills etc.
Iv always had a good credit rating never any late payments etc
Tesco loan was taken out in 2011 when I was unemployed yet they lent me £20k!?. I have sent an irresponsible lending claim for this but its older than 6 years so will they even look into it?
My dad passed away last year and we have sold his house so I should soon be coming into around £20k. My dad will be turning in his grave that all my money will be going on stupid debts.
Would any of the credit cards accept a reduced payment for a lump sum?
My mum is going to be 70 next year and mortgage will end bank said they don’t supply mortgages to over 70s so she may struggle to find another provider I wanted to keep my credit rating as high as possible in case I could help with this
im thinking if i spend my 20k on paying debts im still going to be left with a massive outstanding amount, if in a year or so i have to go bankrupt/iva etc anyway would i be better off spending the 20k on a desperately need loft extension (currently my 3 sons sharing a box room) let my debts default then doing in iva/bankrup in a year or so? I hate the thought of im just trying to avoid paying my debts but i have to think about my boys future too. Aargh im so torn and feeling terrible.
Thanks in advance for any advice.
Sara (Debt Camel) says
That is long and complicated. I will make a few general comments, but I suggest you should discuss your situation in detail with a good debt adviser such as National Debtline on 0808 808 4000.
“Would any of the credit cards accept a reduced payment for a lump sum?”
No. You haven’t defaulted on any of them, why should they? I suppose they might accept 95% but nothing less.
“My mum is going to be 70 next year and mortgage will end bank said they don’t supply mortgages to over 70s so she may struggle to find another provider.”
There may be other options for her. It sounds as though she has an interest only mortgage? If there is a lot of equity she may be able to get equity release or a “lifetime mortgage”. she ntoo needs to talk to a good debt adviser about her options.
” I wanted to keep my credit rating as high as possible in case I could help with this”
Then you would have to use your inheritance to repay the most expensive of your current debts in full. You can’t afford all the debts you currently have. You need to pay enough off so the remaining debts are more affordable. I can’t tell if it can possibly work for you.
You need good debt advice based on the specific detauils of your situation, not guesses beased on generalities.
If you go bankrupt, you will lose the house. And I have no idea if you could afford an IVA. – it is not an easy option – about 30% of IVAs fail.
Please call National Debtline. There is so much going round in your head. Talking things through in detail will let you work out what the realistic options are.
Lia says
Thankyou for the reply. At the moment my mum has an interest only mortgage but yes plenty of equity – £65k owing on a £350k house. My name is not on the mortgage so it wouldn’t be affected if I went bankrupt would it? She will be contacting an independent advisor soon. Iv come to the decision/realisation that I’m not going to be able to help with the mortgage anyway so at this point I don’t care about my credit rating and that feels like a relief of sorts.
I have spent day’s reading posts on Facebook regarding the 3 letter process so you think this is something worth trying? In the meantime should I set up temporary payment plans or stop paying the debts in order to deal with dcas? Thankyou
Sara (Debt Camel) says
My name is not on the mortgage so it wouldn’t be affected if I went bankrupt would it?
No – I said that because you said you wanted to try to keep a good credit rating so i assumed you were thinking of some form of joint mortgage.
I have spent day’s reading posts on Facebook regarding the 3 letter process so you think this is something worth trying?
No – it is a legal nonsense that sometimes works by accident when there is something wrong with the paperwork a debt collector has – the legally correct version is to ask for the CCA agreement of a debt (see https://debtcamel.co.uk/ask-cca-agreement-for-debt/ for how that is done). But that isn’t going to work as you haven’t defaulted on any of these debts and it’s not worth bothering to try now. Or for several years if you default now.
I think you should talk to National Debtline who will talk about all your options in detail. A temporary DMP now or for several years and them making offers from your inheritance may be a good idea. But if your house is just too small for you, then you may need to face selling and moving.
PS you can’t assume asking for a CCA agreement in a few years will work. It may, but it probably works less now than it did a while ago and that trend may continue.
Lucy says
In my grandmothers will it is written that I will inherit £5000. Since writing the will (when I was a child) she has told my parents and Aunt that she wants me to have £10000.
My grandmother is seriously ill and unlikely to survive beyond me being discharged from bankruptcy
Do I have to inform the OR about the 10k or just the 5k that is in the will? I would let my parents or Aunt keep the remaining 5k until after discharge.
Sara (Debt Camel) says
Assuming your grandmum doesn’t change her Will, then it sounds as though it’s up to your relatives whether to give you the 5k. If that is after you are discharged, it can’t be claimed by the OR, but if you are Making monthly payments you should inform them.
Simon says
My Mother in Law is a year into an IVA. Her sister was named in the will of a Great Uncle and received half of his property which has since been sold. Her sister has taken pity and written a cheque for some of the money received. As this isn’t strictly an inheritance does this need to be used to pay towards the IVA?
Sara (Debt Camel) says
Her sister has given a cheque? Has she cashed it?
Simon says
Yes, it has been paid into her account
Sara (Debt Camel) says
Bother. It is a windfall payment she has received. If it is over £500 she has to tell her IVA firm immediately or she is in breach of her IVA and it will be claimed by the IVA firm to pay to her creditors. It is a great pity she didn’t take some advice about this as there were better ways of handling this, but it’s too late now as the money is in her account.
Simon says
Thank you for your response. The money was give to be used for home improvements, particularly a new bathroom and kitchen. Can it still be used for this?
Sara (Debt Camel) says
No, it has to go to her IVA. If there is any money left over after her debts and the IVA fees have been repaid, then it will be returned to her. Sorry.
Jane says
Hi. I was wondering if I took out a DRO and then was left £500 inheritance during my first year would i have my DRO revoked. I have 3 small children under 6 years. Thanks.
Sara (Debt Camel) says
£500 shouldn’t be a problem, see https://debtcamel.co.uk/dro-income-up/
Gina says
Hi, my husband and I are in an IVA, we have been for 2 years. We have managed to make all payments but it has been a struggle. My mother in law has kindly offered to pay off our IVA to leave early as we are worried about defaulting – our IVA company have advised that we can pay the total of our monthly contributions rather than the full amount. However, she has also mentioned that when she sells her house in the next year she wants to buy a house and put it in our name. Once we have the certificate of completion, will this still be counted as an inheritance and will they have any claim to it?
Sara (Debt Camel) says
Once your IVA has completed it is over, they will have no claim on any windfall you get.
Joanne says
Hi would appreciate some help.
Ive currently got 18 weeks left on my dro.
I was left In a will for the estate to be spilt leaving me approx £17,500. the estate has just had a offer accepted so no idea when I will get the money. I will be receiving a cheque.
1st question if this is all sorted out after my 12 month dro probation do I have to get in touch with anyone?
2nd question is if it goes through just short of the 18 weeks e.g 16 weeks but haven’t cashed the cheque until later, where do I stand please will I be in trouble even though I haven’t had the money until after? Any help please. Not trying to get away with anything just would like to provide for my family.
Sara (Debt Camel) says
How large are the debts in your DRO?
Jo says
Roughly £16,000 so it will all be paid off if I receive the money before the 18 weeks. But obviously it would set me and my family up for life. Before I was young and stupid when I got myself into debt. Thanks
Sara (Debt Camel) says
and how large is the inheritance?
Jo says
About £17, 000 but only a guess. Could be less
Ruby says
Hello Sara,
I’ve had a look through the previous comments and can’t see any info about my specific issue, so I’d be very grateful if I could ask you some advice/info on my situation please:
I owe a total of approximately £15,000 to a number of creditors. I paid a token payment to each through Stepchange, then this charity advised me that I should apply for a DRO. I was about to sign the DRO paperwork but decided to have some conversations with my creditors before doing this. They listened to how I was currently unable to pay them, and that I suffer with long term illness, and they were sympathetic – one bank actually offered to ‘cease collection’ of the debt. One by one I approached the other creditors, gave lots of evidence of my health situation and they have also agreed to cease collection of the debts.
My question is around the possibility of inheriting about £15,000 in the next few months. I have various statements in writing from the creditors, about how they view the accounts. One has said that my accounts with them “are now closed. This means: We won’t contact you about the accounts again”. But another creditor says although “we will no longer contact you in pursuance of these debts, please note that the balance will remain liable for this debt”.
Do I need to worry about having my inheritance taken to repay creditors, despite them saying they have ceased pursuing collection? If I have any chance of supporting myself in future, I desperately need to diversify my self-employed work due to growing ill health, and so could easily spend the inheritance on new equipment and tools. Would the creditors have any way of forcing me to re-pay the debt if they see funds in my account?
Any information gratefully received.
Sara (Debt Camel) says
So all your creditors have either wiped your debts or said they will not collect on them? You are not making any payments to any of them?
You haven’t had a DRO – you would have had to sign the paperwork and pay the fee and it would be on the register, so the DRO is irrelevant.
Do you have any other debts – utility arrears, deductions from benefits, council tax arrears, rent arrears?
“new equipment and tools” is this for your self employment work? Or is some of it for your housing eg things like new mattress and chairs or other aids that will make it easier to manage your health problems?
Ruby says
The creditors have said that they won’t be collecting the debts, as a result of my long term health situation. I haven’t paid anything to them since I made the last token payment through Stepchange last year. I have no other debts anywhere else.
Some equipment would be both work and health related, such as special tables and chairs to allow me to work from home in less pain. Some items would be needed as a direct result of having to work from home now, as pain levels no longer allow me to go out to work. There are also domestic items that I would love to buy to help with my pain levels and these include a mattress and a sofa.
My main question is, do I have a legal obligation to tell the creditors about any inheritance, now that they have said they won’t be pursuing the debts? One creditor even referred to the accounts as ‘closed’.
Sara (Debt Camel) says
I can’t see that you have a legal obligation to tell your creditors. If they had asked you to contact them again if your situation changed, that would be different. You may feel ethically you should have told them about your inheritance when they wrote off your debts, but perhaps you didn’t know about it at that point.
Can I ask if you are on disability benefits?
The reason is, that with 15k in the bank, your means-tested benefits (Universal Credit?) will be reduced. A lot. You can have 6k in the bank and this will not reduce your benefits.
So it makes sense to use the money to buy things that are needed now for your health problems – they will make your life easier and having less money in the bank will mean your benefits are not cut so much. If the DWP knows about your disability, then just make a list of what you are buying and the reason for it. Mattress, sofa, yes. Also less direct things such as heavier curtains so the house is warmer? carpets not rugs as less of a trip hazard? tumble drier to reduce condensation? It depends on what exactly will help you.
If the DWP doesn’t know about your health problems, then it may help to get a letter from your GP detailing your health problems and saying that X,Y and Z will help your health by reducing pain (or whatever).
I think it would be a good idea to talk to Business Debtline (https://www.businessdebtline.org/) about your self-employment business and how much of the inheritance to spend on tools for that. Set out what you need, what it will cost and how this will be shown in your accounts.
Ruby says
Thank you Sara, all of this is very useful info, feedback, and food for thought.
After years of poverty there are lots of purchases that would make my life less painful, and I’ll make a list and research how likely each is to be deemed as acceptable.
Thanks again.
L J says
Hello,
I have just completed my DRO, and a few weeks later, I received some money as a gift.
If I were to now buy some land, what complications would come up? Do the solicitors check my credit record? Do they investigate further when they see you’ve had a DRO recently? Are there other institutions, like Land Registry that will get a red alert if I try to buy land?
Thanks.
Sara (Debt Camel) says
Can I just check this was a gift? Not an inheritance?
L J says
Yes, my grandmother is dying, but not dead yet. Gave me the gift before death.
Sara (Debt Camel) says
That’s so nice of her!
Diven after your DRO has ended, the is all yours, no effect on your DRO which has completed. You can buy whatever you want with it, including land.
L J says
ok. But will anyone cause trouble asking for evidence of where the money came from, etc. I dont want them bothering her.
Sara (Debt Camel) says
No. Your DRO has finished. You don’t owe those debts any more. You don’t have to inform the Insolvency Service about this gift. If you are uncertain, talk to the adviser that set up your DRO and they should Explain this to you.
Richard says
Hi, I am the executor of my Aunt’s will, my brother and I are beneficiaries. My brother has a Protected Trust Deed that I did not know about and he did not disclose his inheritance to his trustees. They have contacted me and told me the inheritance should be paid directly to them. My question is, should I pay the Trustees or should I release the money to my brother so he can pay the trustees? Thanks. Richard
Sara (Debt Camel) says
I am not a solicitor. If your brother is happy for you to pay the money to them that may resolve the question? If he isn’t, you may need to take legal advice on your duties as an executor.
Richard says
Thanks, Sara. I simplified the question for clarity, it is far more complicated and my brother has a history of embezzlement and dishonesty to the family and we don’t talk. For weeks I’ve been seeking legal advice but no-one has returned my calls, and Citizen’s Advice have been unable to help. You were my last hope. If you are interested for research I can let you have the full details, email me.
Sara (Debt Camel) says
urghh. Do you live in Scotland too?
Richard says
Short version – No.
Sara (Debt Camel) says
I have deleted those details as I don’t think you want them on the internet.
I will send you the name of an insolvency solicitor – their firm’s website says they also handle wills. I hope they can help. So far as I know (and again you need to check this, not rely on what I am saying) you can charge legal advice you take as an executor to the estate.
Richard says
Thank you Sara, you have been a great help.
Jo says
Hi Sarah
My aunt died Oct 2019 and I was left a share in a house which needed to be sold.
I started my dro in Nov 2019
The house was sold Oct 2020 but I just received the actual cheque 2days after my dro has ended.
My question is do I need to declare it now it has finished?
Sara (Debt Camel) says
Yes you do. How much have you inherited? How large were the debts going into the DRO?
Jo says
Thanks for replying
£14000 debt £17000 inheritance
So does that mean also a will I’m left in April 2019 which hasn’t been finalised I would of had to declare that.
Is it because they died before the date?
Sara (Debt Camel) says
Yes it does. It is a shame you did not tell the debt adviser about these two inheritances when the DRO was set up.
Your DRO is now almost certainly going to be cancelled. I suggest you talk to the debt adviser who set it up asap and ask for help to tell the insolvency Service.
This means you will be left back with the debts… what sort of debts were they?
Jo says
I did tell them and they still advised this was the best option.
Was a loan and credit card.
Thanks for you help
Sara (Debt Camel) says
That is surprising but there may be some reason for that, they know your individual case, I do not. I suggest you need to talk to them urgently. Tell them what has happened. Tell them that you have been told it is highly likely your DRO will be revoked. Ask them why they recommended the DRO. Ask them what you should do now.
How long ago did you default on the loan and credit card?
Jo says
Thanks have been in touch
It’s a shame but they must of thought it was best at the time. I had only defaulted for a month I was struggling to keep upto date leaving myself short so I phoned for advice. The dro was the answer.
Never mind thank you for your time
Mandy Wood says
Hello
My friend has an IVA for around £30k and has been paying £100 a month for the last year .
Sadly her sister dies in July , most unexpectedly and left around £70k to her
Probate not yet granted and friend is an executor .
My friend is hoping to “ hide “ the money in her fathers bank account along with the £50k she received directly from the deceased’s death in service benefit .
I am urging her to contact her Iva company to sort this matter out ; she is typically appalling with finances .
My friend is if the opinion “ they won’t find out “
Which makes me think – how do they check ? I am assuming there is some method of checking the probate data base and any beneficiaries who are in Iva are flagged .
Thank you in anticipation of your assistance – also love your blog .
Sara (Debt Camel) says
Tell her not to be an idiot.
If she settles this now, she will be left with a good chunk of money.
If the IVA firm finds out later, they are likely to apply to make her bankrupt, which would cost her far more than just settling the IVA in full will.
robert says
sara.
i was in an iva it was due to finish on 1st feb 2019 or 2020 if not fully paid up.
during the iva, a missed bonus payment and a forced holiday,
the iva went over by 6 months + the year.
the iva finished, 1st july 2020.
my dad died on, 23rd march 2020.
the inheritence money was tied up in his house.
we just accepted an offer on my fathers house £290’000 (28th jan.), though obviously still some time to go before everything is finished up.
i have spoken with payplan twice, approx i month after my fathers death to inform them of the situation and send them copies of the will + death certificate, i was told that my supervisor might wave the the outstanding balance.
and again after my iva had finished approx nov, after they requested my yearly earnings, i got in touch with them again, a guy dealt with me, he requested the info for my dads will etc, he found it.
he said he would pass to my supervisor, and that i should get a finalization letter of my iva fairly shortly, still not received that yet!
in dec 2018 the outstanding balance was £20512.39, 19mths later, i paid in an extra £7159.50, guessing extra money would be added to the outstanding balance?
anyway they know the situation, but i have yet to inform them of the sale of the property.
is there a cool off period after an iva is finished & inheriting money, or does it not matter how long it takes, as long as the inheritence was issued whilst still in the iva?
Weatherman says
Hi Robert
I’m sorry to hear about your dad. You did the right thing by declaring the inheritance of the property – because it’s the date of death that matters there. I would say it’s always worth being open with the supervisor; if you hadn’t been able to sell the property, the equity would still be ‘due’ to the creditors, so you should let the supervisor know that it’s now been sold.
When you say the outstanding balance, is that the value of remaining IVA payments, or the total of all the debts included in the IVA? In any case, you would not have to pay more than the total of the outstanding debts plus fees (your supervisor should be able to tell you what this would be). This might well be more than the ‘total you were expecting to pay in IVA payments’, but should be considerably less than the remaining share of the property.
robert dunlop says
yeah £20512.39 was the outstanding balance that they told me on dec 2018.
i went through my final 19 payments after that date and i had paid an extra £7159.50 into my iva, but i guess more would have been added to the sum since, for supervisor fees etc.
the property is not sold yet and i have to share with my sis, but from the £290’000 we will be sharing, barring any problems i’m expecting approx £140’000 after solicitor & estate agents fees.
i have not informed payplan yet as i don’t want to tell them, then it to all collapse :(
if i ask for an outstanding balance, would the figure be likely to change again if i tell them, then it falls through or takes 3 or 4 months to complete or having completed the iva last july would the outstanding figure be set?