A reader asked:
I have received a letter from my IVA firm with a cheque for over £2000, saying uncashed dividends had been returned by one of the creditors. They have said if I don’t cash it in 90 days they will give it to a charity.
Now I’m worried – What are these dividends and why would the IVA firm send them to me, surely it would be classed as a windfall? It says the creditor should claim these directly from me! Does this mean I’m still not out of debt? My IVA finished two years ago and I have had the completion certificate.
First I have to say that this issue is unusual. If you are currently in an Individual Voluntary Arrangement (IVA) don’t start hoping you will get a cheque like this at the end!
What are these “uncashed dividends”?
When you make payments into your IVA, your IVA firm deducts its fees and then divides the rest between your creditors. These payments to creditors are called “dividends”. At the end of your IVA, a final distribution will have been sent to your creditors.
Sometimes these payments are not accepted by the creditors – the cheque is never cashed or a payment is returned. The most common reason is probably a systems error: the creditor doesn’t recognise the reference so it doesn’t know which account it should be allocated to.
After two years your IVA firm is fed up of trying to sort this out. It wants your case completely closed, so it doesn’t have to do any more work on it, and to close the case it has to get these unclaimed dividends off its books.
The IVA firm can’t pocket the money itself because they can only claim fees for certain specified things. It isn’t a “windfall” – that is defined as something which you received between the start and end date of your IVA. The money could be redistributed to your other creditors (unless they were paid in full) but the costs of doing this are often so high the money is simply sent back to you.
The money could be redistributed to your other creditors (unless they were paid in full) but the costs of doing this are often so large the money is simply sent back to you.
You aren’t still in debt!
The IVA firm may not have yet marked your case as closed, but your IVA has completed and the debts in it were wiped out. The fact this money is still in limbo doesn’t change that – you have your completion certificate.
Is this money now yours?
Some recent IVAs have a term that says once unclaimed dividends are sent to you, the creditor can’t claim them. This is from the 2014 IVA Protocol:
10(3) The Supervisor must pay you any funds he/she holds representing dividends that are still un-cashed 6 months after payment of the final dividend. Once this has been paid to you the creditors have no further claim to these funds.
But older Protocol IVAs don’t have this clause. And IVAs on R3 standard terms say:
56(3)[Debtor liable for unclaimed Dividends] Once a Dividend has been paid to the Debtor … the Creditor must claim it from the Debtor…
Should you try to pay the dividend to the creditor?
It’s not your job to try to sort this out. I would suggest not bothering. There is only one exception here, and that is pretty unlikely – if the debt is still showing as unsettled on your credit records you need to get that resolved.
If you see a debt on your credit record that looks as though it may have been the debt with this creditor (possibly it has been sold to a debt collector?) then ask them to set the balance to zero and the default date to the start of your IVA, as How to clean up your credit record after an IVA explains. Doing this may wake them up so that they will then ask for their final dividend and you can send them the money.
If the debt isn’t there, it doesn’t really help you. By now the debt is very likely to have disappeared from your credit record as the default date should have been over six years old, even if the creditor didn’t mark the debt as settled. So when can you assume this money is yours?
It’s unlikely you will be asked for this money
Your IVA firm wouldn’t be proposing to give the money to charity if it thinks the creditor is likely to pop up and ask for the money. It is, however, possible…
To be 100% sure, pay the cheque into a separate savings account and wait four years. At that point, it will have been six years since your IVA ended and you can safely treat it as your own.
If you really need the money before then, you could use it and accept that you may have to make an arrangement to repay it to the creditor if they ever do get in touch – a sort of interest-free loan.
Getting this cheque is very probably good news and can’t be bad news. Make sure you do cash it! And file the letter from your IVA firm with your Completion Certificate. These documents should be kept for a very long time.