For some debt solutions, coming into inheritance can result in people being made to offer their windfall into the debt solution.
If someone knows they are going to be coming into money it can change which debt solution is best for them and should be made clear when receiving debt advice.
Inheritance & Insolvency Solutions
An insolvency debt solution is where a person is unable to repay the full amount owed or meet their monthly contributions towards their debt on time. It’s these solutions which could see people lose any inheritance which is left to them by a loved one.
In an IVA, Trust Deed or Bankruptcy solution, any inheritance, lottery win or general windfall must be provided for the benefit of the creditors. This means you could repay all of the debt and any fees or charges.
Both the English and Scottish version of bankruptcy will affect a debtor the same way in regards to inheritance.
When someone enters bankruptcy or sequestration any disposable income or available equity must be made available throughout the term of the solution. So, if somebody enters the solution and comes into money during the term of the solution, they would likely be asked to provide this towards the bankruptcy specialist.
While the debt solution will last for 1 year in bankruptcy, any available money received within that period must go towards repaying the debt.
IVA/Protected Trust Deed
When entering either an IVA or a protected trust deed a person in debt is agreeing to repaying what they can afford over a fixed period of time. This means the payments can change during the debt solution term.
A trustee will be appointed to monitor the finances, negotiate with creditors and essentially take control of their assets.
It would be the job of the insolvency specialist to make sure the creditors got back the money they were due and anything extra, if that was possible.
Anyone coming into inheritance while in an IVA or protected trust deed will need to pay it towards the debt along with the fees for the debt solution.