You can use your disability benefits to pay an IVA if you wish although you don’t have to. Your ongoing income for DLA or PIP will not be affected.
Included in this article:
- Are you allowed an IVA if you get disability benefits?
- Will your ongoing benefits payments be affected?
- What if your benefits payments increase during your IVA?
- Is an IVA the best option if you get disability benefits?
Are you allowed an IVA if you get disability benefits?
You are allowed to start an IVA if you receive disability benefits. When you first set up the Arrangement, you decide whether you put any of this income towards your IVA payment or not.
You don’t have to use any of your disability benefits to fund the Arrangement. You still need to show the money coming in on your income budget. However, you can then offset it with a similar amount in your expenses. You call this simply “disability expenditures”.
You do not have to justify exactly how your disability expenditures category is used.
That said, you still have to show that you can fund a minimum IVA payment. If you are able to do this from your other sources of income, there is no problem. But if you can’t, you will need to use some of your disability benefits to top up the payment (or even fund it in full).
Using your disability benefits to pay your IVA is perfectly acceptable. However, it is important to make sure you are left with sufficient funds to cover any extra extra expenses you have associated with your disability.
You do not have to use your disability benefits to fund your IVA but you might need to if you don’t have sufficient income from other sources.
Will your ongoing disability benefits payments be affected?
Starting an IVA will not affect your disability benefits payments at all. The money you receive for either PIP or DLA will remain exactly the same.
The funds you receive will continue to be paid to you in the same way as they are now. Normally this will be direct into your nominated bank account.
Remember, if you owe money to your current bank, you might need to open a new account before starting your IVA.
If you do need to open a new account, it is normally sensible to do so before you start your IVA. This will give you time to contact the benefits agencies and give them your new account details.
What if your benefits payments increase during your IVA?
An IVA will normally last for 5 years. If your general income were to increase during this time, your monthly payments would also go up. However, this should not happen if your disability benefits increase.
If you receive an increase in your disability benefits payments, this would be to assist you with the increased costs associated with living with your illness. It can’t be touched by your IVA company because there should be no associated increase in your surplus income.
You still need to highlight the increase at your Annual Review. However, it should be offset with an associated increase in your living expenses budget “disability expenses” category. As such, your surplus income (the amount you pay into your IVA) remains the same.
An increase in disability benefits during your IVA should not trigger an associated increase in your monthly payment.
Is an IVA the best option if you get disability benefits?
If you receive disability benefits, an IVA will allow you to reduce your debt payments to a single affordable amount. This will mean you no longer have to worry about how you will make your payments each month.
Your income is likely to remain steady because you receive these benefits. As such, you should always be able to maintain the agreed IVA payment. You should therefore be debt free in 5 years.
If you are a home owner, the Arrangement will help protect your house.
Despite all of these benefits, if you live in rented accommodation, you should also consider going bankrupt. This could be a cheaper way of becoming debt free overall.
Given you are a tenant and your only income is benefits, you will not have to make any further payments towards your debts at all. You will be debt free in just 12 months.
That said, their might be other implications such as the affect on your car. So you should not decide to go bankrupt without taking advice from us first.
Want more advice about starting an IVA if you are on disability benefits? Give us a call (0800 011 4712) or complete the form below. Its free and confidential.