Where all or part of your income is made up of benefits there is nothing to stop you using an IVA as long as you have sufficient disposable income.
Jump to article contents:
- Can you start an IVA if you are claiming Benefits?
- What if you have a combination of wages and benefits?
- The implications if your benefits change
- What if you cannot afford monthly payments?
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Can you start an IVA if you are claiming Benefits?
You can start an IVA whether or not your income is made up of benefits, wages or a combination of both. The deciding factor is whether you can afford to make reasonable payments into the Arrangement each month.
The amount you will have to pay is based on your disposable income (the amount left after all your living expenses are accounted for). For an IVA to be viable you will generally need to have disposable income of at least £80 to £100 per month.
If you are on benefits money will be tight. As such even if you can afford the required monthly amount on paper you need to be comfortable in your own mind that this is sustainable.
If you are receiving PIP you do not have to justify how this money is spent. You can include an equivalent amount in your expenses budget called “PIP Expenditure”
What if you have a combination of Wages and Benefits?
If you are working but your wages are low your income may be topped up with benefits such as working and child tax credits. You can certainly consider an IVA in these circumstances.
In the same way as if your income is only made up of benefits you will need to be able to pay at least £80-£100 per month towards your debts.
Again you must be sure that you can sustain the agreed payments. If you start an IVA but then realise that you are unable to keep paying the agreed amount it will be at risk of failing.
If your payments are relatively low and your IVA fails it is likely that you will lose the money you have paid in.
The implications if your Benefits change during your IVA
Your circumstances may change during your IVA. You might find a job that gives you an increase of income or have a change in family circumstances. These things will affect the amount of benefits you receive.
If you are in this situation you must inform your IVA Company straight away. They will need to review your income and expenditure budget to assess whether your disposable income has also changed.
If it has increased the payments you make into your Arrangement may also have to rise. If the amount you can pay has fallen your creditors might agree to you reducing your payments.
You should delay starting an IVA if you know your benefits are about to change. You will not be able to correctly calculate your disposable income until you know what they will be moving forward.
What if you cannot afford monthly payments into an IVA?
If you cannot afford to make large enough payments to start an IVA this solution may not be right for you. In these circumstances you should consider other options.
If you or a third party can make a cash lump sum available you might be able to do a Lump Sum payment IVA. This would not require any ongoing monthly payments.
If you are renting or have very little equity in the property you own it might be better to consider Bankruptcy. Given your only income is made up of benefits you will not have to make further payments and will be debt free in 12 months.
On benefits and considering an IVA? Give us a call (0800 011 4712) or complete the form below. The advice is free and without obligation.