Your IVA payment will always be based on what you can reasonably afford. That said there is usually a minimum payment for an IVA.
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- How much will your monthly IVA payments be
- What is the Minimum payment for an IVA
- Could the amount you pay change during the IVA?
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How much will your monthly IVA payments be
It is really important to understand that your payment will be however much you can afford. Some people pay a large payment each month, because it is affordable for them and perhaps they have a larger total debt. Don’t get too fixed on the amount.
Your priority should be that you can afford all of your normal living expenses. This will prevent you getting into further debt. Your monthly payment is calculated by subtracting all your living expenses from your total income. This is called your Disposable Income (DI).
Calculating your DI correctly is really important as it forms the basis of your IVA payment. You have to give all your DI to your IVA each month. Get the DI calculation wrong and you might not be able to afford your payments and your IVA could fail.
Your creditors will expect all of your disposable income each month. If they suspect you are holding some back, they may refuse your application.
What is the Minimum payment for an IVA
The ‘minimum’ payment for an IVA has changed a lot in the last 10 years. Whilst the payment is based on what you can afford, there used to be a minimum of around £250 per month. However that has reduced a lot in recent years.
If you present an IVA today, you should be able to afford at least £100 a month towards your debts. Whilst you might be able to start an IVA for slightly less, you would be expected to increase it during the IVA.
Creditors might accept a lower payment at first if they know you can pay more later in an IVA. For example, if a car finance deal finishes in 2 years and you then have £150 more per month to contribute to the IVA.
If creditors are accepting to write off a chunk of your debt, it is only fair that you pay as much as you can afford during the IVA.
Could the amount you pay change during the IVA?
In the spirit of paying as much as you can afford, you need to understand your IVA payments are not fixed. Creditors will expect you to pay more if you can afford more.
This usually arises when your income increases or you get overtime and bonuses. This is usually reviewed each year at your annual review when your budget is checked by your IVA supervisor. However, if you know you have an increase or extra money, do not wait for the review.
Always check with your IP whether you need to save extra money during the year. If you have not paid the extra amounts during the year you will be expected to at the annual review. If you have not saved the money you risk your creditors failing your IVA.
It is possible to reduce your IVA payments if there is a genuine reason why you have less money available each month. However the creditors do not have to agree to this.