Saving in an IVA

Saving in an IVA

Saving during an IVA is allowed. If fact most people will need to save to some extent during the Arrangement. This makes sure there are sufficient funds available to pay for annual expenses such as car servicing when needed.

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Can you Save during an IVA?

There is nothing to stop you saving during an IVA. Once your living expenses budget has been agreed you are in full control of what you do with your agreed spending allowances. You can save as little or as much of these as you want.

In fact, saving during the Arrangement is often a necessity. It is likely that there will be expenditures in your budget which you don’t pay for each month. Good examples of these are the budgets for home or car repairs.

You need to ensure that you save these funds. This way, they are available when those periodic bills and costs do come up.

There is no limit to the amount you are allowed to save during an IVA. Just as long as what you put aside comes from your living expenses budget or from extra earnings you have been allowed to keep. More on this below.

How to save during an IVA

Although saving during an IVA is important, doing so is by no means easy.

Normally, your only option will be to find cost savings from your agreed living expenses. Perhaps you could reduce your monthly energy bills by switching suppliers. Alternatively you might be able to make small cuts to your housekeeping, travel or leisure budgets.

In additional to cutting costs, you might also be able to save if you can earn a little extra each month. If you do overtime or earn a bonus some of this will have to be paid into your IVA. However at least 50% will be yours to save.

The key to saving during your Arrangement is making sure that you physically put the money aside each month.

The best way to do this is open a savings account at your bank. That way you can physically transfer the money you want to save into this account and you will be less tempted to spend it.

If you earn extra by doing overtime or get a bonus, you can’t save all this money. Such additional income must first be declared to your IVA company. 50% will have to be paid into your IVA. You can save the remaining 50%.

Can Savings be used to Settle your IVA early?

After you have been saving for a while it is possible that the amount you have aside will grow to a reasonable sum. In theory you might be able to use the amount you have saved settle your IVA early.

The money you have saved from your agreed expenses budget is yours to keep. You are not obliged to pay it into the Arrangement and your creditors have no claim on it. As such if the sum was large enough it could be offered to settle early.

Having said that it is very unlikely that you will be able to save a sufficient sum during your IVA to make a settlement offer that would be acceptable to your creditors. As such it is normally best to simply hold on to your savings.

What if you are unable to Save and face a Financial Emergency?

It is possible that you will face an unexpected financial crisis during your IVA before you have managed to save enough to cover it. If this happens you may be tempted to try and borrow (perhaps from a Payday lender).

You must not do this. Borrowing more could put your whole Arrangement at risk. It will leave you in a position where you are unable to pay both your agreed monthly payment and the extra you have borrowed.

As such if you find yourself facing a financial emergency you should first speak to your IVA company. Most will allow you a payment holiday. This means you stop paying the Arrangement and instead use the money to cover the emergency.

Do not be tempted to borrow more during an IVA. It will put the Arrangement at risk. If your savings are not sufficient to cover a financial emergency speak to your IVA Company.

34 thoughts on “Saving in an IVA

    Greg says:

    Hi

    I voluntarily surrendered my car a few months ago (April approximately) because I fell behind with payments. I now use the train to get to work (my wife drops me off at the station). As a result of the car going back I have a bit more money. I have been saving this to buy an annual rail ticket in september. Is this OK?

      Hi Greg

      This situation is not straight forward. If your expenses fall while you are in an IVA you cannot just save the cash you have freed up. The situation you have described is a fundamental change in your financial circumstances and must be discussed with your IVA Company.

      You will need to complete a new income and expenses budget with the previous car expenses taken out and the new rail / additional travel expenses added in. If as a result your disposable income is the same then your IVA payments will not change. However if it has risen your payments will have to go up . You are not allowed to simply save the excess.

      If you have not already done so I advise that you speak to your IVA Company about this asap. If you had a car on finance which has been returned but not replaced then the total cost of running the car must be deducted from your living expenses budget (not just the finance payment but also fuel and allowances for insurance, road tax and maintenance etc).

      In my experience the total of these things will be greater than the budget required to pay for a rail ticket. As such your monthly payments may have to go up.

    Nico says:

    I am in an IVA. My salary has been increased and I have around 500 pounds more a month. How much do I need to pay more towards to IVA? I am in debt of 12k. I agreed with IVA to pay 6k during the 5 years at the moment I pay 100 pounds. so if they will want more money, for example by 200 more, total 300, so if we times 60 months by 300 pounds. In total I will pay back 18k which is more than 12K. Please advise.

      Hi Nico

      From what you have said I think there is a strong possibility that your payments will increase significantly after your pay increase. This will mean you are very likely to end up paying more than you originally owed. This would not be sensible.

      Before making any decisions you should speak to your IVA company and see what they decide your payments will have to go up to. Then you will know exactly what the problem is. However if you find yourself in the above scenario I would recommend cancelling the IVA and paying the debts yourself.

    Will says:

    Hello.
    I am in an IVA,or will be soon anyway.Its 11k debt,so over 5 years I will payback 6k at 102 a month.
    My concern is that I could,in the near future be given a substantial amount of money,as a gift from my mother,my question is,how would that affect my IVA? Would I be able to settle the 6k or would I have to pay the full debt,if the money I am given is over 11k?
    Thanks in advance.
    Will.

      Hi Will

      You need to be very careful.

      If anyone gives you money during your IVA it is a windfall. 100% of the amount received will have to be paid to your IVA company. This would NOT shorten the length of your IVA. You would have to continue making your monthly payments. It would simply increase the amount you repay overall. So in theory you could end up paying more than your total debt because you would also be liable to pay the IVA company fees and interest.

      This being the case, you should either ask your Mother not to give you anything until after your IVA finishes. Or you can speak to your IVA company about offering a lump sum from your Mother to settle early. However for this to work you would normally need to be in your IVA for at least 6 months.

      Alternatively you could consider delaying starting your IVA. Once you receive the funds from your Mum you could then consider what is known as a lump sum IVA. In other words pay a single lump sum which then settles your IVA straight away. Then you don’t have on going monthly payments to worry about.

      If you would like to discuss any of these options, then please give me a call (0800 011 4712)

    Diane says:

    Hi. My husband is entering an iva. He is a taxi driver. He will need to replace his taxi in 4 years as its not allowed on road after so long. Can he save for another taxi…is it considered reasonable. Thank you

      Hi Diane

      I assume your husband is self-employed? As such he will not normally be allowed to save for a new vehicle out of his agreed living expenses. However, he should be able to budget for vehicle depreciation in his business expenses. This amount can be saved and put towards a new vehicle.

      That said I think realistically it will be difficult to safe a sufficient amount to buy a new vehicle outright which is suitable for use as a taxi within 4 years. He may only be able to save enough for a deposit and then will need to consider financing the rest.

      To be 100% sure about where he stands, I would strongly urge you to discuss this situation with his IVA company before he agrees to start the IVA.

    James says:

    Hi. I have a IVA and I have been paying it for 3 or more years now. It runs out in 2023. I have manged to save around £3k since I started from my income and some gambling. I know I have to stop gambling money. Do I have to declare the savings?

      Hi James

      You can keep any money you have saved by cutting back on your agreed living expenses budget. That is yours to keep. However if you have been able to save because you have done overtime or your income has gone up, you are not able to keep all of this. You have to declare any extra earnings and around 50% of it will have to be paid to your IVA company.

      It is not a good idea to gamble while you are in an IVA. I recommend that you stop. Strictly speaking, any extra cash you have “earned” through gambling is a windfall. 100% of windfalls over and above £500 should be paid to your IVA company. They would ask for it if they found out about it.

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