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

    Toni says:

    Hi there
    I’m just wondering if I’m able to apply for student loans/grants whilst on an IVA?
    Kind Regards

      Hi Toni

      If you are a student, you can still apply for government backed student loans. These are available to all eligible students regardless of the status of your credit file.

      However, you must not apply for student credit facilities through a bank or other commercial lender without first discussing this with your IVA company. Given your creditor rating is poor, it is unlikely that such lenders would offer funds to you anyway.

    courtney says:

    can i save the money to pay off my IVA early or will this be frowned upon as being more financially stable and increase monthly payments?
    thank you!

      Hi Courtney

      From what you are saying I understand that these potential savings will come from extra money you could earn (perhaps overtime or bonus payments)? If do do earn extra income in this way, you need to disclose it to your IVA company. They will take around 50% of the extra earned in any month. This would not pay your IVA faster. It would just mean that more money is paid back to your creditors.

      The remaining 50% is yours to keep and do with what you wish. You can save this if you like. It might be possible to save enough to eventually make an offer to settle your IVA early but it would be unusual.

    Simona says:

    Hello.
    If I managed to save some money while I am on IVA just cutting expenses with no overtime or bonuses, can these savings can be taken if I decide to make a Bankruptcy because I planning to move abroad and won’t be able to keep up with IVA payments?
    Thank you

      Hi Simona

      If you are planning to move abroad, stopping your IVA does sound like a sensible option to consider. It will certainly take away the pressure of your UK debts and give you a fresh start. In terms of your savings, if the amount is a few hundred pounds that should be fine. However, if you are left with any more than that (after the associated cost of going bankrupt), there is a risk that it would have to be handed over to the official receiver.

      I would suggest that you speak to us before making your final decision so we can advise you on all the ins and outs. If you would like to do that please give us a call (0800 011 4712).

    Costel says:

    Hi. If i have a IVA in place and and now i am a student and i recive maintenance loan from SFE, can i invest the money from the student loan in a ISA investment account ?? Or if they see that i have a account like this, will the IVA take my money?

      Hi Costel

      As discussed in the above article, there is nothing in the IVA rules that says you can’t save during an IVA. In fact if you are able to, it is to be encouraged. That said the question is always where would the money you are saving come from.

      If your income has not changed but you are still able to put money aside because you are making savings on your agreed living expenses budget, this is no problem.

      The issue is where you are only able to save because your income has increased (through whatever means). If this happens, you should first report the change to your IVA company. They will decide how much of the increase you can keep and how much will need to be added to your IVA payment. You can then save any of the amount you are allowed to keep.

      With regard to your income increasing due to the fact you get a maintenance loan from Student Finance England, my feeling would be that this would not be treated as income in the true sense. Therefore, you should be able to save as much or as little of the loan as you like. However, I would recommend you double check with your IVA company before proceeding as they may take a different view.

    Lisa says:

    Hi,
    If I have an IVA based on my current salary but that goes down. Can the payments be reduced to reflect this?

      Hi Lisa

      It is possible to reduce IVA payments following a reduction in income. That said, whether or not your IVA company will be able to help you will depend on the level of your payment currently and if reducing further would still leave a viable IVA.

      Remember, if you do get agreement to reduce your payments, this will normally go hand in hand with an extension of the arrangement normally for 12-24 months.

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