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

    Ismael says:

    Hi, If I an in an IVA and I receive an extra income due to a work accident claim, will this go to the IVA or can I keep it? Will my payments into the IVA be more that the total amount of money I own to the banks? Thank you.

      Hi Ismael

      The rule of thumb is that compensation payments received during an IVA are treated as a windfall. In other words, the funds have to be paid into the IVA. That said, you will normally be able to keep any part of the compensation paid as a result of pain and suffering. Only the part relating to “loss of earnings” should be payable to the IVA.

      In terms of the total amount you may have to repay during your IVA. The rule is as follows: Where funds allow you have to pay up to 100% of the original balance owed + 100% of the IVA company’s fees and costs + interest charge on the date at 8% pa from the start date of the IVA. As such, if the compensation received is sizable, it is possible that you could end up paying more than the original amount owed.

    Neil says:

    Hi, can I open a stocks and shares ISA whilst in my IVA?

      Hi Neil

      You are allowed to save during an IVA as long as the money saved comes out of your agreed living expenses budget or your share of any overtime or bonuses earned.

      If you chose to pay these savings into a stocks and shares ISA that is also allowed.

      Most IVA companies will allow you to keep any interest earned on your savings (or capital growth in the case of a stocks & shares ISA).

    Kerria says:

    Hi im in an iva and was wondering would I be able to save money in a savings account with my husband

      Hi Kerria

      Any money you are able to make from your agreed living expenses budget can be saved anywhere you like. If you want to use a joint savings account with your husband that is absolutely fine. The money you save is yours to keep so there will be no problem.

    Tom says:

    Hi – Can I use any savings from my agreed budget to invest into Forex Trading? If so, would that mean that I only have to pay 50% of the additional investment? (I.E – If £100 was invested and £50 additional was gained, then £25 to the creditors?)

      Hi Tom

      The problem here is that there is probably nothing formal in your IVA agreement which dictates what happens in this situation. As such, we need to consider what normally happens to interest earned on savings during an IVA. The general view would be that this is yours to keep.

      In the last 10 years, no IVA company has really been bothered about interest earned on money people have managed to save because the figures are so small. Savings interest rates have been next to nothing so whether or not someone manages to earn interest over a year of a few pounds really has not been worth worrying about.

      Given this, I would say that if you were to invest your savings and as a result earned a few pounds (£50-£100 a year), your IVA company would have no interest and the gains would be yours.

      However if the earnings become greater and regular (say £100 a month), then you would be obliged to declare this as additional income (as you would have to with any type of pay rise). Your IVA company would then likely want to increase your monthly IVA payment accordingly.

    Alex says:

    Hi,

    I am currently 4 years into my IVA, am I able to put money into a help to buy ISA, as well as a general savings account to spend on whatever I wish as long as this comes out of my agreed living expenses budget? Which from your other article “IVA Living Expenses Allowances” is virtually any of my outgoings? I just don’t want my IP to have any claim if I start saving more heavily, thanks!

      Hi Alex

      Any money you are able to save from your agreed living expenses budget is yours to keep. If you want to invest this into an ISA of what ever type, this is entirely up to you. Your IP does not have a claim on any money saved in this way.

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