Getting your IVA Living Expenses budget right is really important. Understanding the allowances you can include will ensure your budget is correct.
Jump to article content:
- What is an IVA Living Expenses Budget?
- The IVA Living Expenses Allowances
- Do you have to stick to the suggested levels?
- What can you do if you get your Expenses budget wrong
What is an Living Expenses Budget?
An IVA Living Expenses budget is a list of all your monthly household expenses. It includes everything from the amount you pay for your mortgage or rent to your utility bills, food and shopping and transport costs.
Getting the budget correct is critical. The total amount is used to calculate your disposable income. This is what is left from your income after all your expenses are taken into account. It is the amount you will pay into your IVA each month.
Your living expenses budget should not include amounts for paying the debts which will go into your IVA. Once the Arrangement starts you will stop making these payments.
If the figures in your living expenses budget are too low your disposable income will be wrong. The amount you are asked to pay into your IVA will be greater than you can afford and you will struggle with the payments.
The IVA Living Expenses Allowances
There are various categories of expenses you need to include in your IVA Living Expenses budget. Generally speaking they are either fixed or variable.
The categories you can include and acceptable allowances for each can be found in our living expenses guide which is free to download.
Fixed expenses are things like your rent or mortgage, utility bills and child care. They are fixed because they are the same each month. Variable expenses include food and clothing, entertainment and transport. They may change each month depending on what you spend.
When you apply for an IVA your creditors will compare the amounts you include in these categories to their guidelines. Using our guide will ensure you stick within these guidelines and you do not miss anything out.
Do you have to stick to the IVA Living Expenses Allowances?
You may feel the living expenses you need are higher than the allowances suggested in our guide. Perhaps your fuel bills are higher because you drive further than average. There may be someone in your household that has more costly medical needs.
If you are in this position you should include the real cost of the expenditure item. As long as the amounts are justifiable and reasonable they will normally be accepted. You may be asked to provide evidence such as fuel receipts.
Even if you feel you have justified higher or extra living expenses your creditors do not have to agree to them. If they do not you will have to reduce them or consider an alternative debt solution.
Despite your efforts to justify your expenses your creditors may reject anything they feel is unreasonably high. If this happens you can agree reductions and a higher monthly payment. However you should not start an IVA unless you believe the payments you ultimately agree are affordable.
What can you do if you get your IVA Living Expenses wrong
It is possible that you have already started your IVA but now you realise that your living expenses budget is wrong. Perhaps you feel the amounts you included are too low or you missed some out altogether.
If this is the case your payments will be more than you can afford. You will then struggle to maintain them. You may even feel the IVA has made your situation worse when it should have become better.
One of the most common reasons for an IVA to fail is that it is based on unrealistic monthly payments.
If you are struggling with your IVA payments you should speak to your IVA company straight away. They may be able to reduce the amounts for you. However you may be asked to extend the length of the Arrangement to compensate your creditors.