The monthly payment you make into an IVA is based on your disposable income. This is the amount you have left after covering your living expenses.
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- How much will your monthly IVA Payment be?
- Is there a minimum payment amount?
- Does your Partner have to contribute?
- Will your monthly payment ever change?
How much will your monthly IVA Payment be?
The monthly payment you have to make into an IVA is based on your disposable (or surplus) income. This is calculated by deducting your total monthly living expenses from your monthly income.
For example if your total income is £2,000/mth and your total living expenses are £1,800 your disposable income and therefore IVA payment will be £200/mth (£2,000 less £1,800 = £200).
You have to pay 100% of your disposable income into your IVA. It is therefore vital that the figures you use to work it out are correct. Make sure that your living expenses budget includes all the expenses you are likely to need including annual costs such as car maintenance.
Completing an IVA will normally mean that you pay back less than you owe to your creditors. The debt outstanding at the end of the Arrangement is written off.
Is there a Minimum IVA Payment Amount?
Generally speaking you will need to be able to pay at least £80-£100 per month into your IVA. If your disposable income is not sufficient to make this level of payment there are a couple of options you can consider.
First your spouse or partner may be able to make the required payments on your behalf. This is actually a relatively common way of starting an IVA particularly for people who have no income of their own.
Second you or a third party might be able to make a cash lump sum available to do a Lump Sum IVA. This type of Arrangement does not require any monthly payments.
A Lump Sum IVA might be ideal if you have recently received a windfall such redundancy money or can remortgage your property to release equity.
Does your Partner have to contribute to your monthly IVA Payment?
If you are living with a partner or spouse legally speaking they do not have to contribute to your IVA payment. They are not liable to pay debts which are just in your name even if you are married.
However if your partner has their own income you will need to declare it in your IVA proposal. You do this by presenting a household income and living expenses budget. This will then give your household disposable income.
The household disposable income is then split between you and your partner pro rata relative to your individual contributions to the income. So if you contribute 60% of the income 60% of the disposable income is attributed to you.
Your share of the household disposable income will have to be paid into your IVA. Your partner can normally keep their share to do with as they wish. However there are occasions where your creditors may demand it is also paid into your IVA.
If your partner has their own income a household income and expenditure statement must be included in your IVA proposal. This is so your creditors can ensure your partner is paying their fair share of the household bills.
Will your Monthly IVA Payment ever change?
Your IVA payment is not fixed. It can go up or down during the Arrangement. If your income rises permanently your disposable income may also increase. In this situation your payment will also go up.
However you will not have to hand over all of the extra money you earn. You will be able to keep 50% of any increase in your diposable income. In other words if your disposable increases from £100 to £200 per month your payments will only increase to £150 per month.
If your income falls it may be possible to reduce your payments as long as the IVA remains viable. However in return you usually have to extend the Arrangement.
If your living expenses fall due to a specific reduction in your costs (for example the end of a car HP agreement) all of this saving will normally have to be passed on to your IVA.