If you are planning to start an Individual Voluntary Arrangement you will need to calculate your monthly expenditure budget. The amount you spend each month will determine how much of your income you need for living and how much you will have to pay to your creditors.

If you want your creditors to accept your proposal you must make sure your expenditures are reasonable in their eyes. In this way they will feel comfortable that you are making the best effort that you can to repay them.

In September 2010 there was some good news in the fact that what creditors regard as reasonable in terms of living expenses were slightly increased. We consider these changes and what they will mean.

How have the IVA Living Expenses allowances increased?

Many expenditure items have been increased by just a few pounds a month. However, the most significant increase is in the area of fuel and parking which has been increased by nearly £40 a month. This is to reflect the recent increases in the cost of petrol.

The other area of significant change is that creditors have now accepted that tobacco should be included as a line item in a smoker’s expenditure budget.

BMD Tip: When you are completing your expenditure budget you may feel that the allowances are still extremely tight and you are used to spending more. You must remember that in an IVA your creditors are being asked to write off a significant amount of your debt. As such in return you need to make every effort to minimise your living expenses and so pay as much back to your creditors as you can.

Can you go over the IVA living expenses allowances?

It is very important that you do not agree to an IVA expenditure budget that you cannot afford. If you do this you will struggle to make ends meet and be at risk of missing your agreed debt management payments.

If you believe that you need to spend more than the expenditures allowed you should include a larger figure. A good example of where this would be reasonable is if you need to travel a particularly long way for work and therefore your petrol expenses are higher. Alternatively you may or members of your family might have particular dietary requirements which need to be paid for.

Having said this you must be prepared to justify the increased expenditures and understand that there is a possibility that your creditors will refuse to accept anything which they feel is not reasonable.

Good news for IVAs

Given the recent increases in the cost of living essentials such as food and fuel, it is very good news that creditors have agreed to increase the living expenditure budgets which they are prepared to accept.

This will make things easier for people who are struggling with debts and want to start an IVA.

However, if you are negotiating with your creditors it is important to understand that you must make every effort to reduce your expenses wherever possible so as to offer the best return that you can.