You are allowed to save during an IVA. Saving should actually be encouraged to help in times of financial emergency.
Included in this article:
- Is saving allowed during an IVA?
- How to save while in an IVA
- Is it better to increase your IVA payment?
- What if you have no savings and face a financial emergency
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Is saving money allowed during an IVA?
There is nothing to stop you saving money during an IVA. In fact in many cases it is necessary to put aside some of your agreed living expenses each month.
It is likely there are allowances in your budget which you do not spend immediately. Perhaps car maintenance or a clothing fund. These should saved so the money is available to cover the costs when they come up.
In addition if you can reduce your living expenditure in certain areas you are allowed to save this money as well. In this way you can build up a fund to cover unexpected expenditures.
As long as any savings you make come out of your agreed living expenses budget you are allowed to keep them. You do not have to declare them and they do not have to be paid into your IVA.
Struggling to get your head round all of this? We can help. Call us (0800 077 6180) or complete the form below. The advice is free and confidential.
How to save during an IVA
You might think it will be relatively easy to save during an IVA. However even if you have specific amounts in your living expenses budget which are not used each month putting them aside can be harder than it seems.
The first thing you will need to do is work out a savings plan. First you must decide what you can afford to save. You might feel it is possible to save a small amount from your housekeeping or sports and hobbies allowance.
You should not to be too ambitious. Plan to save small amounts first. Once you have been in your IVA for a few months you can review and increase the amount you put aside if possible.
Once you have know what you will save you must decide when to do it. It is best to put money aside as soon as you get paid and open a specific savings account at your bank.
Is it better to increase your IVA payment instead of Saving?
If you can save money from your living expenditure budget you might think it would be best to use this to increase your IVA payments. Surely this would mean the Arrangement would be paid off faster?
In fact this is not the case. If you are able to increase your monthly payment during an IVA all that happens is you pay back more of the money you owe. The number of payments you make is not reduced.
It is possible to settle an IVA early. However to do this you will have to provide a cash lump sum which is offered to your creditors instead of ongoing monthly payments.
What if you have no savings and face a financial emergency?
You never know when you might face a financial emergency during an IVA. Even if you have started to save you might not have have put enough aside to cover an unexpected expenditure which comes up.
If this happens your first instinct might be to try and borrow more to tide you over. It might be possible for you to approach a pay day lender who might help you despite your poor credit rating.
However you must avoid this strategy. If you borrow more it will be difficult for you to maintain both your IVA and repay the new debt.
It may be possible to add a new debt into the Arrangement but not easy.
If you have a financial emergency during your IVA but have no savings set aside to cover it speak to your Insolvency Practitioner. They should be able to arrange a Payment Break which will help.
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Hello. What if your income decreases? Say going from night shift to day shift.
Thanks
Hi Andrew
If your income falls there are various options you can consider depending on whether the fall is permanent or not. If it is temporary you could speak to your IVA company about taking a payment break until it goes back to normal.
If the fall is permanent then you will need to speak to your IVA company about the possibility of reducing your payments. They might be able to help with this as long as you can still pay enough to make your IVA viable. In these circumstances it is also likely the IVA will be extended for an extra 12 months.
If you can no longer afford to make ongoing payments or the amount you can afford is to low for the IVA to remain viable then it is likely that it will fail. You will then need to chose an alternative solution to deal with your debts.
Hi there,
In an IVA can I save cashback from sites like quidco and topcashback, and monetary birthday gifts? What about tax rebates?
Hi Gabs
You can definitely keep and save birthday gifts during an IVA. The same applies for cash back as long as it is ad hoc and relatively small amounts (for example £10-£20 here and there is no issue). However if you are talking £100s every year from cash back schemes you would need to discuss that with your IVA company
Tax rebates are 100% a windfall. You cannot save these. They will have to be paid into the Arrangement over and above your normal monthly payments.
Hi,
I am just looking for some advise, my IVA is due to begin next month with my first payment and i am wondering, if i save any money i have and have enough in a few years to be in a position to offer a lump sum to end the IVA is this acceptable or will they try and take my savings regardless and continue the IVA?
Thank you
Hi Louise
Saving during an IVA is allowed as long as the savings come from your agreed living expenses budget. You can’t save by earning extra overtime and putting this all aside (some would have to be paid into the Arrangement).
Because of this it is normally difficult to save sufficient funds to settle your IVA. You usually have to pay the equivalent of the outstanding payments so saving enough to achieve this will be hard.
That said I would not want to discourage you from saving during your Arrangement. It is always a good idea to do so if you can. You can then fall back on these funds if you have emergency expenses or a reduction in your income during the Plan.