Before you start an IVA you will need to put together your expenditure budget. When doing this you should consider the allowable living expenses amounts.
- Why is your IVA Living Expenses Budget important?
- What are the allowable living expenses amounts?
- What if you need to spend more?
- Can you change your expenses during an IVA?
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Why is your IVA Living Expenses Budget important?
Your living expenses budget is used to work out how much you can afford to pay into your IVA each month. As such it is vital that it is worked out correctly.
If you use figures which are too low or leave expenses out it will seem that you can pay more into the Arrangement than you can actually afford. Your payments will be set too high.
On the other hand if you use figures which your creditors find unreasonable they may reject your proposal or ask you to change it.
Getting the right living expenses allowances in your budget is critical. If they are wrong your IVA payments will be too high or the Arrangement could be rejected.
What are the Allowable Living Expenses amounts?
You have little control over the amount you spend on some of your living expenses. Things like your rent or mortgage payments, Council Tax and utility bills are normally fixed.
The amount you spend in these areas should simply be added to your budget. They can easily be proved from your bank statements or the bill itself and would be difficult to change in the short term.
Expenses in your budget which must be considered more carefully are those which change depending on your circumstances. You will need to include reasonable amounts for your food, travel, clothing and meals at work. However these will differ between each person and household.
An full up to date list of the allowable living expenses items and budgets for an IVA is available in our Living Expenses Guide which is available for free.
What if you need to spend more than the suggested levels?
When you are completing your budget you should try to keep to the amounts suggested in the Living Expenses Guide. Having said that some or all of them may seem unreasonably restrictive.
If you find this is the case remember you are going to be asking your creditors to accept reduced payments and write off debt for you. As such you have to be prepared to tighten your belt a little and meet them half way.
Having said that it is important to be able to live within your budget once agreed. If you believe you need to spend more than the guidelines allow you should not be afraid to include higher figures. However these must be justifiable.
If creditors feel that your living expenses budget is unreasonable they may demand that you make reductions. You can refuse to do so. However they are then likely to refuse your IVA.
Can you change your Living Expenses during an IVA?
If your expenses budget is too low the IVA payments you agree will be unaffordable. You will then struggle to pay them and feel that the Arrangement has actually added to your problems.
Where you find yourself in this situation you must speak to your IVA Company. They may be able to reduce the payments if mistakes in your allowable living expenses have been made.
However this will not always be possible. If not you only have two options. Tighten your belt and continue making the agreed payments or stop your IVA and choose a different solution.
It is difficult to reduce your IVA payments once they have started. Where it is possible you will usually have to extend the length of the agreement to compensate your creditors.
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