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What happens to Overtime during an IVA?

What happens to Overtime during an IVA?

What happens to Overtime during an IVA?

If you earn overtime during an IVA you will have to pay some of this into the Arrangement. The amount you can keep depends whether the payment is regular or a one off.

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What happens if you earn Regular Overtime during an IVA?

The amount you pay into your IVA each month is based on your disposable income. This is the amount of income left over after your reasonable living expenses have been deducted.

If you always earn extra money due to overtime this is counted as part of your standard income. Your total monthly income figure must include these payments.

In this way regular overtime is taken into account when working out what you can afford to repay to your creditors. It is not something you can expect to earn on the side and keep for yourself.

The regular overtime you earn may vary from month to month. If this is the case you should include the average amount you have earned over the past 12 months in your income calculation.

Can you keep one off Overtime payments?

You may only get the opportunity to earn overtime every now and then. Because they are not guaranteed these type of earnings should not be included as part of your standard monthly income calculation.

However if at any time you do earn extra money you must tell your Insolvency Practitioner (IP). They will tell you if any of it has to be paid into your IVA.

Generally speaking you can earn up to an additional 10% of your normal income in any one month and keep all of this. But anything over 10% must be split 50/50 between you and the Arrangement.

If your monthly income is £1000 and you earn £200 in one off overtime the first £100 (10% of your normal income) is yours to keep. The next £100 is split 50/50. You therefore keep £150 and £50 is paid into your IVA.

Does earning Overtime mean your IVA will be paid off early?

If you earn overtime and pay more into your IVA as a result it will not be paid off any earlier. You still have to make all of your remaining payments. Your creditors are just paid back more of their debt.

The only time your Arrangement could be paid early as a result of extra payments is if the extra you pay is sufficient to cover the total of your original debt plus fees and interest.

It may be possible to settle your IVA early if you can pay a one off lump sum. However this could not come from an overtime payment. It would normally have come from a third party.

What happens if you receive a Bonus during your IVA?

It is possible that your employer could give you a bonus during your IVA. If it was not guaranteed it would not have been included in your original income calculation.

However as income it is treated in the same way as a one off overtime payment. You will be allowed to keep the equivalent of 10% of your normal monthly income. 50% of the rest will have to be paid into your IVA.

If you receive an annual bonus it may be associated with work carried out across the whole year. However to calculate how much should be paid into your IVA it is measured against the standard income for the month in which it was received.

If your monthly income is £1,000 and you receive an annual bonus of £1000 in December you will be able to keep the first £100. The remaining £900 is divided between you and your IVA. As such overall you will keep £550.

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    20 thoughts on “What happens to Overtime during an IVA?

    1. Tom says:

      If i always earn extra money doing overtime, it will be counted as standart income, and will need to be paid to creditors…
      Why then i shoud do overtime then???
      Does not make any sence

      1. Hi Tom,

        The amount you pay into an IVA (your disposable income) must be based on your normal monthly income less your reasonable living expenses. If you have a job where you always do guaranteed overtime perhaps because it is a requirement rather than a choice then the income you earn from this has to be treated as normal income when calculating your monthly disposable income.

        However it is entirely possible that running up to your decision to start an IVA you have chosen to work lots of overtime to try and keep your debt payments up to date. Continuing to work this many hours may not be realistic or sustainable. As such it would be perfectly acceptable for you to reduce the amount of overtime you do before starting your IVA. Your disposable income would then be based on a more sensible and sustainable level of income.

        As you go through your IVA you could then work additional overtime if you wish and keep 50% of it as discussed in this article. However you need to understand that this rule is for add hoc overtime. If you start regularly earning a large amount of overtime every week again then there is an arguement that your income has permanently changed and your disposable income will have to be recalculated accordingly.

    2. Kieran says:

      I am eligible to take a lump sum bonus under the agreement that I do not submit my notice for a further 4 years. Am I able to use this bonus to settle the outstanding payments on my IVA? I only want to take this bonus if it means I know longer need to pay into the IVA

      1. Hi Kieran

        This all depends on whether you are obliged to take the bonus if you do not hand in your notice. In other words will it definitely be paid to you while your IVA is in place. If the answer is yes then it is extremely unlikely that your IVA company will allow it to be used to settle your IVA early as they would get it anyway once it is paid.

        However it you can legitimately hold off until after your IVA is completed then it might be possible to negotiate with your IVA company that you will only take it and hand it over on the basis that the Arrangement is settled early.

        However you have to think carefully before bringing it up. Once you make clear to your IVA company that the bonus is available I think there is a strong chance they will simply say that under the rules of your IVA you must claim it and hand it to them. As such it will be simply paid into the arrangement and your ongoing monthly payments will have to continue as normal.

    3. Paul Richford says:

      My Iva is due to finish next month however I have been told that I have earned over the amount I should of and owe an extra £4,000. My partner wants to get a loan to pay this amount into my Iva can we do this and would that be the end of my Iva it is my Iva she has nothing to do with it the iva is in my name

      1. Hi Paul

        If your partner is able to get a loan and pay the £4000 you still owe to your IVA on your behalf this is perfectly acceptable. Once this payment has been made your IVA company should then be able to complete the agreement and send you a completion certificate. I would definitely discuss this with your IVA company as I am sure they would be very happy to accept this proposal.

    4. Riley says:

      If the bonus is quarterly, do I work it out as calculated on a monthly basis (divide by 3) or does the 50% apply to anything over 10% on the month it’s paid?

      1. Hi Riley

        Unfortunately (and I know this seems unfair) the amount you receive as a quarterly bonus is compared to the standard income received in that month. You cannot divide by 3.

        As such if your normal monthly income is £1500 and you receive a quarterly bonus in that month of £1500 then the income that month is treated at £3000. You keep the first 10% of the extra (£150). The rest £1350 is split 50/50 so you will have to give up £675.

        This works the same way if you receive an annual bonus. You cannot split it by 12. The total amount received must be split 50/50 (less the first 10%).

    5. Steven says:


      I have recently started a new job and I am getting quite a lot of overtime pay. Do my creditors receive 100% of any overtime payments I make? I’ve tried asking the company I’ve used for my IVA but had no response.

      1. Hi Steven

        During any individual month you are allowed to earn up to 10% of your normal take home pay. This money is yours to keep. However anything over this must be split 50/50 between you and your IVA.

        It is very important that you contact your IVA company and inform them you are earning overtime so they can take the correct amount from you each month.

        If you are unable to speak to your IVA company about this then to be safe you should set aside at least 50% of any overtime you earn each month. That way when you have it to hand if you are asked for it down the line. This will normally happen at your annual review.

    6. Ben says:


      I have been paying off my IVA £100 a month. My total debt is £12,000. I am currently 14 months in. If i work overtime and have to pay into the IVA the 50% of said overtime, will that come off my £12,000 total? If so, the overtime i do at work could pay off this £12,000 in the space of 3 years. Yet when i spoke to my IVA company they said this wouldnt be the case?

      1. Hi Ben

        As discussed in the article above if you pay extra money into your IVA as a result of overtime (or for any other reason) this does not help to pay your IVA faster. You will still have to continue paying your agreed monthly payments as normal. The extra money you pay just means you pay back a greater amount to your creditors.

        This is one of the fundamental things you sign up to in an IVA. If you pay more the creditors get more back.

    7. Ben says:

      So regardless of how much i owe (say i owe £12,000) and with overtime pay i can pay that all back in full plus fees in 3 years will i still have to pay my monthly installments and overtime i earn for the remainding 2 years i have left on my IVA?

      1. To be clear Ben once you start an IVA you normally have to pay for the full 5 years even if your income increases or you earn extra overtime.

        This is because the IVA agreement states (and you may not be aware of this) that if you can afford it during the arrangement you have to pay 100% of the debt you originally owed plus the fees charged by the IVA company plus interest charged at 8% per year on the original balances from the start date of the arrangement.

        In your case (given you owe £12k) this would total around £22,500 (£12,000 + fees which of around £3500 + interest which will be around £4800 (8% per year).

        So if you paid back £22,500 in 3 years then yes your IVA would then be completed and finished early. However until you reach that point you will continue paying. The payments will only stop once you have paid for the full 5 years or until you have paid back a total of £20,500 (which ever happens earlier).

    8. Nikki says:

      I am going to be made redundant and I will be getting a retention bonus to see it through to the end. It will be a significant sum (approx 4k MORE than I would have outstanding on my IVA) I will also receive 2 weeks redundancy pay as well.

      I have asked my IVA company what would happen to my redundancy pay (will they take it or let me use it whilst trying to find another job) and also will I have to pay over ALL of my retention bonus or just the 50% on top of my normal salary. I have also asked if I could use the lump sum as a full and final settlement but they refused to answer if this would be considered. Any advice welcome. Thank you.

      1. Hi Nikki

        First lets look at your redundancy pay. The rules on redundancy pay during an IVA are normally clearly stated in the terms and conditions of the Arrangement. In general redundancy payments are treated as windfalls and will have to be paid into your IVA as such. However you will be allowed to retain the equivalent of 6 months take home pay to cover your ongoing living expenses. Given this if you are only going to get redundancy pay equivalent to 2 weeks wages you have nothing to worry about and will be allowed to keep this.

        In terms of the retention bonus I believe your IVA company will treat this differently. I think it may be highly likely they will treat this as any other work bonus. As such you will normally have to hand over 50% to them (less the 10% of your normal monthly take home salary). You will then be left with the other 50% and I see no reason why you could not negotiate a full and final settlement using these funds. Given you have been made redundant I would have thought your IVA company would be keen to discuss this with you.

    9. Barry says:

      My IVA was due to finish this May but owing to the fact that I had earned quite a bit in non-guaranteed overtime the company extended the term by 10 months to allow me to pay the outstanding amount as I couldn’t afford the full amount up front.

      Now after four months of making that payment they have asked me to increase my monthly payment by 20% which means I will be giving them more than the original percentage that they were entitled to take. They haven’t asked my to fill out an income and expenditure form And I cannot afford the increase.

      Is the company allowed to do this?

      1. Hi Barry

        If your IVA is extended to pay an outstanding amount it is important to understand that it is not just the outstanding amount that can be collected. All the terms of the IVA are extended. In other words if your income increases or you earn overtime or get a bonus during the extension this has to be treated as if it had happened at any other time during the Arrangement. You would then have to hand over additional amounts accordingly.

        I assume this is why your IVA company have now asked you to pay more? However if, as you say, nothing has changed it does seem strange. The only way to get to the bottom of it will be to ask them I am afraid.

        One final point… You mention that such an increased payment will mean you repay more than the “original percentage they were entitled to take”. In fact the terms of an IVA normally state that where possible (due to income increases and the like) the IVA Company can collect up to 100% of the original debt owed plus their fee and plus interest at 8% pa.

        As such it is more than possible that during the life of an IVA you will pay more back than the amount originally anticipated at the beginning.

    10. Todd says:


      Just wondering If my IVA was to fail. Would my debts gain all the interest from when i started my IVA?

      1. Hi Todd

        If you fail your IVA then interest may be added to the original debts yes. It is always a possibility. Whatever happens you will normally still owe a large percentage of your original debt (particularly if the payments you made into your IVA were relatively low).

        Given this it is not ideal to let your IVA fail unless you have a sensible plan for dealing with the debt afterwards. If you are not a home owner (or you are but there is no equity in your property) a sensible way forward might well be bankruptcy. With this solution all your outstanding debt will be written off (whether interest has been added or not). In addition if you can’t afford to make further payments towards the debt you don’t have to.

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