If you earn overtime during an IVA you will have to pay some of this into the Arrangement. Generally speaking it will not mean that the Arrangement is paid off more quickly.
Included in this article:
- Can you keep overtime payments earned during an IVA?
- Does overtime mean your IVA will be paid off early?
- What happens if you get a bonus?
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Can you keep overtime payments earned during an IVA?
You may get the opportunity to earn overtime. Because it is not guaranteed, this type of earnings will not have been included as part of your normal monthly income calculation.
However if at any time you do earn extra money, you must tell your IVA company. They will normally need you to pay some of it into your Arrangement.
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.
So for example, if your monthly income is £1000 and you earn an extra £200 in 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.
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Does earning overtime mean your IVA will be paid off early?
If you earn overtime and pay more into your IVA, the Arrangement 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 will pay you a bonus during your IVA.
Bonuses are treated in the same way as an 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.
You might receive a quarterly or annual bonus. This is associated with work carried out across a number of months. However the amount you have to hand over is calculated based on just the income for the month in which the bonus was received.
So 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 and pay £450 extra into your IVA that month.
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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
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.
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
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.
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
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.