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 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?
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%).
Hello,
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.
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.
Hello,
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?
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.