If you believe that an Individual Voluntary Arrangement (IVA) is the best debt solution for you one of the concerns you may have is how will you be able to afford the required monthly payments that you will have to make.

Generally speaking the minimum payment that you will need to be able to afford is £100 a month (although in certain circumstances this could be lower). If you cannot afford to pay this then you may believe that the solution is just not viable for you.

But before giving up on the idea there may be some things you have not thought about which could mean that it is still possible for you. We will explain each of these in more detail.

An IVA means you stop paying your unsecured debts

When you are working out the amount you can afford to pay into your IVA each month remember that all of the payments to your unsecured debts will stop because these will be included in the Arrangement.

As such when you review your living expenditure budget you should make sure you have not included any payments to unsecured creditors. By stripping out all of these you may find that this alone gives you enough disposable income to make the solution viable.

BMD Tip: If you have bought something on credit from a shop such as a sofa or some electrical equipment and you are paying for this each month the debt is likely to be unsecured and can be included in your IVA without worrying that these items will be taken away.

Can you make savings from your general living expenses?

One of the most important areas to consider is whether you can make any savings within your general living expenses which will then mean that your IVA payments become affordable.

Perhaps you have an expensive mobile phone, sky or gym contract that you do not really need. Could you replace these with a cheaper option that could save you money straight away? Although the payments for these services are contracted it is possible to cancel your contract, stop paying and include any unpaid debt in your Arrangement.

Another area of your living expenses that you could look at is any pension payments that you are making. Depending on your age it might be an option to reduce or even suspend these entirely.

After you have finished your IVA you can start paying into your pension once again and it may even be possible to increase payments to make up any loss as you will be debt free at this point and will have more disposable income.

Do you want help to start an IVA? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts

Your IVA payment will increase when an HP agreement ends

If you are paying for a car on Hire Purchase (HP) you will normally include this debt payment in your living expenses budget which will reduce the amount you can afford to pay into your IVA.

However when the HP ends you will then redirect the payment you were making towards this into your Arrangement thus increasing these payments from then on. This increase could be sufficient to ensure that overall you pay enough to make it viable.

If you no longer need the car you have on HP or have decided that it is simply not affordable you could simply hand it back to the HP company. This would free up the money you were paying towards the finance and any shortfall can be included as a debt in the Arrangement.

If you still need a car perhaps you can get help from friends or family to get a cheap car or stop paying your creditors for a couple of months before starting your Arrangement and use this money to buy a run around.

Can you reduce your mortgage payments to afford an IVA?

If you are a home owner and you have a repayment mortgage you could talk to your mortgage provider and ask to change your monthly payments to interest only.

If this is possible it would significantly reduce your monthly mortgage payment thus releasing the funds you need each month to pay your IVA. Clearly after the Arrangement has finished you then change your mortgage back to repayment again.

BMD Tip: It is very important not to make any changes to your mortgage without first getting more advice. You would need to ensure you have agreement from your mortgage lender that they will not require you to move back to a full repayment produce before the end of your IVA.

Could you start an IVA without making any monthly payments?

If having reviewed your living expenses there is simply nothing you can do to cut back and so making monthly payments into asn IVA is just impossible you could still consider the option of a full and final settlement.

This option involves settling the Arrangement immediately it in full with a single lump sum payment. No further monthly payments are then required. Your IVA ends almost as soon as it starts.

This of course is only possible if you can get your hands on a reasonable lump sum. Such a sum could come from a third party such as family or friends or yourself if you have recently received some kind of windfall such as a redundancy payment. If you have equity in your home you could release this by re mortgaging if possible.

Obviously the amount of the lump sum you will need to offer depends on the amount of debt you have but it is usually possible to offer far less than your total debt if ongoing monthly payments are simply not possible.