If you are planning to start an Individual Voluntary Arrangement (IVA) you need to remember that you are asking your creditors to write off perhaps a considerable amount of your debt. They will only be prepared to help you do this if they feel that you are making your best effort to repay them as much as possible through the Arrangement.

As such if you try to include car expenses in your living expenditure budget which are greater than their guidelines and cannot be reasonably justified you cannot expect your creditors to take your proposal seriously and accept it.

Given this the amount you spend on things like fuel each month and the amount you put aside for repairs and maintenance will need to fit within certain limits. We consider what happens if the amount you need to spend is in excess of these.

Creditors can be flexible about car expenses

Having said that it is important to keep to the creditors recommended expenditure guidelines your creditors can be flexible on the expenditure figures you include if the amounts you need can be justified.

For example if you live in a rural location or a considerable distance from your place of work, it stands to reason that you will need to use your car a lot more and your associated fuel and maintenance costs will be higher than the average guidelines.

As long as the reasons for you needing to spend more money are reasonable and you can justify them, then you can include higher figures in your expenditure budget.

To justify your fuel and maintenance expenditure you should explaining clearly the locations between which you need to drive each day and the number of miles involved in the round trip. Your creditors can then review and check these distances if they like.

BMD Tip: In order to better understand the car expenses guidelines that your creditors are likely to accept please see our IVA Living Expenses Guide.

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Unreasonable IVA living expenses

Of course if your creditors do not feel the journeys you are making are reasonable they may well say that your expenses are unacceptable.

For example, a daily journey to care for a long term sick relative may be justifiable. However, your creditors may not allow the same visits to healthy relatives simply on the grounds that they are important because “it is family and you have always done it”. Equally, if you need your car but spend less than the creditor’s guidelines, they will expect you to reduce your budget in this area.

Ultimately whether the creditors are prepared to accept the cost of the journeys you make or not will boil down to whether they are reasonable. If they are a necessity for your job or for other good reasons they will be accepted by your creditors.

If they are not accepted, this may seem unreasonable to you. However, your creditors will expect you to make every effort to repay them as much as you possibly can.

If they feel you are not doing this, they will be rightly unhappy about your request that they write off a considerable amount of your debt, which is what they will normally be required to do if they accept your IVA proposal.

Be realistic with your IVA expenses proposal

It is very important that you make your living expenditure budget proposal realistic. You must not ignore the fact that you spend more if that is truly the case, and try to please your creditors by only including the guideline budget.

If you do this you will have to spend more than you have budgeted for. An IVA expenditure budget does not allow room for overspend and as such, this will result in you not having enough money each month to pay for other essentials in your budget.

Ultimately you will not be able to continue to afford to pay your payments and the arrangement will be at risk of failure.