The key to a successful Individual Voluntary Arrangement (IVA) is correctly putting together your living expenses budget. This is because all the money left over once your budget is agreed will be used for the repayment of your creditors.

You will not be allowed to keep any money back in reserve so you must make sure that within reason an amount for all priorities and eventualities is included your budget. We explain how to calculate this and what expenses you will be allowed to include as priority payments.

What are living expenses priority payments?

Priority payments are the amounts that you are allowed to include in your IVA living expenditure budget each month. They include your fixed monthly expenses such as your rent or mortgage, council tax, utilities, car finance agreement if you have one, and insurances.

BMD Tip: If you have any arrears associated with your priority living  expenses you will also be allowed to include a budget to repay these in a sensible period of time.

For example if you have Council Tax arrears you could include an additional amount over and above your normal monthly payment so that the arrears are paid off.

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

Some IVA living expenses are variable 

Also included as priority payments in your living expenses budget are a number of variable payments. Variable payments include things like food, clothing, transport and travel. These are variable because they will depend on your specific family circumstances and might change from month to month.

The key to budgeting for your variable payments is that they have to be reasonable. What is reasonable for one person is clearly different to what is reasonable for another. For this reason, the main high street banks and other major creditors have come to accept certain budgets for variable payments as reasonable.

BMD Tip: Once the budgets for your variable living expenses are agreed it is down to you to decide how best to spend this money. If you are able to use less then the agreed budget you can use this surplus to save.

What if you need to spend more? 

If the priority payment amounts that you have included in your budget are greater than the guidelines this does not automatically mean that they will not be allowed. However you have to have a reasonable justification for these higher expenditures.

For example if you need to add to your housekeeping budget due to the special dietary requirements of you or others dependent on you or if you have other special expenditure needs, you should include these.

You will need to make sure you can clearly explain why these higher expenses are necessary and need to be included as a priority.

Do not agree to IVA payments you cannot afford

It is very important to remember that all the money you have left over once your budget has been agreed will have to be paid into your IVA. Other than this you will not be able hold any additional cash back for anything else.

For this reason, you must not agree to start the Arrangement unless you are comfortable that all of your priority expenses are covered in your budget and you can stick to this.

If after you have started you need to spend more than has been agreed  this will put your ability to make your payments at risk and ultimately your Arrangement could fail.

BMD Tip: If you believe that you simply will not be able afford the IVA payments required do not be afraid of abandoning the solution altogether and considering an alternative.