How Much Does An IVA leave You To Live On?
When considering IVAs, a frequently asked question revolves around the amount of money remaining after making the monthly payment or, specifically, “How much does an IVA leave you to live on?”. IVAs are among the most cost-effective debt solutions, ensuring you never pay more than you can reasonably manage. However, it’s natural to be curious about the portion of your monthly income dedicated to debt repayment.
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In this guide we will provide information on the amount an IVA leaves for living expenses, allowing you to ease your concerns and take the initial step towards permanently improving your financial situation.
What is an IVA?
Before diving into the specifics of how much an IVA allows you to live on, it’s crucial to understand what an IVA entails and its role in helping you achieve a debt-free life.
An Individual Voluntary Arrangement (IVA) is a widely used debt solution and a legally binding agreement between you and your creditors, enabling you to settle your debts by paying less than the total amount owed. Based on your financial situation, you can either make monthly payments or fulfil the agreed amount through a one-time lump sum payment.
Distinct from other debt resolution options, an Insolvency Practitioner can only establish and oversee an IVA. At IVA Helpline, our panel of Insolvency Practitioners act as intermediaries between you and your creditors, ensuring that both parties adhere to the terms of the agreement.Check if you qualify
Will an IVA affect my credit rating?
Understandably, an IVA will be recorded on your credit file for a total of six years from the approval date. During this period, your credit score may be negatively affected, potentially making securing loans, mortgages, or additional credit challenging.
Nevertheless, there are measures you can implement to restore your credit after completing your IVA. Creditors may be more inclined to grant you credit if you have demonstrated consistent, full, and timely monthly payments.
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What does an IVA cost?
The cost of an Individual Voluntary Arrangement (IVA) varies for each individual, and this amount will be clearly stated in your IVA proposal. At IVA Helpline, we ensure that you are fully aware of the total cost before your IVA is approved and you begin making payments.
Additionally, any fees related to your Insolvency Practitioner (IP) will be incorporated into your monthly payments, eliminating the possibility of hidden or unexpected charges. Apart from your monthly repayments, you should anticipate a Nominee’s Fee and a Supervisor’s Fee as part of the overall cost.
During the initial year of your IVA arrangement, the Nominee’s Fee is disbursed directly to your creditors, typically within the first five months. This fee covers the necessary expertise and time required to prepare your IVA proposal.
The amount can vary based on the agreement reached with your creditors, usually ranging from £1,000 to £2,220.
The Supervisor’s Fee is charged upon the approval of your IVA and consists of monthly payments made concurrently with your regular contributions to cover the specialized services provided during the agreement’s duration.
The fee amount may differ, but it will never exceed 18% of your total contributions throughout the entire IVA term. As IVA Helpline, we aim to ensure that our services are tailored to your financial needs while maintaining transparency in our fee structure.
How much will my monthly payments be?
IVA payments are always determined by your financial capacity rather than the total amount of debt you have. This ensures that you only contribute what you can comfortably afford, allowing you to cover your daily living expenses.
To establish the terms of your arrangement, we will first deduct your essential living costs (such as food, bills, and transportation) and priority debts (like mortgage arrears and rent arrears) from your overall monthly income. This calculation informs your creditors of the feasible amount you can allocate towards your debts each month, considering your living expenses.
Typically, your monthly payment will amount to at least 25% of your total debt by the end of your five-year term, which is the minimum IVA payment creditors generally accept.Check if you qualify
What is an Additional Income Threshold?
Upon approval of your IVA, our Insolvency Practitioner (IP) will determine the Additional Income Threshold, which indicates the amount you can earn before contributing to your arrangement.
Typically, this threshold is around 10% of your monthly income. For instance, if your monthly earnings are £1,000, you can earn an additional £100 without having to contribute to your IVA. However, should you earn an extra £125 beyond your regular income, 50% of this amount must be paid into your IVA.
This approach allows you to save money while simultaneously repaying your debts, an outcome that can be challenging to achieve with other debt solutions. Additionally, throughout your IVA term, you must adhere to specific spending restrictions, such as not borrowing more than £500 without obtaining consent from your IP.
How much money will I have left over?
Upon covering your monthly living expenses, any remaining funds should be allocated towards your IVA, as expected by your creditors. For instance, if your monthly income is £1,800 and your total living expenses amount to £1,600, it is necessary to contribute £200 to your IVA each month.
This demonstrates to your creditors that you are committed to repaying your debt and refraining from non-essential expenditures such as dining out, holidays, or luxury items. As IVA Helpline, we aim to provide guidance and support in managing your financial obligations effectively.Check if you qualify
Can my IVA payments be reduced?
If you find it challenging to manage your finances after making your IVA payments, you may be able to decrease your monthly contributions. An Insolvency Practitioner (IP) can facilitate a reduction of up to 15% without needing your creditors’ approval.
However, if you wish to lower your payments by 15% or more per month, your IP must obtain consent from your creditors, which might result in an additional fee. Alternatively, an IP can assist you in deferring a monthly payment, temporarily reducing your payment amount, pausing your payments for a specified duration, or sometimes settling your IVA ahead of schedule.
Where can I get more advice on IVA’s and other debt solutions?
Explore your financial options and receive the assistance you need to manage your debt by getting in touch with us at IVA Helpline. Call us on 0800 0431 431 or click the check if you qualify button to determine your eligibility.Check if you qualify