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To qualify for an IVA, your debt needs to be at
least £20000 (there is no upper limit). Also,
you need to be able to afford the monthly
payments.
The amount of your monthly payments will depend
on two things: how much you owe, and how much
you can afford. To find out the exact figure,
consult a professional Debt Advisor such as
those at Thomas Charles & Co Ltd. As a rule of
thumb, however, if your debts are below £32000,
you would need to pay at least £300 per month.
Where your debts are higher than £32000, you
would need to contribute more.
The only exception to this rule is when you have
a lump sum that can be released and contributed
towards your IVA – in such a case, your monthly
payment may be reduced. However, it is important
to remember that from the Creditor’s point of
view, you are agreeing to offer them as much as
you can afford – not simply paying the minimum
and keeping any extra money to yourself!
Therefore, a Debt Advisor would sit down with
you and work out exactly how much money you
could realistically spare each month – no more
and no less – and that would be the amount you
would offer towards your IVA. Furthermore, if
your circumstances change for better or worse
over the period of your IVA, you are obliged to
contact your Insolvency Practitioner to reassess
your case, and your payment plan may be adjusted
accordingly.
It is important to note that your Debt Advisor
will view your monthly spending realistically
when working out how much your IVA payments will
be. They will be careful to leave you enough to
live on, without cutting any corners. The reason
for this is that if you make dramatic cutbacks
in your spending, it is unlikely that you will
be able to maintain such a frugal lifestyle for
the period of the IVA.
If an emergency happens and you are left with an
expense, you will miss a monthly payment and
your IVA will fail, leaving you no choice but to
go bankrupt. And remember – even if you feel
sure that you can maintain a frugal lifestyle,
your Creditors may not agree. Therefore it is
important to be honest and realistic when
assessing your finances in the initial stages.
Having said that, the IVA is a fairly flexible
arrangement and allowances are made for
unforeseen emergencies. For example, if you are
suddenly made redundant, the first thing you
would do would be to notify your Insolvency
Practitioner.
Your Insolvency Practitioner would then contact
your creditors and negotiate a ‘payment holiday’
on your behalf, allowing you to get yourself
back on your feet before resuming your IVA
payments. If a more serious emergency arises,
further negotiations may be made. However, if
you do not keep up your payments without a good
reason, your IVA will fail and you will be made
bankrupt.
In summary: during your IVA period you will
definitely have a reasonable amount of money to
live on, but you will not be living in the lap
of luxury. If your IVA is professionally
handled, it should be a smooth and relatively
painless. For many people, an IVA is a real
life-line – without it, their situation would
have been very difficult indeed.
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IVA and Debt
Guide
