When you enter into an Individual Voluntary Arrangement (IVA), one of the key aspects is determining how much you’ll need to pay each month toward your debts. The monthly payments in an IVA are carefully calculated based on what you can reasonably afford, allowing you to make progress toward becoming debt-free while still covering your essential living expenses.
How Are IVA Payments Calculated?
Monthly payments in an IVA are calculated based on your disposable income. This is the amount left over after your essential living expenses have been deducted from your total income. The process begins by reviewing your income and expenses, including:
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Income: This includes all sources of income, such as wages, pensions, benefits, or any other form of regular earnings.
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Essential living costs: These are necessary expenses that you must cover, such as rent or mortgage payments, utility bills, groceries, transportation costs, and childcare.
After all of your essential living costs are accounted for, the remaining disposable income is what you will contribute to your IVA. This ensures that you can still meet your day-to-day needs without overextending yourself financially.
What Factors Influence IVA Payments?
Several factors can influence the amount you pay each month in an IVA, such as:
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Your income: Higher incomes typically result in higher monthly payments, as more disposable income will be available.
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Family size and dependents: If you have a family or dependents, your essential living costs will be higher, which may reduce your disposable income.
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Unsecured debts: The total amount of your unsecured debts and the agreements made with your creditors can influence the overall payment structure.
Can Monthly Payments Change?
Yes, your IVA payments can be adjusted if your financial situation changes during the arrangement. This could include a change in employment, a rise in essential expenses, or other financial shifts. Your insolvency practitioner (IP) / FCA Regulated Debt Advisor will review your situation annually, and if necessary, your payments may be recalculated to reflect your new circumstances.
Conclusion
Monthly payments in an IVA are based on what you can afford after covering essential living costs. By taking into account your income, expenses, and financial obligations, an IVA ensures that your payments are manageable while you work toward clearing your debt. These payments can be adjusted if your financial circumstances change, offering flexibility throughout the arrangement.