Featured in...
Dashboard
Individual Voluntary Arrangement (IVA)
Is an IVA Worth it?

IVA Spending Restrictions – Living Expenses Guide

Scott Nelson Profile Picture Janine Marsh Profile Picture
By
Scott
Scott Nelson Profile Picture

Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

Learn more about Scott
&
Janine
Janine Marsh Profile Picture

Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Feb 23rd, 2024
Could you legally write off some debt? Answer below to get started.

Total amount of debt?

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Featured in...
IVA Spending Restrictions

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Making sense of IVA spending restrictions might seem hard. But don’t worry, you’re in the right place to learn more about it. We understand that you might be feeling a bit confused by the IVA process or worried about paying off a debt, but you’re not alone. Every month, over 170,000 people visit our website for guidance on debt solutions.

In this guide, we’ll help you to:

  • Understand the spending restrictions of an IVA.
  • Manage your IVA budget effectively.
  • Figure out if you can go on holiday during your IVA.

Our team is made up of people who have faced debt challenges too, so we know it’s not easy, and we’re here to help you. This guide is full of useful tips and advice to help you understand more about IVA spending restrictions. Let’s start the journey together.

Don’t worry, here’s what to do!

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out. 

Fill out the 5 step form to find out more.

How do I Manage My IVA Budget?

The reason why so many people opt for IVAs as opposed to other debt solutions is mainly because of two reasons:

  • you can get a significant portion of your debt written off.
  • Tyou will never be obligated to pay more than you can afford. 

Your insolvency practitioner sits down with you and assesses your income and expenditure and in the end, your monthly payments are devised. Your monthly payments will be devised only according to what you can afford. At this time, you will also be made aware of the cost of an IVA, and how this will factor into your agreement. It is important to note that being in an IVA implies that you will contribute all of your spare income towards your IVA payments.

This means that you are only allowed to spend your income on essential living expenses. You cannot use any of it for luxury or unnecessary purchases. The remainder of your income is all to be given to your monthly payments. This is something that you will have to abide by throughout the entire duration of your IVA which could be five years or more (it could be earlier than five years if you decide to opt for a full and final offer with a lump sum payment). 

Thus, when you’re considering an IVA, be sure that you’re mentally and financially ready to stick to a budget for the next five or so years. It’s also important that you seek advice from your IP before you make any major purchase during an IVA. You don’t want to accidentally violate the terms of your IVA which is why it’s essential that you discuss your purchases with your IP beforehand. 

Remember, an IVA and cost of living expenses are factored into how much you can spend during the IVA.

How much does an IVA leave you to live on?

Unfortunately, I can’t answer that question for you!

A monthly IVA payment is different for everyone. This is because it is based on individual financial circumstances:

  • how much you owe
  • how much you earn
  • how much disposable income you have.

Speaking to your IP or a debt charity may be helpful. They can walk you through your options and make sure that an IVA is the best option for you.

Living on a Budget 

Your IVA proposal may include your suggested budget. Your budget is calculated by taking your income, your monthly expenditure and your debts into account.

For a lot of people, an IVA is the first time they’ve actually sat down and planned a budget for their household. But don’t worry! Budgeting is not always complicated and your IP can take you through it in detail.

For many others, this may be the first time they’re having to stick to a budget without making use of credit. Odds are that if you’ve had trouble with debt management in the past, then you may have trouble managing your budget as well. This is why many people tend to fail or miss payments towards their IVAs when they’re first starting out.

It’s essential that you learn to be financially disciplined and stick to your proposed budget in order to keep your IVA running smoothly. If you feel that you’re having trouble managing your budget, you can go to your IP for advice and information. They will be able to give you some help or maybe figure something out so your IVA doesn’t fail. 

It’s important that you think thoroughly about all of your living expenses and be extensive with the information you provide when you’re putting together your budget. You will have to provide proof and documentation about both your income as well as your expenditure when you’re putting together a budget with your IP.

This could be in the form of bank statements, receipts, payslips, etc. Keep in mind that your IVA monthly payments will be devised according to the figures you provide. It is very important that you give as much accurate information as you can!

If you miss something related to your living expenses, then you may be put in a difficult situation where you’ll have to choose between essential living expenses and your IVA payments

It’s also important for you to include monthly allowances for essential annual expenses within your budget. An example of this would be MOT costs if you have a car. It’s important that you put some money aside for costs such as these every month so that when the time comes every year, you already have the money ready to go. 

It’s always best to be on top of annual expenses such as these so that you’re not caught off guard when they do come up. If you’re not prepared for such payments, you may end up missing your IVA payment or paying it late which could put its success in jeopardy. 

Frugal living during an IVA is not necessary! You just need to be strict with yourself and stick to your budget.

Keep an Eye on Your Income

I’ve mentioned earlier how there’s usually a 10% threshold of additional income that you can earn which you can keep to yourself. You need to keep your IP updated on your finances and let them know if you have an increase in income.

Please note that you are obligated to do this and if you fail to report this to your IP, then your IVA may fail and your road to becoming debt-free may become a whole lot rockier. Once you inform your IP of your income increase, they will work out the changes needed to your IVA payments. 

You have to do the same thing if your income decreases. Go to your IP and inform them of your income drop and they will work out if it will have an impact on your IVA payments. You might find that your payments are lowered a little, but remember that this is not guaranteed and is a negotiation with your IP and your creditors.

Emergency Expenses 

The budget you provide in your proposal typically has provisions put aside for emergencies which aren’t part of your essential living expenses each month. This is money that you put aside each month in order to build an “emergency fund” over time in case any unexpected expense arises. 

However, if the money you’ve put aside isn’t enough to cover your emergency expense, then it’s a good idea to seek further advice from your IP.

Depending on your circumstances, they may be able to give you a payment holiday or lower your IVA payments so that you are able to get some breathing room to pay for your emergency. 

Can I go on a Holiday During My IVA?

There is nothing about an IVA that stops you from travelling for business or pleasure. There are also no restrictions on you going abroad during your IVA.

You are not beholden to your creditors if you have an IVA – you can choose how you spend your money after you have made your IVA payment!

Just keep in mind that excessive non-essential spending may not be accepted by your IP. You may breach the terms of your IVA if you go on that luxury holiday! Keep your IP up to date with your finances and make sure you let them know about any big expenses you have planned.

The same can be said for any other leisure expenses during your IVA.

When thinking about leisure expenses during your IVA, you need to keep in mind that it isn’t always possible to get credit during your agreement. But having an IVA is no reason to not go on holiday if it is a reasonable expense!

Additional Income Threshold

Once your IVA is approved and registered, your IP will inform you of your additional income threshold. This is a figure which tells you how much additional income you can earn without having to pay it towards your IVA.

This amount is usually 10% higher than the income you have listed in your original IVA proposal, but it can vary depending on the terms of your IVA.

A good idea would be to save up this additional income over a few months in order to fund your holiday. You could get this additional income by working extra hours or through bonuses or commissions.

Keep your IP regularly updated with your income. This will allow them to make any necessary adjustments to your monthly payment.

What do I do if I can’t afford my IVA payments?

If you are struggling to make your IVA payments, the first thing you should do is contact your IP and let them know. They may be happy for you to temporarily pause your payments, or let you pay a little bit less so you can get in control of your finances again.

If you miss a payment, your IP will send you a notice of breach. This means that you have breached or broken the terms of your contract and you have a little while to put it right by paying quickly.

If you can’t or don’t make your IVA payments then your IVA might fail.

This means that your IVA is over and your creditors can come after you for any remaining debts that you owe. You may even owe money to your IP for work they had done for you until now.

FAQs

Can I save money while on an IVA?
Yes. Although it will be harder and it will take longer to save, it is possible. Your IVA payments will allow you to save small amounts.
Can I take out a phone contract while in an IVA?
Yes. There is nothing to say you cannot take on a mobile contract whilst on an IVA but it may take up a portion of your budget and limit your IVA payments.
Why does an IVA stop you doing?
An IVA stops you from spending excessively. On an IVA you do not have unlimited freedom on what you spend your money on as you need to meet your IVA obligation.
Can you get married while in an IVA?
Yes. An IVA is an individual arrangement and therefore does not require anything from your partner.
What is classed as a windfall in an IVA?
A windfall is when you receive an unexpected quantity of money like winning the lottery, inheritance or getting a large bonus.
Did you like this article?
Show your support ❤️
We're glad you liked the article! As a small team, your support means everything to us. If you could rate us on Google, it would be amazing. Thank you!
We are so sorry...

Is there something missing? We’re all ears and eager to improve. Send us a message and let us know how we can make our article more useful for you.

You can email us directly at [email protected] to share your feedback.

The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Debt Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.