www.iva.co.uk

Hi all

I wanted to find out what income should be declared when applying for an IVA.

Should the monthly income be basic income or overtime? I wouldn't want to commit to an IVA based on overtime and the find that there is no overtime in the future and I am unable to pay the IVA.

I would be greatful of any advice.

Thanks

Use only basic income as overtime cannot be guarenteed. If a company suggest working the figures to include overtime then walk away as you will struggle to keep up payments based on income you cannot guarentee.

Paul

Hi
Good advice from plasticdaft, your income should always be based on basic pay. The only exception may be roles that rely heavily on commission such as recruitment consultants, estate agents etc etc
Regards

My husband is a tradesman, and in the past he has alway earnt above his basic weekly hours of 37.5. But resently, they reduced his income down from 50 to 45 hours per week, which hit our income. He also occational works nights, so gets a higher hourly rate, but then there are other weeks when he will just earn a flat 37.5 hours. His P60 will show a higher yearly salary, but I am worried that there is not a lot of work out there and they could reduce the hours to the flat contracted 37.5 just to keep him on the books.

Would the IVA be worked out on an income from the 37.5 hours??

Thanks

It would be worked out on the basic pay, and then any overtime/bonus would be calculated on you keeping the first 10% over and above his normal pay and then 50% of the rest, so you would pay 50% across to the IVA.

If the IVA is based on his basic pay he has the incentive of doing overtime as he can keep anything that increases his take home pay by up to 10%. If the IVA is based on overtime he is obliged to that overtime for no benefit to himself just to maintain his payments.

Many people have wage slips and P60s showing good earnings prior to approaching an IP as they have done every available hour to try and keep on top. However, that is not sustainable and taken into account by the IP when preparing the IVA.

Hmmm, I am almost at the stage of posting back my pack to cleardebt. I have a similar problem in that my basic wage is supplemented by overtime. This overtime is regular, indeed, only worked about 3 basic weeks in all the years I have been there, but... it is not guaranteed. I was told however that the figures are based on your last three months salary regardless of the overtime.

It is not unfair to take an income calculation based on facts and not conjecture in my opinion. If you have been in a role for years and your wage virtually always shows extra, then by working on a basic wage, which you never receive, then it can be argued that you are artificially deflating income, which of course would lead to a whole host of different problems.

Regards.

This may be true but if the person has only been doing the overtime to try and meet the demands of creditors then it may not be sustainable to expect them to continue for another 5 or even 6 years. I have seen many clients whose health, marriages and home lives have suffered due to the level of overtime that they have been doing. The IVA gives them a chance to reduce that pressure and try and regain their lives.

I agree that there has to be a happy medium and all income must be declared but IVAs based on any large amounts of overtime are unfair on the debtor and may not even run their course.

Interesting debate, but, playing devils advocate, if someone has been doing the work for a long period of time to meet demands of creditors then by definition that person was therefore in debt trouble a long time ago and presumably has ran up further debt during that time. If not, then the debt must therefore have been run up during the time when the work was routinely being done. Put another way, the debtor was using credit based upon his or her perception of his or her ability to repay, i.e he or she would almost certainly not have ran up as much debt if there wasn't as much money coming in. Whilst I totally accept the point re health, and also if it is known beforehand that overtime was definitely being stopped, is it not the case that if the original status quo is maintained, i.e he or she continues in the routine of earning extra, that the creditors ultimately lose out through no fault of their own?

As I say, I am playing devils advocate to a certain extent, but it would be interesting to hear all the different opinions on this one.

Regards.

I accept your point and I like playing devil's advocate myself even if sometimes I am arguing against something I believe it. It stimultes debate and can avoid pitfalls which is very healthy.

However, I do believe that by the time most people come to IP firms they have stopped obtaining credit and are trying to pay it back. They have been refused remortgages, consolidation loans, have entered DMPs, been to their local CABs and taken on extra work.

I believe that in most cases the debt was taken out based on their earnings at the time but something has changed e.g pregnancy, marital break up, sickness, redundancy etc. The clients have then tried to consolidate or used credit to fund credit while they tried to stabilise their situations. Most will take cash from a credit card to meet a direct debit for a loan and while this does increase the level of the debt, the client receives no benefit from it.

The overtime or extra job is their last throw of the dice and is a final attempt to stay solvent. However, due to the debt spiral they have found themselves in there is no possibility of earning enough to even meet the minimum payments so they seek professional help. This can take some time before clients actually do seek help as they often genuinely believe that something will improve but all the while their debts are spiralling out of control. I have seen cases and no doubt you will have too where the income is thousands of pounds below what the minimum contractual payments were in a month before paying any living expenses. Yet the clients have never missed a payment but enjoyed no benefit from the tens of thousands of debt.

It is certainly an interesting debate as are many on this forum and like you I would appreciate hearing what others think.

Indeed I have seen many cases of the nature you describe Michael and healthy debate is certainly a good thing.

Regards.

[quote]Originally posted by bergy

Hmmm, I am almost at the stage of posting back my pack to cleardebt. I have a similar problem in that my basic wage is supplemented by overtime. This overtime is regular, indeed, only worked about 3 basic weeks in all the years I have been there, but... it is not guaranteed. I was told however that the figures are based on your last three months salary regardless of the overtime.
[/quote

Size 5
Is that normal practice for Cleardebt to take an average of the last three wage slips ?? Surely a recipe for disaster ??
Regards

Whooo! Didn't mean to cause such a debate!

All I worry about is this: If my husband works nights, he takes home around £800 pw, but if he works days, he takes home around £500. As you can see, it is a big difference. If we worked an IVA out on the £800 income and then the night work stops and the income drops to £500, we wouldn't be able to afford to eat or pay to heat the house.

Any more thoughts?

For what it's worth, I think that you should propose an IVA on the £500 and anything extra earned be paid on the 10% plus 50/50.

Just my opinion.