I won't be allowed to save any money IVA Myth
Summary: I won't be allowed to save any money - This article explains the circumstances in which those in an IVA (Individual Voluntary Arrangement) could legitimately save money or when this would create a problem.
Savings are an asset
When an IVA is presented to creditors for agreement, a list of assets will need to be provided. These tend to focus around property and vehicles, but if there are savings or lump sums expected they will certainly be relevant to the proposal. If a debtor can provide some lump sum upfront as well as the monthly payments, it can be a more attractive proposition to creditors.
Saving whilst in an IVA
Clearly creditors will not be impressed by a debtor in an IVA, paying some debt back whilst at the same time storing up funds for other purposes. The point of an IVA is that all available funds after reasonable outgoings are covered are made available to the creditors through the IVA.
However, within an IVA, some form of savings is actually encouraged. The reason for this is that not all outgoings occur monthly. Allowances within an IVA are provided to cover most eventualities including the small and the infrequent. A trip to the dentist may be once or twice a year at most, but when it comes there is usually a bill to pay. Similarly with car servicing, medical, school trips, car tax etc. Even council tax is often calculated over 10 months, so the 2 spare months funds might be saved to meet the slightly higher costs of the council tax payments for the 10 months (as allowances in the outgoings budget tends to be spread over the full 12 months). Therefore setting some funds apart to meet such outgoings is actually a good thing.
Built into an IVA proposal, there is usually a small allowance for emergencies and/or house repairs. However this would not be enough to cover a significant extra expense e.g. higher than expected car repair, boiler problem etc. If a small amount has been saved monthly then we may be better equipped to cope with such an emergency. Of course, some such expense may be impossible to cover, and at these times it would be important to discuss this problem with the supervisor of the IVA. It may be that a payment break from the IVA could be taken to allow the extra expense to be met.