I won't have enough money to live properly IVA Myth
Summary: I won't have enough money to live properly - This article aims to reassure those considering an IVA (Individual Voluntary Arrangement) will be able to meet normal, everyday expenses whilst repaying their debts through the IVA.
A list of outgoings
Fundamental to an IVA proposal, is an income and outgoings analysis. The income side is usually more straightforward as paye income and benefits are clearly shown via payslips and bank statements. Even for the more irregular income of the self-employed, tax returns will suggest average monthly profit. However, listing all household and personal outgoings can be trickier.
We're all different
We become used to different standards of living, and have different priorities and values that shape our spending habits. But in an IVA there has to be some standard allowances for some outgoings. Creditors, not unreasonably, would like as much of their debt back as possible so will be eager to see that the expenses listed in the outgoings budget are within acceptable limits. So the outgoings budget is made of actual expenses that can be demonstrated e.g. rent or mortgage, council tax, utilities, insurance policies etc. Other areas such as housekeeping, clothing, phones, social etc are usually subject to limits dependent on the size of the family unit.
Although hardly living a life of luxury, those in an IVA are supposed to be able to meet all reasonable outgoings. Indeed occasionally an IVA may be rejected because creditors don't feel the debtor can actually afford the IVA payment because they have not allowed themselves enough to live on properly. Larger items such as mortgage or rent, bills, fuel for the car, enough food for the individual, couple or family need to be met. In addition provision should normally be made for smaller, but nonetheless important expenses e.g. dental, medical, haircuts, dry cleaning/laundry, meals at work or school etc.
For some people who have been living so frugally for so long, having proper allowances for food, clothing etc comes as great news. We have been scraping by on minimal funds because so much has been going on debt repayments and we have been consistently short of funds. Others entering an IVA may be more difficult. If we have been used to a certain standard of living with holidays and an active social life, we may need to be willing to adapt to our changing circumstances. For the length of the IVA at least we will need to budget more carefully.
A positive outcome
Many are quite willing to make changes if it means they have the peace of mind of knowing that their debt is being dealt with and they are looking forward to a date where they will finally be debt free. Once the IVA is completed, the money we were paying back on the debt is now an addition to our available funds and will create more options for us whilst still living within our means.