Increase in outgoings when in an IVA IVA Issue
Summary: Increase in outgoings when in an IVA - This article explores the ways that outgoings can increase and the implications for someone in an IVA (Individual Voluntary Arrangement).
The IVA repayment level is calculated on best evidence available at that time regarding income and outgoings. Certain expenses are fixed amounts e.g. mortgage/rent, household bills, mobile contracts, car tax/insurance etc. Others e.g. housekeeping, clothing, social etc are allowances that creditors regard as being reasonable relative to the size of your family. However expenses rarely remain the same - the fixed bills are subject to increases (they never seem to decrease!) and cost of food, petrol, clothing etc is constantly changing too.
These smaller changes will be incorporated in an annual review of income/outgoings which is conducted by the Insolvency Practitioner. It may be that a small pay rise absorbs inflation-linked expenses increases. The annual review may be a good time to reassess outgoings and if is felt that demonstrable increases have occurred then the available income for the IVA may be reduced.
Major changes of expense
It may be that the annual review is too far away and some help is required immediately. Sometimes there are 1-off unexpected expenses e.g. car repair, boiler etc. In these instances it is important to notify the IVA supervisor. It may well be possible to take a payment holiday from the IVA in order to meet the unexpected expense. If however the increased expense is not a 1-off but a regular outgoing eg rent/mortgage increase, change of work routine resulting in higher travel expenses, then the implications of this increase in regular outgoings will need to be discussed with the IVA supervisor. The same applies to an unexpected loss of income through salary or benefits reduction.
There are times when the increased outgoings simply render the IVA payment unsustainable. Sometimes IVA's have to fail as payments are simply no longer possible. Bankruptcy is the likely alternative. However by making adjustments elsewhere, if it possible for the IVA to continue, even if it means reduced payments, then it is likely to be in everyone's interests for it to do so.