The debt advice apprenticeship
Find out which debt solution is right for youGet started
Answer a few simple questions
See if you are suitable
Understand your next steps
What you pay into an IVA depends on your circumstances and what you earn. Let’s have a look at additional monies on an IVA.
It’s important to know how a debt solution works so that there aren’t any surprises further down the line and you know what will happen should your circumstances change.
Here, we’re going to look at how additional monies are dealt with on an Individual Voluntary Arrangement (IVA.)
What are additional monies?
When we use the term ‘additional monies’, we just mean any overtime, bonuses or commission that you get in addition to your normal earnings.
When you first set up an IVA your advisor will carefully go through your finances, accounting for everything that comes in and everything that goes out of your household. This is to make sure that your payments on the IVA are affordable, and also to make sure that you’re paying everything you can towards your debts.
Keeping track of your income and expenditure (I&E) means we can make sure the arrangement is fair to everyone and your usual income will be listed as part of this.
What happens to any additional monies?
If you end up earning anything extra, due to overtime, bonus or commission, you won’t necessarily have to put all of it into the IVA.
If you do earn any extra money like this, you’re allowed to keep the first 10% over your usual income that’s listed on your I&E. If it is more than 10%, half of it will have to go into the IVA. Or put another way, you’ll get to keep the first 10% and half of the extra.
Let’s look at an example. Say you normally earn £1,000 a month and one month you earn £150 extra due to overtime (after tax and NI have been deducted.) You can keep the first £100, as this is 10% over your normal earnings, and half of the remaining £50 as well. So in this example, £25 would be due to the IVA.
It’s an important condition of your IVA that you pay as much as you can afford towards your debts while it’s ongoing – normally for 5-6 years. The IVA cannot successfully complete until all additional monies have been paid in correctly.
It’s looked at every six months
Additional monies aren’t anything for you to worry about if you’re starting an IVA – you just need to be aware of how they’re dealt with, make a note of anything extra you earn, and let your provider know.
Every six months we’ll check to see whether there are any additional monies due to the IVA and make sure that anything that needs to be paid into the IVA is paid in. The exception to this is if you get an annual bonus, in which case we’ll look at this once a year.
The advantage of looking at additional monies every six months is that you’re able to keep the first 10% and half of anything else for the whole period - regardless of how much extra you happened to earn in a single month.
Let’s say one month you earn £400 over your normal £1,000, and the next month you earn £200 more, but you don’t earn any more overtime for the rest of that six month period. You would still be able to keep the whole £600 yourself. Why? Because when you look over the whole six months, you’d normally earn £6,000, which means your 10% allowance is £600 – it doesn’t matter that you happened to earn £400 of it in a single month. Anything over your £600 allowance is split evenly between you and the IVA.
All you need to do is keep us aware of any changes in your working life. Our advisors are very experienced in dealing with these kinds of issues and will always make sure that everything is done by the book, so your IVA isn’t in any jeopardy.
What about a pay-rise?
If you get a permanent pay-rise, you might be expected to increase your monthly IVA payments. However, we’ll always look at the whole picture so that what you’re asked to pay actually reflects what you can afford.
Once a year we’ll conduct an income and expenditure review and as part of that we’ll ask whether you’ve had a pay-rise. If you have and we can see that you’ve more money to put towards your debts as a result of this - you’ll have to put in 50% of the increase in your disposable income.
Let’s look at an example. Maybe you’ve got a new job that pays better than the job you had when you started the IVA. You might have to pay more into the IVA – but only if there’s been a real difference in the amount of money you can afford to put towards it. If that job was further away from your home, for instance, and you had to pay more for transport, we’d take this into account. The bottom line is you will only ever be expected to put in 50% of the difference between your disposable income when you started the IVA and your disposable income after the pay-rise.
There are other solutions available
An IVA is just one of the debt solutions that can help you if you’ve got debts that are out of your control, have a look at the others available and give it careful consideration before you decide to go ahead with anything. There are upsides and downsides to every solution, go to our dedicated page to learn more about the pros and cons of an IVA.
You can use one of the buttons on the left of the page to get in contact with our experienced advisors. They will assess your situation and from the information you provide recommend the best solution for your needs.
We have lots more information on how IVAs and the other solutions work on the blog, so make sure you explore it.
by Christine WalshBack to blog home