When setting up any debt management plan or Individual Voluntary Arrangement (IVA), your provider will work with you to determine that you have enough money for the basics. Most companies have set ranges that your allowance will be expected to fall into which are generally based upon industry allowable guidelines.
There are some exceptions to living expense guidelines. However, broadly speaking, everyone embarking on an IVA will be subject to the same rules.
Rent and Mortgage
Generally speaking, the cost of housing is higher in some cities than others. Your IVA company may adjust your allowance accordingly.
Your IVA company will allocate a certain amount of money for food and essential household purchases, such as the products you need to keep your home clean. A couple can expect to be allocated around £275 per month. You will also be asked to specify your average monthly gas, electricity and water bills.
If you live on your own, you’ll be allowed around £25 for clothing each month. Couples can expect to be allocated £40 per month. You will also get a very small amount towards hobbies or sports, plus a small additional reserve of around £12 per child for pocket money.
If you have to pay child support, this is allowed under an IVA.
When you’re repaying debts under an IVA, you won’t have to give up absolutely everything you normally enjoy, and you’ll be allowed to maintain your health and safety. You’ll be allowed a budget for a mobile phone, a TV licence and routine medical costs, such as the cost of eye tests. You will also be allowed to purchase the normal insurance you need for your home and belongings. The cost of owning pets will be allowed, as long as it’s reasonable.
Expenses That Aren’t Allowed
Your Insolvency Practitioner or Supervisor will expect you to cut back any excessive expenditure. For example, if you are currently paying for an expensive mobile phone contract, health insurance or gym membership, you can expect to have to downgrade or cancel each of them to bring your spending under control.
If you have satellite or cable TV, you’ll be asked to cancel it, or reduce your package to a reasonable level.
Most IVA providers will not allow money for holidays, birthdays or Christmas presents. Although this seems unfair, their reasoning is sound; you will be expected to save money for trips away and gifts by economising on other things or working extra hours. This is normal for people who live on a budget, and it is a good habit to get into for the future.
IVAs vary from person to person, and no two individuals will have the same budget or allowances. For personalised advice, speak to Varden Nuttall at www.vardennuttall.co.uk so that you can draw up a plan for your own personal circumstances.
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