Working Out Your Payment, Question by Question
From income and allowances to disposable income, and what happens when things change.
How do you calculate my IVA payment?
It comes down to one simple sum: your income minus your reasonable living costs. Your Insolvency Practitioner adds up everything you have coming in, works out a fair budget for your essential outgoings, and whatever is left over, your 'disposable income', becomes your monthly IVA payment. The figure is set at a level you can realistically afford and sustain for the full term.
What counts as my income?
All the money you have coming in each month, after tax. That means your take-home wages or self-employed earnings, plus any benefits such as Universal Credit, Child Benefit or tax credits, pension income, maintenance, and any other regular income. Disability benefits like PIP are usually set against your disability-related costs rather than treated as spare cash. If you live with a partner, their income is considered too, though only your debts go into the IVA.
How are my living costs worked out?
Carefully, and around what is reasonable. Fixed essentials, such as rent or mortgage, council tax, utilities and childcare, are based on what you actually pay. Variable costs, like food, travel and clothing, are assessed against recognised spending guidelines. The goal is a realistic budget that covers a reasonable standard of living, not one that leaves you only able to survive.
What are the spending allowances or guidelines?
They come from the Standard Financial Statement, or SFS, which sets guideline figures used by practitioners and creditors across the UK. The SFS gives 'trigger' amounts for each category of spending, so there is a reasonable allowance for things like food, clothing, personal costs and even modest amounts for pets or dental care. You can spend above a guideline where your costs genuinely are higher, but you may be asked to evidence it.
So what is my disposable income?
It is simply what is left after your living costs are taken from your income, and it is the heart of the whole calculation. That surplus is what you pay into the IVA each month. If your allowances are set too low your payment looks higher than you can really afford, which risks the IVA failing; set too high and creditors may reject the proposal. Getting the budget right is what makes a payment both affordable and acceptable.
Is there a minimum payment, and why do payments vary?
There is no single fixed minimum set in law, but an IVA needs to offer creditors a worthwhile return, so a certain level of disposable income is usually needed for one to be viable. Payments vary a lot from person to person because they depend entirely on your own income, household size and essential costs. Someone with children or high travel costs may have less spare income than someone living alone on the same wage.
What happens if my income goes up?
Your payment can rise, but you keep a share. If your income increases without your costs going up, more disposable income usually means a higher contribution, typically around half of the increase, with you keeping the rest. For one-off extra income like overtime or a bonus, you are generally allowed to keep up to 10% of your normal take-home pay, with anything above that split roughly 50/50 with your creditors. You must tell your supervisor about increases.
What if I can't afford the payment?
Tell your supervisor as soon as money gets tight, do not just stop paying. Payments are reviewed every year, and can be changed at any time if your circumstances do. Your practitioner can reduce your payment by a small amount without even asking creditors, and propose a larger reduction to them if needed, sometimes extending the term to balance it. The whole point is to keep the arrangement affordable.
How do I get an accurate figure for me?
An online calculator can give you a rough idea, but only a proper assessment gives a real figure. A licensed Insolvency Practitioner, or a free adviser, will go through your income and spending in detail and work out a payment that is genuinely affordable, then confirm it with your creditors. It costs nothing to get free, impartial advice first, and it is the best way to know what an IVA would really mean for you.
