How much will I have to pay into my IVA each month?

If you have researched the minimum monthly payment for an IVA (Individual Voluntary Arrangement), you may have found that various sources say around £200.

This is not an official figure - it is more of a guide. The amount you would have to pay into your IVA each month is determined by how much you can afford to pay. The amount you pay per month should remain constant, so you need to be sure that your income is reliable enough for this.

To learn about the benefits of an IVA, as well as the drawbacks, click here.

How is the size of the monthly payment worked out?

An IVA is designed for people who cannot keep up with their current unsecured debt repayments - and doubt they will be able to repay what they owe in the foreseeable future.

Before you start an IVA, you and your Insolvency Practitioner (IP) will need to calculate how much you can offer your lenders. You will be expected to offer as much as you can realistically afford. Your lenders may accept these new payments if they can see that you genuinely can't afford your current repayments, and are offering as much as you can instead.

These new payments will be designed not to interfere with your mortgage or rent repayments, bills, food, petrol and other essential expenses: you will only offer your lenders as much as you can afford after these costs are accounted for.

Although the 'minimum' monthly payment on an IVA is often said to be around £200, this does not mean that you could just offer this figure. You will be expected to offer as much as you can, depending on your available income.

If your available income is just too small to offer a reasonable monthly sum to your lenders, an IVA won't be an option - you may be recommended another debt solution instead.

What do I need to know about an IVA?

If enough of your lenders accept your IVA, you will start making your new payments. IVAs usually last five years, after which time any remaining debt is written off, providing you've upheld your side of the IVA agreement. During these five years, interest and charges on your debts will be frozen, and you'll be protected against legal action from your lenders.

An IVA will affect your credit rating for six years from the date it starts - and if you are a homeowner you may be required to release equity in your home during the final year of your IVA.

Visit our IVA Questions Page to find out more.

What if I don't have enough for an IVA?

If you are really struggling to meet your debt repayments, but you don't have enough to offer your lenders each month, a DRO (Debt Relief Order) might be more suitable. The requirements for entering a DRO are quite specific: for example, your available income after your 'essentials' cannot be over £50 each month, and your assets can't be worth over £300 in total (except for a car worth under £1,000). Plus, you can't enter a DRO if you owe over £15,000.

Fill in the callback form if you're not sure which debt solution is right for you, and a friendly debt professional will get in touch to discuss your options.

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