A good Individual Voluntary Arrangement (IVA) proposal will have at its heart a sensible, realistic and well constructed Income and Expenditure Statement (I&E). A concern for anyone who is contemplating entering an IVA is whether creditors will look for the last penny of disposable income to be contributed, leaving nothing for emergencies or for ‘rainy day’ events.
In truth, a proper and fair I&E should include a reasonable amount set aside each month for emergencies and contingencies. If the insolvent debtor is single with no family commitments then the amount will be smaller than where the family consists of two adults (partners or spouses) with or without dependent children. In such a case, I&E is a statement of family income and family expenditure. How much is a reasonable amount? One yardstick used is that the family I&E should allow a single debtor to retain a contingency amount of £15 per month, a couple £30 per month and each child £12 per month. Creditors may sometimes decide that in all the circumstances of the case, such contingency amounts are too generous and may seek to reduce them somewhat. In the end however, the debtor will have control over a certain amount of the disposable income and can retain that amount each month.
The important thing however is to ensure that all sources of income and all family expenses are listed on one’s I&E Statement. When the IVA is approved it is rather late to realize that a certain recurrent expense item has been overlooked. It is in the interest of the debtor and his or her responsibility to ensure that this does not happen and to make sure that the insolvency practitioner (IP) who is acting as nominee includes all reasonable expenses in one’s I&E statement in the IVA proposal.
It is obviously essential that all sources of income are included: wages, salaries, housing benefits, child benefit, tax credits, pensions, dividends and interest earned on savings accounts, lodger rental or other income from letting property and so on. Household or family income should include the income of both partners and the contributions of any non-dependent children to the household budget. Income should be net of all taxes & national insurance deductions and any mandatory contributions to pension schemes
Spending should include all reasonable living expenses. Start with the ‘must pay’ bills such as mortgage or rent or cost of lodgings and car HP. Next summarize all food and housekeeping expenses for the family and the cost of utilities such as water, gas and electricity. Then list all the normal items of expenditure one by one: council tax, water rates, telephone, mobile, internet, sky, TV license, life and property insurances, vehicle costs (fuel, parking, car insurance, car tax, repairs & servicing), medical optical & dental costs, clothing & footwear, costs incurred by children (school meals, school trips and activities, sports & hobbies, pocket money, transport), laundry & dry cleaning, hairdressing, newspapers & magazines. If you have a pet you must allow for insurance & upkeep. If you smoke than unless you are sure you are giving up the habit this expenditure must be listed. Modest contributions to church or charity should be included if applicable. Any special unavoidable expenses (e.g. special diet for a family member) should be included. Last but not least, an appropriate amount is included for sundries, contingencies & emergencies.
If done properly, life is indeed bearable in an IVA and the debtor can look forward to a debt free future.