Are There Spending Restrictions with an IVA?

If you’re considering whether an individual voluntary arrangement (IVA) is the right debt solution for you, you may be wondering whether there are spending restrictions with an IVA. In simple terms, if you meet your IVA monthly repayments, there’s no specific restriction on what you spend money on beyond that. How much you have available to spend is the key point for IVA spending restrictions.

As an IVA is a route out of debt, you’ll be required to direct virtually all your disposable income towards repaying your debt. You certainly don’t want to be making purchases that could accrue more debt or make it difficult for you to meet the requirements of your IVA.

Before starting an IVA, your insolvency practitioner (the nominee for your IVA) will work with you to get a complete picture of your income, expenses, and debt. From this information, they’ll prepare an IVA proposal. They’ll also include the administrative costs of the IVA and nominee fees. This is the plan that they take to your creditors seeking consent for your IVA to go ahead.

One of the appealing aspects of an IVA as a debt solution is that it considers your living expenses in assessing what you can reasonably repay each month to your creditors. What this means is that you can continue to meet your costs of living while making your way out of debt. What it doesn’t mean is that you can pursue a luxurious lifestyle for the duration of your IVA. There are IVA spending restrictions if you’re serious about getting out of debt.

If at least 75% of your creditors approve the IVA, your insolvency practitioner will start the process of implementing it. The IVA proposal is what your creditors have agreed to, as such, this is the budget you need to abide by if you want your IVA to succeed.

The IVA proposal will also outline the additional income threshold, the amount of extra income you can earn without it going directly towards your IVA. As outlined in a recent article by MoneyNerd, this is usually 10% above the income listed in your IVA proposal. If your income increases within that threshold, you’ll have surplus funds for spending (or saving). Anything over the additional income threshold would likely be assessed as needing to go towards your repayments. In this sense there are IVA spending restrictions.

As you need your insolvency practitioner’s written consent for any credit over £500, this also restricts taking out credit for any large spending purchases while on an IVA. Spending restrictions may seem daunting, and professional guidance can have a huge pay off when considering a debt-free future.

Professional Advice to Navigate IVA Spending Restrictions

Choosing the best route out of debt for your unique circumstances can be challenging, with many aspects to consider. You don’t have to navigate IVA spending restrictions alone. Contact Irwin Insolvency today for expert, tailored advice on individual voluntary arrangements to move towards a debt-free future.