In our last article ‘IVA Living Expenses’ we looked at the approach creditors take in deciding whether to accept or reject your proposal for an IVA. In this article, we will look in detail at the IVA Guidelines or Living Expenses Guide which most creditors claim to adhere to in making their decisions as to whether to allow each item of expenditure or not.
IVA Living Expenses
Your IVA Living Expenses are calculated using a set of budget guidelines. The budget guidelines allow us to work out what you can realistically afford to pay each month in an IVA. The Living expenses guide covers all expenses so that your IVA payment will be as accurate as possible, whilst also being fair for both you and your creditors. The expenses include guideline amounts for items such as Bills, Utilities, Transport, Healthcare, Mortgage/Rent, Food, Toiletries, Clothing, etc… These expenses are all explained in detail below.
Priority expenses are considered as important expenses in your monthly budget which can vary in amount from person to person and are an important part of your household budget that must come first. For example, priority expenses would include your mortgage payments or monthly rent. Also, any monthly HP payments on a vehicle you might have. Such items are not covered in the IVA Budget Guidelines but creditors may make certain suggestions about these items if the relevant expenditure is deemed by them to be excessive.
For example, creditors will look at a situation where 40% or more of your disposable income is required to pay the mortgage or indeed the rent and may deem this as excessive. Similarly if you have acquired a very expensive car via a HP agreement, creditors may suggest certain actions if the monthly HP premium is deemed to be excessive in the context of your disposable income.
Within the most recent Living Expenses Guide 2014, the largest single item of monthly expenditure listed is Food, Toiletries and Cleaning or what most people would call Housekeeping. Detailed below are the suggested guideline amounts for you and your family on what you should spend on these items per month.
The suggested monthly guideline figure for a single person is £169 with a minimum of £100 and a maximum of £222.
For a couple the guideline figure is £287 with a minimum of £185 and a maximum of £354.
If there are additional adult dependents in the debtor’s family, the guideline figure for each such dependant is £105 with a minimum of £75 and a maximum of £138.
The guideline figure for each dependent child a debtor may have is £71 with a minimum of £54 and a maximum of £86.
The figure that you put into your IVA proposal should reflect the reality of your situation. If the amount claimed lies below the minimum or above the maximum expenses figure, then you must provide explanations as to why this is so and justify such a variation credibly. This also applies to each of the budget items dealt with below.
Clothing and Footwear expenses
Clothing and Footwear is considered separately and the monthly guideline figures are
- single £25 (min. £0, max. £34)
- couple £40 (min. £0, max. £53)
- adult dependent £25 (min. £0, max. £34)
- child dependent £18 (min. £0, max. £20)
Car or Vehicle expenses
Car insurance and motor tax are not listed since these vary hugely depending on the age, experience and track record of the driver and on the make model and size of the car. However, the guideline for Fuel & Parking is £125 per month (min. £0, max. £200) and for Spares & Servicing is £15 per month (min. £10, max. £30).
Food and meals expenses
Meals at Work carry maximum monthly allowances of
- £36 for a single person
- £72 for a couple
- each child is allowed a maximum of £50 per month on School Meals.
School Trips & Activities may be claimed for each child up to £7 per month and the guideline for Child’s Pocket Money is £12 per month.
Phone and Mobile expenses
Monthly allowances for Telephone & Mobile are
- single £49 (min. £0, max. £57)
- couple £60 (min. £0, max. £77)
- adult dependent £10 (min. £0, max. £20)
- child dependent £7 (min. £0, max. £10)
Medical, Dental and Optical expenses
Dentist & Opticians allowed monthly expenses are
- single £11 (min. £0, max. £14)
- couple £22 (min. £0, max. £28)
- adult dependent £11 (min. £0, max. £14)
- there are no allowances for children.
Medicines & Prescriptions are allowed at a maximum monthly rate of £11 for each adult (min. £0), with no allowance for children.
Sundries & Emergencies have suggested monthly guidelines of
- single £11 (min. £0, max. £12)
- couple £16 (min. £0, max. £23)
- adult dependent £11 (min. £0, max. £12)
- child dependent £6 (min. £0, max. £11).
Hobbies and Entertainment expenses
Sports, Hobbies & Entertainment have suggested monthly guidelines of
- single £10 (min. £0, max. £20)
- couple £15 (min. £0, max. £30)
- adult dependent £5 (min. £0, max. £10)
- child dependent £5 (min. £0, max. £10)
The guideline figure for expenditure on Satellite is £26 per household and household expenditure on pets including pet insurance is £23 per household (min. £0, max. £34).
Monthly hairdressing expenses are allowable at
- single £12 (min. £0, max. £12)
- couple £24 (min. £0, max. £24)
- adult dependent £12 (min. £0, max. £12)
- Child dependent £5 (min. £0, max. £7)
Of course a family may have other expenses that arise that must be included in the IVA expenses, such as a special diet for a family member with a particular medical condition for example. Such expenses need to be listed and included in the IVA proposal.
There are also such standard set expenses such as council tax, water rates, TV license and so on. You need to make sure all relevant expenses are included. One tip is to look back over bank statements and credit card expenses for the last year to identify any such expenses.
In addition to your Insolvency Practitioner (IP) who is acting as nominee in the matter and their staff will review the income and expenditure statement to ensure that no standard regular expense item is inadvertently omitted. It is up to you to flag up any unusual or occasional items which the IP could not have foreseen or anticipated.
Get IVA help
If you are thinking about dealing with your debts and want to know more about an IVA then get in touch with us at McCambridge Duffy. Fill in our IVA Calculator to get an idea of what your IVA payment could be. We have expert advisors who can assess your situation fully and can determine what the best option is for addressing your debt problems. All advice is free and confidential.