If you are thinking about proposing an Individual Voluntary Arrangement to your creditors, you should be clear as to what debts must be included in the IVA proposal and which debts must be excluded.
Your Insolvency Practitioner (IP) will verify this for you but even before you take that first step of seeking advice you should be aware that not all debts can be addressed via an IVA. Some debts must be paid in full on an ongoing basis and you must make allowance for these when preparing your monthly household Income and Expenditure Statement.
To begin with, all secured debts must be paid outside of the IVA arrangement. The most important secured debt you will have is your mortgage and your car Hire Purchase is probably your second most important secured debt.
Nearly all of your unsecured debts must be included in your IVA. This means that you will be offering your creditors a dividend on these debts and therefore not paying them in full. There are however exceptions to this for example fines, student loans and Child Support Agency arrears must be paid in full on an ongoing basis. These debts cannot be lumped in with your other unsecured debts.
Therefore after deducting all of your normal living expenses from your income – including mortgage or rent, car HP, council tax, water rates, food, drink, clothing, heat and light, travel expenses, costs relating to children and so on, you will be left with what’s known as your disposable income or DI for short. This remaining amount of disposable income is what you will contribute to your creditors, minus the administration costs of your IVA.
Your Insolvency Practitioner will calculate for you exactly how much you can offer to your creditors in your IVA taking into account all of your income and all reasonable household expenses. It is therefore important that you disclose all of your debts to your Insolvency Practitioner from beginning otherwise you could find that an omitted debt could cause your IVA to fail in the future.