If you get benefits, can you start an IVA

Use this guide to find out everything you need to know about starting an IVA if you are on benefits. Do you have to use your benefit money to pay your IVA? Can you write off any overpayments you owe?

Our experts have all the information and advice you need when it comes to deciding if an IVA is right for you where benefits form part or all of your income.

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Are you allowed to start an IVA if you receive benefits?

You can start an IVA if you receive benefits.

You may be surprised to learn that a significant number of people who have an IVA are likely to get some kind of benefit payment. This could be in the form of child benefit, universal credit, attendance allowance or disability payments.

When you are setting up your IVA, you simply include these payments in your income calculation (together with your wages etc).

You can rest assured that your IVA will not affect your ongoing benefit payments in any way.

Your eligibility to receive your payments does not change. They will still be made into your bank in exactly the same way as before your IVA started.

Do you have to include your disability benefits – PIP or DLA?

You will have to add all disability benefits you receive (such as PIP and DLA) into your IVA. That said, you don’t have to use this money to pay your debts.

If you get PIP (Personal Independence Payment) or DLA (Disabled Living Allowance), you must include these amounts when you calculate your total monthly income.

However, you should highlight in your IVA that you need these funds to pay for the extra expenses you have due to your disability.

How do you do this?

• Simply add an amount in your living expenses budget to cover your disability associated costs.
• Ensure you include all your extra expenses such as transport; home care and treatments.

It is not necessary for you to justify each of these extra expenses individually. A total figure in your expenses budget called ‘disability related expenses’ is sufficient.

Can you choose to use disability benefits to pay your IVA?

You can only start an IVA if you can afford to sustain a reasonable payment towards your debts every month.

The minimum monthly amount you will need to pay is normally £100.

If you can’t afford this from your other income, you can choose to use some of your disability benefits to make up the payment.

You justify this by reducing your disability related expenses in your expenditure budget. You will then be able to show that the payment can be maintained.  

Is an IVA suitable if you only get benefit income?

There is no reason why you can’t do an IVA if all your income is made up of benefits.

As long as you can afford to maintain the minimum payment required, you can choose to start this debt solution if you want.

However, where you have no other forms of income, an IVA may not be the best solution for you.

In these circumstances, you might be better off going bankrupt. This is particularly the case if you are living in rented property.

If you go bankrupt, the Official Receiver will not take any of your benefits to pay your debts. So if this is your only form of income, you will not have to make any further payments towards your debt at all.

You will be bankrupt for just 1 year. After this, you will be debt free.

Want to discuss whether an IVA or bankruptcy is better for you. Have a chat with one of our experienced advisers today.

Can you write off your benefits overpayments if you start an IVA?

You can use an IVA to write off any benefits overpayments you owe.

They are treated in the same way as your other debts – such as a credit card balance or bank loan.

Once your IVA is agreed and in place, the associated benefits agency – normally the DWP (Department for Work and Pensions) – has to stop collecting the overpayment.

You will continue to receive your ongoing benefits award as normal.

If DWP are deducting anything from your payment, this must stop. Other debt collection activities such as bailiffs must also cease their enforcement actions.

What if your overpayments are in joint names?

Where you have an overpayment debt in joint names with someone else, adding it to your IVA will not write it off.

Your IVA only protects you. The other person named on the account will still have to repay 100% of the balance owed.

One way to resolve this problem is for both of you to start a joint IVA.