Can I Do an IVA If My Only Income is Benefits
This is a question that I am often asked and it is certainly an interesting topic.
If someone’s sole income is derived from benefits then there is no legal reason why they should not be allowed to propose an IVA. If after prudent budgeting, a review of reasonable expenditures shows that there is a disposable income available, then this could be used as the basis of an IVA proposal.
Despite this situation, an IVA can only be put in place if the proposal is accepted by creditors. Over the past 12-18 months, many commercial banks have taken the view that it is not morally correct for someone who’s sole income is benefits to carry out an IVA. Their argument is that benefits are means tested and designed to pay for a reasonable cost of living but do not include extra funds for the repayment of debt.
On the face of it, this is a reasonable argument. However, it seems to me that if someone with this type of income has been allowed to borrow in the first place and then gets themselves into difficulties, then surely they should be given the same options as everyone else to resolve the problem. After all, if not IVA, then what? A Debt Management Plan will require monthly payments in the same way as an IVA and so surely if your argument is that benefits money must not be used to pay for debt, then the Debt Management plan is also taboo. This then leads us to assume that those on benefits will be driven to declaring bankruptcy which is surely in no-one’s interest.
My personal view is that IVAs for people who’s sole income is benefits should not be dismissed. However, the discussion is likely to continue.
Note – It is certainly possible for someone to undertake an IVA when only part of their income is derived from benefits (eg a tax credit). Also creditors may consider accepting an IVA if the debtor has a property which they stand to loose in bankruptcy.
