Can I enter an IVA if I'm unemployed?

Yes, you can still apply for an IVA even though you may be out of work, but is it in your best interests to do so?

Establishing Your Priorities

When unemployment strikes, the effect is normally immediate and tough decisions have to be made.

Making a list of your priorities is always a good way of keeping track of the most important aspects of your financial affairs and, consequently, this should be one of the first things you do.

Prioritise your expenditure

The highest priorities should relate to your health, security and wellbeing.

So ensuring that you have sufficient financial resource to keep yourself and your dependents well nourished and a roof over your heads should be at the top of your list of priorities.

You should be as accurate as possible with these costs, as failure to maintain these high priority items will cause you the most problems in one form or another.

At the very bottom of your list will be your obligation to maintain your personal unsecured debts, such as your overdraft, loans, credit and store cards and so on.

Even the most aggressive creditors will recognise the difficulty in trying to extract a payment from someone who is unemployed.

In most cases they'll simply ask you for a regular update, or perhaps even a £1 token payment. This is sometimes done to avoid the escalation of their debt collection process, but don't be pressured into making a payment you can't afford.

Here's a list of expenditure, with the highest priority items at the top:

  • Food and clothing: Sufficient to keep you and your dependants fit and well.
  • Housing costs: Your mortgage or rent, needed to maintain the roof over your head.
  • Council Tax: A high priority given to this item as non payment can have serious consequences.
  • TV license: A high priority given to this item as non payment can have serious consequences.
  • Utility bills: Maintaining access to water, warmth and power takes next highest priority.
  • Personal needs: Such as opticians, medical and dental costs and other personal needs.
  • Unsecured debts: Payments to loans, overdrafts and credit cards.

As you can see from this list, making arrangements to repay your unsecured debts is right at the bottom of the list.

Unemployed IVA option

If, after you have covered your essential living costs, you still have some disposable income available to put towards your unsecured debts, then an IVA might be an option.

You could also supplement your income by using any of several different sources listed here:

  • 3rd party contributions.
  • Partner's income.
  • Part-time income.
  • Disability Living Allowance - DLA.
  • Personal Independence Payment - PIP.
  • Child Tax Credits - CTC.
  • Family Tax Credits - FTC.
  • Housing Benefit.
  • Council Tax Relief.
  • Occupational pension income.

Any of the above sources could be used to supplement your income to maximise your chances of generated a surplus.

Financial assistance offered by friends or family in the form of 3rd party contributions provides a very straightforward solution.

In such cases, the offer of 3rd party assistance is conditional and, therefore, the 3rd party wouldn't be required to continue payments after employment had been found.

Also, we should point out at this stage that a family member or friend providing the 3rd party funds wouldn't be exposed to any liability towards the debts in the IVA either and their involvement would be completely voluntary.

With reference to the other types of income, the primary consideration would be to ensure that sufficient allowance is given to meet your expenditure on these areas, before any surplus could be allocated towards your IVA.

Professional IVA Advice

If you would like to have a free consultation with an IVA specialist, please call on 0800 088 7502.

Alternatively, complete this form and one of the team will call you back at your preferred time.

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