If you are entering an individual voluntary agreement (IVA), you may be concerned about your personal independence payment (PIP) being taken away. Without PIP, you may not be able maintain a comfortable standard of living, due to the expenses associated with your condition. 

Whether IVAs include your PIP within the disposable income calculation is a tricky issue as it all depends on your overall budget.

When you are considering your options, establishing your affordability is extremely important to determining the appropriate solution.  Insolvency Practitioners pay close attention to your overall household income when reviewing your application, as some solutions are not appropriate where you are unable to afford a sustainable payment.

It can be particularly worrying if you are not employed full-time, or receive a significant percentage of your income from state benefits such as PIP. In these situations, you are often left worrying, ‘can creditors take all of my PIP?’. 

Let’s have a look at this more closely below: 

The Best Advice

Insolvency practitioners are licensed through a Recognised Professional Body, and as part of this, are bound by the Insolvency Code of Ethics.  They are therefore required to give 'best advice' to make sure you choose an appropriate solution for dealing with your debts.

Best advice should be objective based on your circumstances, spell out the facts and be in your best interests. 

On this basis, when assessing your circumstances to determine appropriate solutions, you should be advised that the PIP payment would not be included in an assessment for an Income Payment Order (“IPO”) or used to determine your disposable income for your eligibility for a DRO. This means that bankruptcy or a DRO would be a faster and less expensive way of getting debt free, compared to entering an IVA.

IVA With PIP

If you are considering entering an IVA and you are in receipt of PIP, Insolvency Practitioners will usually point to the bankruptcy or a DRO option. This is because, as previously explained, PIP will not be included in the calculations of an IPO during the bankruptcy process, or accounted for when assessing your disposable income for the DRO criteria. 

However, it should be noted that if you are in receipt of PIP, you are free to choose to enter into an IVA rather than petition for your bankruptcy, or apply for a debt relief order.  Sometimes, there are other considerations that prevent one of these options being appropriate, for example, you own your home, or you have a personal preference to pay something back to your creditors, which would not be achievable through bankruptcy or a DRO. 

Setting Your IVA Budget

The criteria for qualifying for an IVA are the same for everyone getting PIP. However, there are usually variations in expenditure requirements and the overall IVA budget for those receiving PIP. 

Consequently, it is important that IVA budgets reflect a realistic and precise breakdown of your monthly needs before making any kind of financial commitment. Otherwise, you run the risk of not having enough money to pay your bills.

Usually, your PIP income will be discounted in full, as this is how it is treated in bankruptcy and DRO.  PIP is awarded on the basis that it reflects additional support you require, for increased expenses associated with your needs.  As a result, where PIP is included in your income, your creditors will usually allow the same amount to be reflected in your expenses.  

If you feel that you do not spend all of your PIP on increased expenses due to your condition, a lower amount can be included in your expenditure allowances, however, you must ensure that you have accounted for all of the expenses related to your condition, as this will affect the assessment of your disposable income, and will affect the potential solutions that are identified.

What If My PIP Payment Changes During An IVA?

During your IVA, your circumstances may change. It's possible that you'll discover a job that will boost your income, or that your family's circumstances will alter. These considerations will have an impact on the number of benefits you receive.  With PIP, you will be reassessed periodically, which may result in your award increasing or decreasing, depending on the changes in your condition.

If you find yourself in this circumstance, you must notify your IVA company as soon as possible. The Supervisor will need to analyse your income and expenditure budget to determine whether your disposable income has changed, after taking account of the change in your income, and any changes in expenditure.

If it has increased, the contributions you make into your Arrangement may have to increase as well. If your ability to pay has decreased, your creditors may be willing to work with you to reduce your payments.

To Summarise

You can begin an IVA regardless of whether your income is comprised of benefits, earnings, or a combination of the two. The decisive factor is how much you afford to pay your creditors, based on the income and expenditure statement.

For an IVA to be a suitable solution, you must have at least £80 per month left over each month, based on your income and expenditure statement.  Where you cannot afford this amount, then other solutions such as Bankruptcy or DRO may be more appropriate.

Money will be tight if you are on benefits. As a result, even if you can pay the required monthly amount on paper, you must be confident in your ability to sustain for the term of the IVA.