Spare income is a key indicator of financial stability and forms the basis for deciding which debt solutions are available and sustainable.

If there is spare income:

• It may be possible to keep contractual repayments maintained.
  
  

• Reorganisation of debts may be an option, such as credit card balance transfers or refinancing with lower interest rates, depending on credit score.
  
  

•  An informal debt repayment strategy, such as a debt management plan (DMP) might be an option to consider.
  
  

•  A formal debt repayment strategy, such as a an IVA might be an option to consider if there are assets to protect.
  
  

• If disposable income is £75 pcm or lower, and other criteria is met, a debt relief order might be considered.
  
  

It might also be possible to look at areas of the budget expenditure to see if expenses can be reduced. Equally, income maximisation options might also be possible. 

Your disposable income is used to test your financial comfort level and ability to repay debts. If your spare income is enough to meet your minimum contractual payments, you might not need a debt solution. If your budget is tight, you might be able to make some cutbacks or increase your income with help from a money adviser.

Debt solutions like a Debt Management Plan (DMP) may help you gradually repay what you owe. But if your spare income is low, in a deficit or inconsistent, you may need to explore insolvency options such as a Debt Relief Order (DRO), Individual Voluntary Arrangement (IVA), or Bankruptcy. It is always advisable to get free debt advice on debt options before committing to an application or paying any fees.

The Personal Insolvency Test uses spare income, alongside assets and personal circumstances, to assess whether someone can realistically pay their debts. If contractual payments cannot be met from spare income, this suggests a debt problem may be unmanageable without formal intervention.

Budgets can be fluid, changing from week to week depending on income, spending habits, or life events. That’s why it’s important to make your budget as realistic and representative as possible when working out whether a debt option is needed.

Starting your own budget is a great first step, but a money adviser can help sense-check it, spot inaccuracies, and ensure nothing important is missed.

Spare income isn't just a number, it’s the foundation for making informed and ethical decisions about managing debt. A clear, accurate budget gives you a better understanding of what's possible, what's sustainable, and what steps to take next.