What constitutes credit on an IVA?

This page contains information about debt solutions available in England, Wales and Northern Ireland. Debt advice in Scotland involves similar but different solutions. If you are considering an IVA as a debt solution, please ensure that you fully understand the risks involved when entering an IVA.

What counts as credit?

Are these “credit”?

We all know that as part of the terms and conditions of your IVA proposal you should avoid taking out further credit.

We’d discourage any form of borrowing at all, but you can’t borrow more than £500 without your supervisor’s permission in writing.

But what constitutes “credit”? Let’s investigate…

Gas and electric

We sometimes get calls from people who worry that because they’re in debt to their utility provider for their gas and electricity that this is against the terms of their IVA.

This isn’t the case. While being indebted to your utility provider is a form of credit it isn’t against the terms of your IVA as long as you maintain the payments as agreed.

So what credit aren’t you allowed on an IVA?

The credit you’re not allowed to take out include credit cards, store cards, loans, payday loans, guarantor loans or any consumer credit act debts. These are against the terms and conditions of your IVA and frankly, they defeat the purpose of your IVA.

Loans from family and friends

Whilst it may seem like a good idea to borrow from your family or friends they will still need to be paid back and this could affect your ability to make your IVA payments. Its OK to accept a gift from them but do not take a loan – contact you IVA supervisor instead.

The dangers of the catalogue

Alongside these debts, another to consider is catalogue debt. People sometimes don’t see a catalogue debt as a real debt, and often people in IVAs find that they can get approved for some catalogue transactions. This is against the terms of your IVA.

While catalogue debts might be small they’re a form of credit which can quickly build up and affect your ability to maintain payments into your IVA.

Needing items from catalogues suggests that your IVA budget might not be working. We’d prefer you call us to discuss your IVA budget before you decide to take on catalogue debt and risk breaching your arrangement.

Payday panic

Payday loans are an increasingly popular credit product but if you take one out you’re in danger of breaching the terms of your IVA and having it fail.

Payday loans normally don’t last longer than 30 days and are sometimes seen as a short term fix to a temporary cash flow problem. However if you’re on an IVA they’re not really worth the worry they can cause.

If you do have a sudden unexpected expense or bill to pay and you can’t afford it, we’d prefer if you called us to discuss how we can help you through this without relying on further credit.

We’re here to help

There’s a risk of bankruptcy if your IVA fails, so we’re here to help you make sure your IVA completes its course. We’re also here to listen to you and help you stick to the terms of your IVA the whole duration of the arrangement.

If you’re tempted to take new credit you should speak to us first, to see if we can arrange an alternative solution which will keep you and your IVA on the straight and narrow.

Posted by in Living with debt