Credit Card and Store Card Debt in an IVA

When credit card debts begin to spiral out of control, action should be taken swiftly to minimise any potential damage.

In some circumstances, the best cause of action will be an IVA.

How An IVA Deals With Credit Card Debt

Under the terms and conditions of an IVA, once the IVA proposal has been accepted, all creditors are legally obliged to freeze interest on their outstanding balances.

This is of particular importance with regard to credit card debts, as it stops the debt from growing any bigger once the IVA has been agreed.

Rather than added interest continuing to grow the balance during the IVA, the debt is frozen.

Then, after the successful completion of an IVA, any outstanding balances left unpaid by the IVA contributions must be legally written-off by the creditors, irrespective of how much debt was actually repaid.

And that's why becoming debt free with an IVA is a real possibility.

Our flexible friends

Over the past 25 years, credit cards have become a central component of our personal finances.

They provide great flexibility and give us instant access to funds, wherever in the world we may be.

Over the years, the big high-street stores have jumped on the band wagon offering access to credit through loyalty store cards.

It's fair to say that we've all become accustomed to this convenient method of shopping and most of us would feel naked without at least one credit card in our pocket.

Flexibility at a price

But, this flexibility comes at a price.

By their very nature, credit cards are designed to provide short term credit as a matter of convenience, but credit card debt is an expensive way of borrowing money over the longer term.

And the truth of the matter is that it's all too easy for credit card debt to change from being a convenient temporary credit facility into a heavy debt burdon within a very short time frame.

When this happens, the benefits of the credit card seem to melt away.

It no longer provide a flexible facility. Instead it provides expensive credit which is notoriously difficult to repay.

The point of no return

When the balance on a credit card is allowed to grow too high there comes a point where, sooner or later, the actual cost of the minimum monthly payments are too high to maintain.

When this tipping point is reached action needs to be taken, and the sooner the better.

If no action is taken, the debt will simply spiral out of control.

Applying for an IVA

One course of action would be to enter an IVA.

To see if an IVA may be able to help you deal with your debts please call our helpline on 0800 856 8569.

Or follow this link to complete an on-line IVA application form.