Can I apply for credit in an IVA?
The terms and conditions of an IVA require that the applicant refrains from obtaining credit until after their IVA has completed.
Certain lines of credit are usually exempt from this requirement, such as obtaining a credit agreement for a mobile phone contract, or paying your annual car insurance on a monthly payment plan.
So, in order to avoid confusion, the terms and conditions stipulate that the applicant must not obtain more than £500 credit without the prior approval of their insolvency practitioner.
If more than £500 is obtained without prior permission, it is considered a breach of the IVA, which could give cause for the IVA to be terminated.
Living Without Credit
For some people, learning to live without credit can be very difficult.
When you've spent years being completely dependent on having access to credit to simply cover essential living costs, it can be hard to let go.
When entering an IVA, the financial burden of multiple debt repayments is removed, which frees up money in the budget to cover normal household costs instead.
A healthy household budget should provide financial stability and sustainability, removing the need to borrow money to get by.
Living within an IVA budget should be no different.
This is why it is extremely important that your IVA payments are based on a realistic reflection of your affordability.
Otherwise, you may be left struggling to make ends meet, and left looking for credit.
Damaged credit rating
If obtaining credit is the last resort, and permission has been granted by the IVA supervisor, will not be easy to find.
Due to the adverse effect an IVA has on a credit rating, it will be very difficult to find a lender prepared to extend any amount of unsecured credit.
It also means that any credit that can be obtained will be expensive.
Alternatives to seeking credit when in an IVA
As an alternative to obtaining credit, the IVA supervisor can, at their discretion, provide a payment break to assist with short term payment problems.
A one or two month break from payments may well provide just enough support to avoid the need to borrow money.
That's why it's always best to speak with the IVA supervisor before doing anything.