I am a Student – Can I do an IVA

I am a Student – Can I do an IVA

For many people being a student can be financially very challenging. Do students have the same access to debt solutions like an IVA, as those people who work full time?

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Can students do an IVA?

The problem is not about whether students are allowed to do an IVA, but whether they are able to. There are no formal rules preventing students from undertaking this type of debt solution. However a key aspect of the Arrangement is that it requires you to maintain agreed regular payments to your creditors.

If you are studying full time and have very little income sustaining such payments could be very difficult. This could call the appropriateness of the solution into question. You will only be able to do an IVA if you and the Insolvency Practitioner (IP) dealing with your case are convinced that you can sustain the required payments.

If you cannot afford to do this one option is to get help from a third party. Your partner or another family member could agree to pay your IVA for you. This will normally be enough to convince your IP that your payments will be sustained.

If maintaining ongoing payments is impossible you could consider a full and final settlement IVA. This allows the Arrangement to be started and then settled in full with a single lump sum payment with no ongoing payments.

Becoming a student while in an IVA

You may already be in an IVA but have decided that you want to leave your job and study full time. If so, you need to understand how this will affect the Arrangement.

The key question is again whether or not you will be able to maintain your agreed payments? If not a variation might be accepted allowing smaller payments to be made. However to achieve this you will normally have to extend the length of the Arrangement.

An alternative solution could be settling your agreement early with a lump sum. This may be possible if a friend or family member is able to offer the cash amount required.

If you are not a home owner you can also consider letting your IVA fail and going bankrupt. It is then likely that you will not have to make any further payments towards your debts.

Student Loans and your IVA

Once you start to study it is likely that you will want to apply for a loan from the Student Loans Company (SLC) to help support you. As long as you are eligible for a SLC loan you will be able to get one whether you are in an IVA or not.

If you start an IVA this will result in you getting a poor credit rating. However this will have no effect on your ability to get your SLC loans. This source of income could therefore help you sustain your ongoing payments.

Student Loan Company loans are available to eligible students even during an IVA. However you will not be able to take new standard credit facilities during the arrangement.

Alternative Debt Solutions for students

As a student it is likely that your income will be relatively low. If you are unable to comfortably maintain the payments required for an IVA a more suitable alternative for you could be Bankruptcy.

Once bankrupt you will not have to make payments towards your creditors unless you can afford to do so. Given are living on a minimal student income payments will therefore be unlikely. After 12 months you will be discharged and so the process will be over by the time you finish studying (although your credit rating will remain affected for 6 years).

Students often turn to family members for support when facing debt. If the ‘Bank of Mum and Dad’ are able to help you could make settlement offers to your creditors. You could then agree to repay your parents once you are in full time work.

If you are a student with no assets bankruptcy could be a better option than an IVA. Give us a call (0800 077 6180) or complete the form below to discuss your options with one of our experts.

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