When debts become unaffordable, it is common for people to continue borrowing just to cover normal living expenses. But will your creditors accept an IVA if you have recently used credit? 

Included in this article:

• Starting an IVA if you have recently taken a loan
• What if you have recently used your credit cards?
• Can you use the remaining credit on your cards?

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Starting an IVA if you have recently taken a loan

With the availability of payday loans in recent times it has been increasingly normal for people to take a new loan just before they decide that they need to use an IVA (Individual Voluntary Arrangement).

In most cases where these loans are smaller amounts, it does not prevent the agreement from being accepted. However if the amount of the recent debt is large, it can cause problems. If the creditor has more than 25% of your total debt and refuses your application, it will be rejected.

If you have just taken a large bank loan, you may have to consider using a debt management plan for 6 months before applying for the IVA. Even then the creditor does not have to accept the offer.

For the IVA to be accepted 75% of the value of the creditors who choose to vote, must say yes.

Struggling to get your head round all of this? We can help. Call us (0800 077 6180) or complete the form below. The advice is free and confidential.

Starting an IVA if you recently used credit cards

If you have credit cards it is normal that you will have continued to use these right up to the point where you decided to start an IVA.

This along with any arrears from your monthly payments will not normally stop your IVA application from being accepted. However once you have made the decision to apply, you should stop using your credit cards.

Do not worry if the only way you have been paying your monthly living expenses up to this point is by using your cards. You will no longer be paying your creditors. This is how you break out of the debt cycle you are in.

If you have a joint credit card make sure you have told the joint card holder to stop using the card. The best course of action is to cut up both of the cards.

Can you use the remaining credit limit on my cards?

Once you have decided to enter an IVA, you may be tempted to spend any remaining credit on your credit cards, but you should not do so. If you do it may lead to this creditor rejecting your IVA application.

One thing you can do to ease your finances is to stop paying your creditors. This can free up a considerable amount which you can then use to pay for your everyday expenses such as groceries and fuel until next pay day.

If you stop paying your creditors they will start to contact you and demand payment. When this happens be honest. Explain that you are in financial difficulty and have taken debt advice. Tel them you are in the process of applying for an IVA and ask them to put your account on hold for a month or two. Most will give you this help.

Creditors will look at what you have recently purchased. If you have bought an expensive luxury item shortly before your IVA application, they will be less likely to accept your offer.

Need help to start an IVA. Give us a call (0800 077 6180) or complete the form below. The advice is free and confidential.