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Can I keep using my credit card whilst on an IVA?
When you start an IVA (Individual Voluntary Arrangement) you must include all of your unsecured debts. This includes credit cards, store cards, overdrafts and personal loans. You'll be expected to contribute as much as you can realistically afford towards those debts.
You will therefore not usually be allowed to keep using your credit card - or take out a new one - during your IVA.
Find out what happens during an IVA here.
When would I be allowed to use a credit card?
Your lenders (and Insolvency Practitioner) may allow you to apply for a small amount of credit (typically up to £500) in a financial 'emergency'. For example, if you needed to take out credit for car repairs, and you need your car to get to work, your lenders might agree. If you need your car to get to work to earn money to contribute to the IVA, your lenders may see that it's in their interests that you get your car fixed.
Bear in mind, however, that the impact an IVA will have on your credit rating can make it difficult to obtain a credit card during your IVA.
What is the alternative to using a credit card on an IVA?
Seeing as though it's not usually advisable, and sometimes not possible, to take out credit on an IVA - what is the alternative?
If you need some extra leeway in your IVA for an emergency - like car repairs - it may help to speak to your Insolvency Practitioner (IP) about it. If you explain your situation, your IP may be able to negotiate with your lenders.
For example, in some cases your IP may be able to convince your lenders to reduce the size of your monthly repayments for a certain period of time. It may even be possible for them to arrange a 'payment break' where you stop paying into your IVA for a few months, in order to sort your finances out. If you are unable to resume your IVA within a certain time period, however, you may have to end the IVA.
If you have any other questions, have a look at these common IVA questions.
Before you start an IVA, it's important to know the drawbacks. For example, an IVA will affect your credit rating for six years. If you are a homeowner, you may also have to release equity in your home (which reduces your deposit for future remortgages).
By Daniel Culpan.
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Subject to eligibility and acceptance. Fees Payable. Debt write off applies to unsecured debts only and on completion of an IVA, alternative solutions may be offered. If your IVA fails, it could lead to Bankruptcy. Your ability to obtain credit will be affected for at least 6 years. Homeowners may be required to release the equity in their property.