When an IVA has been agreed at the Creditors Meeting the IVA becomes a legally binding agreement.
One of the conditions attached to the IVA, and stated within the IVA proposal, is that whilst the IVA agreement is active, the IVA applicant will STOP using all existing lines of credit, or apply for any credit facility whilst the IVA is active.
There is the exception to this rule which allows the IVA applicant, with the agreement of the Insolvency Practitioner, to use up to £500 credit under special circumstances, such as to assist with running a small business where there may be a need for purchasing supplies in advance of being paid for the work being completed.
This, on the face of it, may seem like a difficult undertaking to commit to. However, when an IVA is being prepared, there are budgeting allowances which are used to establish how much the IVA payment will be. These budgeting allowances ensure the debtor will be able to afford their everyday commitments, before they pay any money into their IVA, which in theory should mean the need to borrow money is removed as there are no unexpected bills to worry about as they should have had a provision set aside.
Unfortunately, it is not so much as wanting credit that most people in an IVA need from a credit card, but more so the actual benefits of convenience that paying with a credit card can bring.
Recently there has been an explosion of ‘Pre-Paid Credit Cards’ that have come to market.
These cards do not offer credit at all, but actually work on the premise of a debit card. A debit card only allows access to ‘cleared funds’ on the account, therefore removing the need for credit checks.
This type of card gives all the same features as the credit card would, such as allowing purchases over the internet or paying for groceries electronically, and can prove to be very useful if you need access to your cash 24 hours a day.
So it will probably come as some relief to hear that it is permissible to own and use one of these cards whilst you are on an IVA, should you want to benefit from the flexibility they provide.
It used to be that learning to live without credit when in an IVA, could be really difficult, as was having to do away with the flexible payment benefits that the card brought, but at least that seems to have been taken care of now.
If you are searching for further information on the IVA subject, then take a look at our full list if IVA articles, where you will find all the IVA information you need.
Or why not call the My IVA Adviser team for free on 0800 088 7503, and discuss your concerns with one of our specialist IVA advisers in complete confidence.
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