My husband and myself are seriously considering entering into an IVA arrangement to sort out our debt problems. We have taken the intial enquiry steps and already know that we would qualify. The only thing that concerns me is that under the terms of the IVA we would being paying £200 a month which leaves us very little left to live on once our other bills are paid. What would happen if something expensive, like the washing machine were to break down and needed replacing, how on earth would we afford it? I do have a credit card (unused) with a balance of £500.00 on it for just such emergencies, but according to the terms of the IVA i wouldn''t be able to use it. If i did use it, what would happen?
If you used the credit card you would be in breach of your IVA which could cause it to fail.
You should be allowed a bit of a contingency allowance each month. Most people try to save this to help pay for the unexpected.
The main thing here is not to agree to repayments you know you wont be able to afford for 5 years. Also, make sure ALL the options available to you are fully explained along with the pros and cons of each.
If your disposable income is as low as £200, it will be very sensitive to unforseen areas of expenditure such as you describe - and in my experience the lower the contribution the more risk the IVA will fail.
You should definately not be thinking about relying upon further sources of credit to assist in funding the IVA, as you have rightly been advised this would not be acceptable.
An allowance for contingencies ought to be made within your budget - and my personal advice would be to try a DMP for a few months to see if you could afford to make these payments - you can always convert to an IVA at a later stage if you can find an IP happy to take you on as a client with such a low payment.
It concerns me at times when people say that they 'qualify' for an IVA. This somehow implies an IVA is a reward or a prize when in reality it is a legal contract between yourself and your creditors. You should never enter into an IVA if there is serious doubt about the long term viability of the proposal and if the payments will cause hardship you should give great consideration to bankruptcy or a DMP for a lower amount.
There is no doubt that some people have been sold inappropriate IVAs and I would speak to another IP to see if an IVA is really the best option for you and your family.
I agree with Melanie that if you are already considering using credit before the IVA has even started then there is something wrong. IVAs do list contingency items and in unforeseen situations the IP can allow missed payments but ultimately five years is a long tome to commit to something without any confidence at all.
