Summary
There is nothing that prohibits you from taking a holiday while on an IVA, and the Arrangement does not restrict your ability to travel. This could be for business or leisure purposes. It is not expected for you to be beholden to your creditors. You have the freedom to determine how you allocate your funds.
Overview
There is a common misconception that if you are in an IVA or any other debt solution, you must give up all non-essential and luxury expenses until you have paid your debts.
But whilst there are strict spending rules you must abide by when you are in an IVA, you are free to spend your money on whatever you wish as long as your living expenses and IVA payments have been taken care of first.
In this guide, we’ll cover everything you need to know about travelling whilst in an IVA.
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What is an IVA?
An IVA, or Individual Voluntary Arrangement, is a formal agreement between you and your creditors to repay a portion of your unsecured debt through a series of monthly payments or a single lump sum.
An IVA can be set up by an IVA company but must legally be managed by an Insolvency Practitioner (IP) who will oversee your arrangement from start to finish and communicate with your creditors on your behalf to ensure they receive their portion of the money they are owed every month.
When you start your IVA, it will be noted on your credit file for six years from the date it was approved, during which time it will lower your credit rating and make it difficult to get approved for further credit products such as a loan or mortgage.
After making monthly payments for five years – or six years if you have missed payments or a payment break – your remaining debt will be written off and you will be free to start rebuilding your credit.
Are there spending restrictions with an IVA?
When your IVA is approved, your IP will outline the terms of your arrangement as well as what your additional income threshold is to be.
This is, essentially, how much additional income you can earn without needing to put it towards your IVA and is usually 10% more than the income you originally listed on your IVA proposal.
With this in mind, you can keep any additional income to spend on whatever you wish as long as it equals less than 10% of the income listed on your IVA proposal. After this, you must pay 50% into your IVA.
Furthermore, you can’t have an overdraft on any of your bank accounts and can only borrow up to £500 of credit whilst you are in an IVA.
If you want to borrow more than £500, you must ask your IP and explain what the money will be used for. They will then analyse your finances and decide whether or not you are in a position to take out further credit.
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Can I travel abroad with an IVA?
Whilst you’re in an IVA, there is nothing stopping you from travelling in your own country or abroad. However, there are some things you should know about before you go ahead and book a holiday.
For example, whilst you don’t need to inform your IP of where you are going or how long you are going for, you must let them know if you are planning on going on holiday for longer than what is considered a short break (usually two weeks).
Additionally, you may only be able to afford a holiday if you have spare money saved from the IVA budget assigned to you when you entered your arrangement although it is also possible for a friend, partner or family member to gift you money towards a holiday.
However, if you are already struggling with your IVA payments or have little to live on after your day-to-day expenses have been paid, it may be in your best interest to seek alternative solutions such as waiting until your IVA is over.
Can I move abroad with an IVA?
As long as you can continue to keep up with your monthly repayments, there is nothing stopping you from moving abroad whilst in an IVA.
Your IP or IVA provider may ask you to submit an updated income and expenses form to confirm your future income is enough to cover your ongoing payments.
However, if you can no longer afford to make payments towards your IVA, you must contact your IP as soon as possible and inform them of your change of circumstances. Should your IVA fail, you will no longer be protected from your creditors and they will be free to chase you for the money they are owed.
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Can I get a payment break to go on holiday during an IVA?
Whilst it is possible to get a payment break from your IVA to be able to pay for an emergency expense, you must obtain permission from your IP beforehand and have a valid reason for doing so. The monthly payments you missed will then be added to the end of your IVA, extending your arrangement by another 12 months.
Because of this, you are highly unlikely to be able to take a payment break to go on holiday and will more than likely need to fund it through alternative means.
You must also never borrow money to go on holiday during an IVA. This will not only add to your existing debt level but, crucially, put your entire arrangement at risk.
Can I go on holiday if I booked it before my IVA?
If you already booked and paid for your holiday before you entered your IVA, there are no rules against still going on holiday when the time comes.
Even if you used a credit card to pay for your holiday and included a debt from the credit card company in your IVA, they are prohibited from cancelling the holiday or stopping you from going on holiday.
The only issue in this instance would be whether the credit card company agrees to accept your IVA proposal but as long as 75% of your creditors agree, your IVA will still go ahead.
