Can I Go On Holiday While on IVA?
An Individual Voluntary Arrangement can help you get out of a tricky situation with your finances, protecting you against legal action and pressure from your creditors. If you are thinking about planning a holiday while on an IVA, you should be aware of the potential blockers.
In this blog, our experts discuss the pros and cons of IVAs and whether it can affect personal holidays. But first, let’s discuss whether or not you can go on holiday while on IVA.
There are no specific rules which prevent you from taking a holiday while on IVA. However, you must prioritise paying the agreed IVA amount and any living expenses before a leisure trip. If you earn any additional money, half must go towards your IVA if it totals more than 10% of your proposed income on the IVA.
Read on to find out more about how being on IVA and how it affects your ability to go on holiday.
Does Being on IVA Mean You Can’t Go on Holiday?
If you are on IVA, there are no rules which mean you are unable to go on holiday. However, you must be aware of the terms agreed for your IVA.
You can earn a total of 10% additional income to that listed on your IVA agreement. This income can be spent on whatever you wish, including a holiday, as long as your IVA payment and any living expenses are taken care of first. If you earn more than this additional 10%, 50% must be paid into the IVA. There are other financial limits on an IVA including not being able to borrow more than £500 of credit and having no overdraft on any of your bank accounts.
It is strongly recommended that you inform your insolvency practitioner about your holiday so they can determine whether you can afford it without compromising your IVA commitment. You won’t be able to borrow any credit for the holiday so keep this in mind when budgeting. If you receive any overtime payments or bonuses from work while on IVA, remember the aforementioned 10%. If you booked and paid for the holiday before you agreed to the IVA, there are no limits stopping you from going, even if you paid using a credit card.
What Does Being on IVA Mean?
An IVA (Individual Voluntary Agreement) provides a plan between you and any creditors to allow you to affordably pay off any debts owed. Any interest will freeze, meaning no additional debt will build while you are paying off your current debts. The debt can be paid over a period of 60 or 72 months (five to six years) either in part or in full.
For the plan to work, 75% of creditors must agree to the IVA proposal. You must also have proof of regular taxable income to be eligible from an IVA such as a permanent job contract. Your IVA must be managed by a licensed insolvency practitioner.
There are many benefits to an IVA including:
- There is not a consistent pressure or legal action from your creditors to pay debts off as you have an agreed deadline and payment amount per month.
- Once the payment plan has been successfully completed, you will be debt free without interest.
- If the agreement is to partially pay back your debts, any remaining debt will be written off after the agreed time period.
- This plan allows for affordable repayment rather than becoming completely overwhelmed by the size of your debts.
However there are also some disadvantages which you should also be aware of:
- An IVA will negatively impact your personal credit rating, meaning you may struggle to apply for jobs, take out loans and find cheaper interest rates in the future.
- Your name will be added to the insolvency register for around 3 months, which can affect your public image.
- If all agreed payments are not made, the agreement can be terminated, resulting in bankruptcy.
- If you are a homeowner, you may need to release equity from your home.
You can find out more about the pros and cons of IVAs in our recent blog.
Licensed Insolvency Practitioners at Restart BTI
If you feel an IVA could help in your current financial situation, our experienced insolvency practitioners can help you create the best possible plan. We can help you plan your finances so you can pay back your debts while still enjoying your holiday. Contact a member of our team today to see how we can turn your situation around.
Established in 2018, the directors at Restart BTi have over 50 years of experience to assist companies, business owners and individuals with expert advice and tailored solutions when facing financial difficulties.
