Can I do an IVA whilst living with parents?

06/09/2019
Can I do an IVA whilst living with parents?

Living with your parents usually means you don’t usually have typical household bills to pay each month. So can you do an IVA whilst living with parents?

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Paying rent in an IVA whilst living with parents

Whether you can do an IVA or not is based around your budget. Your normal monthly income and your normal monthly expenses. When you live with your parents however, your expenses are significantly reduced.

Usually when living at home you would pay some rent to your parents. However you would probably not pay the extended bills such as council tax, electricity and gas etc. This means that when you calculate your budget for an IVA you might quite easily show a disposable income.

The problem with this is it is not a realistic budget away from home. It only works whilst you live at home. That may be ok if you are not planning to leave anytime soon. But if you are then starting an IVA whilst living with parents, might be the wrong choice.

Check out local rental costs. It is reasonable for you to pay rent to your parents and a contribution towards bills. After all this is what you would pay if you lived elsewhere.

Will parents have to pay your debt

This is a typical misunderstanding. If you have taken out a loan or credit card in your name, then you are responsible for it. Just because you live with your parents does not make them liable for it if you do an IVA.

If however you parents are linked to your debt in some way, then they might be liable. If they acted as a guarantor for you when you took out the loan, then they would have to pay if you could not. Even if you took an IVA the guarantor loan company would pursue your parents (the guarantor).

Another possible reason they could be liable is if you have a joint debt with them. This is unlikely, but not impossible. Note – if you are an additional cardholder on a credit card in your parent’s name, this is not a joint debt. If you ran up debts as an additional card holder, your parents would be liable to pay it not you.

Always be cautious about taking joint debts or guarantor loans. This can effect your ability to do an IVA in future.

Moving out during an IVA whilst living with parents

So this can be tricky. In principle an IVA will not stop you actually moving home. However the amount you pay towards rent and bills may have to remain the same during your IVA. So moving out might be problematic as living at home usually costs less.

That said if you tried to live in shared accommodation with friends, it may be possible. Splitting the rent and bills may be comparable to living at home. Renting a home on your own or perhaps with a partner could however be too expensive as you will be shouldering more of the home bills.

There are ways of doing this though. If you needed more income to cover the extra costs of moving out, you might consider a new job or increased overtime. You would have to discuss this with your IP (insolvency practitioner) first though, to make sure your creditors would agree to it.

Perhaps you could increase your earnings to cover your new home expenses and offer a slight increase to your IVA payments. That way everyone get’s a slice of the pie!

Is your parents’ credit rating or home effected

When you take on any kind of debt solution your credit score will be effected. This will make it harder for you to get credit, which in the short term would be a good thing.

Your credit score is personal to you, it is not linked to anyone else living at your address. So your parents credit score will not be affected by your debts, nor will their ability to get credit.

The same is true of your parents home. If the debt is in your name and you do not own the property, then the home would be unaffected. If the debts are joint with your parents or they were a guarantor for you then it is possible if the debts were very large that this could be more complicated.

If a debtor owns a property, then creditors can seek to secure their debt on that property through a county court judgement and a charging order. Call us for more advice on how to avoid this.

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