If you are living with parents you can do an IVA. However you need to think carefully about how to create your living expenses budget. Also how it will affect them and what happens if you want to move out.
Included in this article:
- Paying rent in an IVA whilst living with parents
- Will parents have to pay your debt?
- Moving out during an IVA whilst living with parents
- Is your parents credit rating or home affected?
Paying rent in an IVA whilst living with parents
Given you are living with parents you will normally be paying rent to your Mum or Dad. The amount you pay them should therefore be included in your IVA living expenses budget. It is unlikely that you will be paying extra towards bills such as council tax, electricity and gas etc. However if you do you can include an amount to cover this also.
But how much rent are you allowed to pay? The answer is it must be comparable to what you would have to pay if you had to move out and get lodgings somewhere else in your area. As a rule of thumb this is normally between £75-£100/week depending on where you live.
It is important to get the amount you pay in rent correct when you are completing your living expenses budget. It will generally be a significant amount and so will have an impact on your surplus income. This is what you will have to pay into your IVA each month.
The rent you show in your living expenses budget should not be more than the amount you would need to pay to rent a comparable room somewhere else in your area.
Will your 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. If you start an IVA your parents do not become liable for it because you are living with them.
The only way they could become liable is if they acted as a guarantor for you. This would mean they would have to pay if you could not. If you start an IVA the guarantor loan company will always pursue anyone who has guaranteed the debt.
Another possible reason parents 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.
Your parents will not have to pay your debt unless they have acted as a guarantor for you or your debt is in joint names with them.
Moving out during an IVA whilst living with parents
This can be tricky. In principle you can move during an IVA. However if you are moving from your parents to a rented property the living costs are likely to be higher. This may then mean you are no longer able to afford your IVA payments and risk the failure of the Arrangement.
That said if you have decided to move into shared accommodation with friends or a partner, it may be possible. Splitting the rent and bills may be comparable to living at home. Renting a home on your own 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 out an IVA your credit rating will be effected. This will make it harder for you to get credit. In the short term this is probably not a bad thing.
That said 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.
Neither your parent’s credit rating or home will be affected if you start an IVA. They will continue to be able to get credit as normal.