Will an IVA affect a student loan?
Summary: This article will look at IVAs and if a student loan can be included. It will also review other types of debt that may or may not be included within an IVA as well as the criteria required in order to apply.
As of November 2009, an amendment to the Teaching and Education Act 1998 was introduced to clear up any confusion about the inclusion of student loans with Individual Voluntary Agreements (IVAs). It states that Student Loans must be treated in the same way as it would be with Bankruptcy, i.e. Student Loans cannot be included within an IVA.
Generally, anyone with at least £12,000 of unsecured debt that is insolvent (whereby their monthly expenditure including debt repayment is greater than their income) can apply for an IVA. They must have at least 3 lines of credit that is spread amongst 2 or more creditors (for example, a credit card, a bank loan and an overdraft would be considered 3 lines of credit, but they cannot all be with the same lender). The debtor must also be employed or self employed and it is usual that they are required to have at least £200 of disposable income remaining each month, after all essential expenditure.
What debt can be included in an IVA?
• Any unsecured debt which could include; overdrafts, unsecured bank loans and credit cards
• Arrears from utility bills from a previous place of residence
• Store credit cards and loans
• Tax bills
• Loans from family and friends
• Hire Purchase (HP) Agreements (in the case of HP, the lender will usually repossess any items bought under the agreement as entering an IVA will automatically default on the payments)
What debt will not usually be allowed in an IVA?
• Secured debt of any kind. This includes a mortgage as it is a secured debt against the property, and defaulting on a mortgage could result in repossession or a forced sale.
• Hire Purchase agreements on items that are still required (for example, in the case of an HP agreement on a car that is required for work purposes, entering an IVA will automatically result in a default on payment if it is included and therefore the car would be repossessed)
• Student loans
• Any outstanding parking or court fines.
• Maintenance and child support