IVA advice please

[Andromed1]

I have a younger sister who I'm very worried about. She probably has a spending addiction. She racked up tens of thousands of pounds worth of debt over 15 years despite having a good salary and no dependents and being repeatedly baled out by family. A year ago she suddenly told me that she'd arranged an IVA, I don't know with which company.
Through the IVA she's paying back around 500 per month against a deb of around 60K. She says that she can no longer get credit from a bank, and that seems to be true because she's moved her bank account to one that doesn't allow an overdraft, and no longer uses credit cards.
But in that year since the IVA started, she has still been getting credit by using Klarna and persuading eg her hairdresser to and beautician to let her pay a month or two late. She also keeps borrowing from friends and gets advances from work each month.
What I'd like to know is, is the IVA likely to be helping her in any constructive way, eg are her debts actually being reduced or are the payments just delayed?
Can anyone help please - it's not much information to go on, but is all I have. Thanks.

How an IVA works is that your sister makes the payment each month for 5 years, (can be 6 in circumstances like a homeowner).

a proportion of those payments will pay fees to the company who organised the IVA, the rest her debt.

whatever she still owes of the debts included in the IVA is then written off at the end of the 5 years.

any additional credit she takes out alongside the IVA won’t be, and if found out could impact her IVA.

the Iva deals with her debts, but it doesn’t fix her spending addiction, she needs to seek professional help for that.

If she's caught using regulated credit, the IVA could fail and she could be made bankrupt.

However she shouldn't be able to access credit, I thought Klarna was being regulated, ie I know there didn't used to be a credit check and credit file entry, but I thought that had changed?

It sounds like she needs more than help with unmanageable debt, she needs treatment for the spending addiction otherwise she'll just get into debt again as soon as the IVA is over and she'll be back at square one in huge debts.

Does she want to stop overspending or does she not see a problem? Sounds like she's in a cycle that needs breaking. If she managed to not borrow extra for one month, or all the people she borrowed from said no, she wouldn't have money to pay back and she could then just live on her current income each month.

Is she a homeowner? An IVA is supposed to relieve people who own their homes from unmanageable debt, otherwise in nearly all cases they should go bankrupt (there are a very small minority of occupations that would be put at risk by bankruptcy but it's not that common and if this applied, she should seek help from her union, professional association or other employee assistant service).

But either way it's also an opportunity to learn to live within your means on a sustainable budget that allows for reasonable spending on non essentials and other annual and irregular expenses like car repairs etc. This is all set before the debt repayment is agreed so it shouldn't be necessary to borrow as long as you stick to the budget, because money is available for all needs and some wants plus repayment of debt.

Thank you, that's helpful. It's good to know that at least the original debts that were covered by the IVA will be written off after the end of the period.

She says that she has 'mental health' problems (undiagnosed) but doesn't accept that a spending addiction is one of them. She thinks that she is having a series of cash flow problems, eg her bonus was less than expected that month, she ran up a debt with a friend who can't pay her rent unless paid back immediately, etc. She isn't a home owner and recently has been saying that she can't afford her rent because of other repayments she has to make, and asks family members to 'lend' her rent money to stop her being homeless. We are refusing now except for offering to help pay off the back rent by matching what she pays, but she never sticks to the agreement. It's a horrifying situation.

Perhaps I am wrong about Klarna, she used to use it a lot but if they are now doing credit checks I guess she will have stopped. I fear she is using loan sharks, but there's no way of knowing.

OP I think you have to step back and let her make mistakes until she realises something has to change. If you or your family regularly bail her out with more loans then you’ll just damage your relationship when she inevitably fails to pay you back. Let her hit rock bottom - but be there to support her emotionally when she does.

Thanks. I think you are right and finally, after ten years of trying and failing to help, we are starting to do that. It is grim getting calls and texts saying that she has nothing to eat and is feeling ill and can't pay to get to work so she's likely to lose her job, but I remind myself that this isn't even necessarily true and she may just be wanting more money for shopping and beauty treatments.

Sounds harsh but you need to hear 'I have spent my rent money on getting my nails done so I'm asking you to pay it for me so I can go shopping for clothes I don't need' because that's what she's effectively doing.

If she says she has no food you could invite her round for dinner or give her basic supplies like eggs and pasta. If true she'd gratefully accept.

Or you offer to help her get help for the shopping addiction but otherwise tell her she's on her own. It's not up to you to do her adulting for her if she won't help herself.

You are right of course. It's hard to do but needs to happen.
If she actually said she's spent her money on botox and clothes it would be so much easier to have a real conversation. The excuses about being caught out by circumstances are infuriating.