IVA and Assets
Can I do an IVA without affecting my Property/House?
In some circumstances your home may be excluded from the arrangement. However, if you have equity (your net interest) in your house, this will be taken into account when making an offer to creditors. You may have to release some of this interest in your property (up to 85% of your share of the net interest and never more than the total you owe) at some stage during the IVA (normally during the 4th year of your IVA). At this time, you may be expected to re-mortgage to raise money to pay into your IVA.
If you have to re-mortgage the property to release the equity, your ability to obtain a mortgage may be restricted and is likely to be on less favourable terms.
Your creditors are only going to approve an IVA if they consider they will get more money back than in bankruptcy. If the net interest in your property is more than your unsecured debts, then they could get it all back by bankrupting you, and forcing you to sell your home.
Usually, also, the net interest is released such that increased mortgage payments once the IVA is completed are no higher than the IVA payments were.
How your homeowner status affects your IVA proposal is complex and depends on many factors such as:
- Your current mortgage repayments.
- How much of the property is yours in the case of joint ownership.
- The amount of equity (your net interest) in the property.
Can I keep my car while on an IVA?
It depends on the car and your circumstances. This is the case for all high value assets. It is normal to be allowed to keep a car worth a reasonable amount, especially if needed for work or family commitments. The conditions are not as strict as with bankruptcy.
For cars on Hire Purchase, this debt is secured and therefore can't be included in the IVA, the HP company will simply repossess the car if you do not maintain payments.
Normally you will be allow to keep making HP repayments while on the IVA, however once payments are completed, you will be expected to make increased payment into the IVA now that your outgoings are lowered.
It may be the case that you decide to cut your losses and return the car to the finance company. In this case the outstanding balance is not longer secured and can be included in an IVA proposal.