An Individual Voluntary Arrangement (IVA) is a debt solution which involves yourself and your creditors coming to a legally binding agreement to extend your loan term and make reduced monthly repayments over this new timeframe.
Whilst an IVA can provide you with a flexible option to address your debt and alleviate the financial strain of debt in the short term, they nevertheless come with a number of dangers which need to be carefully considered.
The following page will outline the potential affects that an IVA might have on your homeownership.
If you’re a homeowner and are in pursuit of setting up an IVA, then you will need to remember that the value of your property will be factored into your agreement. Usually, you be asked to conduct a valuation of your property during the last year of your IVA, in order to determine whether there is a meaningful amount of equity in it. Equity is the amount of cash you would obtain from selling your home, after your secured loan provider has been repaid.
If it is officially determined that there is over £5,000 worth of equity in your home, you will most likely be asked to begin proceedings to re-mortgage it in order to use the excess cash to contribute towards the repayment of your creditors. However, you will not be obligated to put your house on the market.
The majority of IVA’s will have an upper limit on the total amount of cash you can use from remortgaging to contribute towards your creditor debt. The value of this limit is usually determined in accordance with the size of your existing mortgage and the official valuation of your property. Typically, you will not be asked to remortgage your property if the loan term for your new secured loan extends past your current term or your state retirement date.
If your loan provider does not allow you to re-mortgage, or it is conclusively determined that there is little equity to be released in your home, then you will carry on making your monthly payments into your IVA for an additional 12 months.
Can I keep my property out of my IVA agreement?
In rare cases, you might be able allowed to keep your property out of your IVA, though it should be noted that it will be extremely difficult to get your creditors to consent to this. If you have any questions about whether your situation would allow you to keep your hoe out of your IVA, you should ask your insolvency practitioner who should give you an accurate indication.
What happens if my financial situation improves?
If your annual salary rises whilst you are on an IVA, you are obligated to let you insolvency practitioner know straight away. A failure to do so constitutes a breakage of the law, so it is imperative that you get into contact with them immediately if there is a sudden change to the amount you own.
Almost all IVA agreements are created with a windfall clause, which clearly outlines what you must do if you come into some unexpected money, such as a lump sum of inheritance money or a bonus payment. If your IVA has a windfall clause, then you will have to use any unexpected money to pay your creditors.
Deciding on an IVA
- How does an IVA work?
- Which debts can I include?
- How much does an IVA cost to set up?
- Income and Asset Requirements
- How an IVA will affect homeowners
- How an IVA will affect your bank accounts and pension
- How an IVA will affect your credit rating
- How an IVA will affect your work, home and assets
- The lasting power of attorney
- Is an IVA the right solution for me?