When dealing with overwhelming debt, one of the biggest concerns is the potential loss of
valuable assets like your home and car. For many UK citizens, these are not just
possessions—they’re essential to daily life, whether it’s having a roof over your head or
reliable transport to work.
An Individual Voluntary Arrangement (IVA) can be a viable solution for debt
management, and one of its most appealing aspects is its ability to protect your essential
assets. But what does this protection look like in practice? In this detailed guide, we’ll
explore how an IVA affects your house and car, the conditions involved, and what you need
to know before deciding on this debt solution.
Can You Keep Your House on an IVA?
The Basics
Yes, you can generally keep your home when you enter into an IVA. Unlike bankruptcy,
which often involves selling property to repay creditors, an IVA is designed to protect your
primary residence as long as you meet the repayment terms.
Key Factors to Consider
- Equity in Your Property
o During an IVA, your Insolvency Practitioner (IP) will assess the equity in your
home. Equity is the difference between the property’s market value and the
remaining mortgage balance.
o If you have significant equity, you may be required to release some of it to
contribute to your IVA. - How Equity is Released
o Typically, you won’t need to sell your home. Instead, you may be asked to
remortgage your property to release equity.
o If remortgaging isn’t possible—due to your financial situation or the lack of
suitable deals—you may instead extend the IVA by up to 12 months to make
additional payments. - Protection for Homeowners
o In most cases, creditors agree not to force the sale of your home as part of the
IVA agreement.
o You’ll be able to continue paying your mortgage as long as it’s affordable
alongside your IVA payments.
What Happens if You Rent Your Home?
If you rent your property, an IVA won’t impact your tenancy. However, it’s a good idea to
check your tenancy agreement for clauses about insolvency, as some landlords might have
restrictions.
Can You Keep Your Car on an IVA?
The Basics
Yes, you can typically keep your car while on an IVA, provided it’s deemed essential for your
daily life. An IVA aims to balance the repayment of debts with the ability to maintain a
reasonable standard of living, and having reliable transportation often falls under this
umbrella.
Key Factors to Consider
- Essential vs. Non-Essential Vehicles
o Essential Cars: If your car is necessary for work, education, or family
responsibilities, it’s unlikely you’ll be asked to sell it.
o Non-Essential Cars: High-value or luxury vehicles may need to be sold and
replaced with a more affordable option. The proceeds from the sale would
then be used to pay creditors. - Car Loans or Finance Agreements
o If your car is on finance, your IP will review the terms of the agreement.
o You’ll usually be allowed to continue making payments on the finance
agreement, as long as it fits within your IVA budget. - Car Running Costs
o Fuel, insurance, and maintenance costs will be factored into your IVA budget
to ensure you can continue using the vehicle.
o It’s important to be upfront about these costs during the application process to
avoid future financial strain.
What Happens if Circumstances Change?
Life doesn’t always go as planned, and your financial or personal circumstances may change
during your IVA. Here’s what you should know:
Unexpected Repairs or Replacements:
If your car breaks down or becomes unfit for purpose, you’ll need to discuss the
situation with your IP. They may adjust your IVA to accommodate the cost of repairs
or a replacement.
Mortgage Payment Increases:
If your mortgage payments increase significantly during your IVA, your IP can work
with creditors to adjust your plan.
Payment Flexibility:
IVAs are designed to be adaptable. If your financial circumstances change, you can
request a variation to the terms of your IVA to ensure you can still meet your
obligations.
How to Ensure You Keep Your House and Car on an IVA
To maximize the likelihood of retaining your home and car, follow these steps:
- Be Transparent About Your Assets and Needs:
o Provide accurate information about your home, car, and overall financial
situation during the IVA application process.
o Highlight why these assets are essential to your life, whether for work, family,
or stability. - Stick to Your IVA Repayment Plan:
o Make timely payments as agreed in your IVA. Missing payments could
jeopardize the arrangement, potentially putting your assets at risk. - Communicate with Your Insolvency Practitioner:
o Keep your IP informed of any changes in your circumstances, such as income
fluctuations or unexpected expenses.
o Your IP can often renegotiate terms with creditors to ensure you remain
compliant with your IVA while retaining your assets. - Seek Professional Advice:
o If you’re unsure about any aspect of the IVA process, consult a debt advisor or
Insolvency Practitioner to fully understand your rights and obligations.
Is an IVA the Right Choice for You?
An IVA can be an excellent option for managing debt while protecting your most important
assets. By allowing you to keep your home and car, it offers a way to regain financial stability
without compromising the essentials of your daily life. However, every financial situation is
unique, so it’s important to weigh the benefits and potential challenges before committing to
this solution.
If you’re struggling with debt and considering an IVA, take the time to explore your options.
Speaking with a qualified Insolvency Practitioner can provide clarity and help you make an
informed decision tailored to your circumstances.
If you’d like more information or need assistance determining whether an IVA is right for
you, reach out for guidance on the path toward financial freedom.