IVA’s Explained Blog 2 ~ Debt Managements and Consolidation

Welcome to day two of my week long series of IVA blogs. Yesterday’s first instalment hopefully explained all of the basics of an IVA and gave you a general overview of what it is. On today’s blog I am going to focus on your assets; what is an asset and how the IVA will impact them. I also want to go through what happens to your mortgage property in the IVA.

It is important to remember that with an IVA all of your assets must be disclosed, once your IVA is approved you are legally bond to notify us of them all, and if you fail to do so it is seen as a legal offense and can have serious consequences.

To break it down and make it easier to take in, I have broken down each asset that would need to be considered in the IVA.

House If you own the property that you live in you will not have to sell it or give it up and it isn’t at risk with an IVA as long as you keep up with the terms of the arrangement. If you have equity in your property you will be asked to release a percentage of this equity in the fourth, however I will discuss this in more details later. As your mortgage is a secured debt, it will be shown as a creditor but you will still maintain your mortgage payments in full. If you have more equity than you do debt then you are solvent so an IVA isn’t an option for you.

Car If you own the car outright, as long as the value doesn’t exceed £5,000 you should be fine keeping the car. However if your car is worth more than £5,000 your creditors may ask you to sell the car and downgrade it to something cheaper. They will then ask for that money to be paid into the IVA. If your car is on Hire Purchase, then you do not actually own the car and therefore they cannot ask you to sell it.

If you have more than one car, your creditors may ask if there is a valid reason for it, otherwise they could ask you to sell one of the cars.

Motorcycle the same rules apply for cars.

Caravan These are seen by the creditors as a luxury and it is therefore highly likely that your creditors will ask you to sell it. If the caravan is on Hire Purchase, you would have to hand the caravan back to the finance company and any money still owing to them would be included in the IVA as an unsecured creditor.

Holiday Home or Time Share your creditors would see this as a luxury and would again ask you to either sell the property or stop paying into the time share and hand it back. Any money still owing to them would either then be included in the IVA as an unsecured creditor.

Shares you would need to tell us who the shares are with, how many shares you hold and the value of them. These would be detailed in your proposals and your creditors may ask you to cash in your shares. This works on a case by case basis so no definite answer can be given.

Savings you would need to tell us how much you have and you would be required to pay a percentage of this into the IVA.

Endowments as long as your endowment policy is linked to your mortgage this will not be included in the IVA, as if the money was to be released it could only be used to pay the mortgage. However if the endowment policy isn’t linked to the mortgage then the money would have to be released and paid into the IVA.

If you are a home owner and have a mortgage there is a clause in IVA proposals that states in the 54th month you must carry out a valuation of the property to show the current value of it. Your creditors would ask that you make a payment in lieu of equity in your property, they only look at you re-mortgaging up to 85% of the value of your property and only for your share of any equity.

If your secured borrowings on your home are already over 85% of the value of your home you will not have to offer any payment in lieu of equity. If not you will be asked to release equity in your home up to 85% of its value, but if you are unable to obtain a re-mortgage and provide proof of this, your arrangement will be extended by an extra 12 months payments instead. By doing this your home is completely safe.