What Are the Implications of An IVA If You’re a Homeowner?
On one hand, an IVA provides the protection bankruptcy doesn’t, by ring-fencing your home if you’ve got a mortgage.
On the other hand, you might be -expected to take out a re-mortgage to generate a lump sum to go towards paying off your debts. This might not seem like a desirable outcome. But you won’t necessarily be forced to sell up.
There are several factors to get to grips with as a homeowner applying for an IVA –
- Property Value – It’s common practice to get your property valued to see if there’s a meaningful amount of equity release available. (Equity is the lump sum you’d get if you sold your house, minus your any secured loans against it, e.g. your mortgage and legal fees.)
- Obligatory Re-Mortgaging – If a valuation shows that the sale of your house would generate £5,000+, you might be obligated to take out a re-mortgage. Your equity release would then be contributed to paying down your debts.
- Equity Release Contribution Cap – There’s usually a cap on how much equity release is used for IVA payments. It isn’t a fixed sum. A cap is calculated on the size of the mortgage you originally borrowed and what the current value of your property is.
- Equity Release Exemption – It’s a rare occurrence. But there are certain exceptional cases where creditors might agree to an IVA without you having to re-mortgage your property. It doesn’t happen often. Your Insolvency Practitioner will discuss any likelihood with you before approaching your creditors.
How Does an Individual Voluntary Agreement Work in Practice?
An IVA might sound like a complex process. The maths is actually quite simple and straightforward –
- Payment Calculation – Your income and expenditure will be assessed to calculate your monthly surplus income. This will be your IVA payment.
- Insolvency Practitioner – To propose an IVA to your creditors you’ll need to instruct/engage a licenced Insolvency Practitioner (IP).
- Single Monthly Consolidated Payment – Rather than paying your creditors directly, you’ll make one reduced, affordable monthly payment to cover all your included unsecured debts. This will be created and managed by your Insolvency Practitioner.
- Payment Allocation – Your appointed Insolvency Practitioner will allocate your monthly repayments amongst your creditors, giving you the peace of mind and reassurance that you’re on the path towards becoming debt free. Your Insolvency Practitioner’s admin fees will be included in your monthly repayment plan.
- Review – You’ll have regular reviews at least once a year to ensure you’re finding your IVA payment affordable.
Our direct Insolvency Practitioner for the Debt Resolution Service Limited is Jason Bowen, who is licenced to act in the UK by the Institute of Chartered Accountants of Scotland – Licence no. 22150. When you come to us in need of debt solutions, any specific IVA advice we provide will be given in anticipation of the appointment of Jason Bowen as your Insolvency Practitioner. If for whatever reason Jason Bowen is unable to take the anticipated appointment, then your details may be referred to a suitable alternative Insolvency Practitioner to avoid any process delays or detriment.
How Does a Protected Trust Deed Work If You Live in Scotland?
There isn’t a great deal of difference between getting an IVA in England, Northern Ireland and Wales or getting a Protected Trust Deed in Scotland.
With an IVA, your assets – anything that can be converted in to cash – become the responsibility of your Insolvency Practitioner. At this point, you become shielded against any further pursuit or potential threats of legal action by your creditors.
The key difference with a Protected Deed Trust is your Insolvency Practitioner must make separate application to protect your assets.
It’s a technicality that otherwise follows much the same process and outcomes, such as –
- A freeze on any further charges and interest being applied by your creditors.
- Your creditors will stop pursuing you for repayments directy.
- A writing off of any debts that are still remaining when the terms of your agreement expire.
Read our entire section about Protected Trust Deeds here.
There’s a lot of information about IVA’s here for you to take in.
In addition to the volume of details, one cap doesn’t fit all.
We’ve pulled the key benefits and considerations together for you in at-a-glance table for quick and clear reference –
No one should have to deal with financial troubles alone. Whether you’re looking to resolve your financial struggle once and for all or just want to ease the burden by talking things through, we can offer you information and assistance on how best to proceed. Get in touch today to take the first step towards a better financial future.
Additional Things You Need to Know About
- Accountability – You can’t get new credit for £500 or more once you enter in to an IVA without obtaining authorisation from your Insolvency Practitioner first. Some things, such as gas, electric and water are exempt from this rule. Your Insolvency Practitioner will talk you through your options should the need arise.
- Duration – IVA’s typically last for a duration of 5 to 6 years.
- Maintenance – You should do everything within your power to keep up to date with your IVA repayments. If you fail to do so, your creditors might take steps to force you in to bankruptcy.
- Transparency – It’s crucial you’re 100% open and honest about providing your Insolvency Practitioner with full details about your assets, creditors, expenditure and income. Any attempts to hide important information might have adverse consequences further down the line.
- Visibility – Your details will automatically appear in the Individual Insolvency Register. This is a public record of bankruptcies, IVA’s and other forms of debt relief. It includes names, addresses and occupations for all listings. The Register can be searched by credit reference agencies, employers, landlords and lenders, which might create adverse impact if you’re applying for jobs or hoping to move home. Your details will appear in the Register throughout the duration of your IVA and be removed 3 months after expiry.