With more people seeking debt solutions in the UK, one of the most common concerns is whether or not
an individual will be made homeless, lose their car or need to sell any items of value.
The reason an Individual Voluntary Agreement (IVA) is one of the most popular options for homeowners,
is that provided the repayments are kept, there is no danger of losing their house. That said, if there
is any significant equity in the property, then this may need to be released, usually at month 54 of
the IVA arrangement, in order to pay back the creditors. Whilst this would require a remortgage, any
increase in repayments should never result in monthly repayments being more than half the amount of the
IVA repayment itself. So for example, if the monthly IVA payments are £200, then the increase to the
mortgage repayments as a result of remortgage should not be more than £100. Furthermore, any equity
release should leave the owner with at least 15% net worth in the property.
Car Owners / Hire purchase schemes
Generally, if a car is valued at less than £6,000, then there shouldn't be any need to sell the car,
especially if it is required for day to day commuting to work etc. Though as with all aspects of an IVA,
this will be reviewed on a case by case basis. Where the car is part of a Hire Purchase (HP) scheme, then
usually the individual will be allowed to continue with the HP repayments (they will be taken into
consideration when calculating the IVA repayments) on the proviso that if the HP agreement ends during
the term of the IVA, then the amount paid to the HP company will then need to be paid into the IVA. For
example, an individual is paying £250 per month for their car, and £150 to the IVA, should the HP agreement
finish before the IVA, then the £250 will be added to the £150 resulting in IVA repayments of £400 per month
for its duration.
It is worth noting that an HP scheme cannot be included in the IVA as if repayments stop, then the car will
be repossessed (ie it is effectively a secured loan on the car).
Savings and Endowment Policies
Should an individual have any savings and/or an endowment policy, it is fair to expect that the capital will
need to be released to repay the creditors.
While every IVA will be based on its own merits, it is fair to say that any belongings or items of value are
excluded from an IVA, so there is little danger that family heirlooms will need to be sold. Along with the
security offered to homeowners, an IVA is often worth considering, however as with any debt solution, it is
important that advice should be sought from a licensed Insolvency Practitioner in order for the best way
forward to be established.