Is my home protected in an IVA?

Is there a more comfortable place on this whole earth than your own home? Of course not! Your home is the place where you feel relaxed, protected and spend quality time with your family, friends and dear ones.

Is it a good deal to lose your home and clear your debts? We don’t think so. In fact nobody will go for this deal until and unless there is no alternative left. This is the scenario of Bankruptcy i.e. you can clear your debts if you don’t have much to pay back to your Creditors but your home may be sold to satisfy the outstanding debts.

The Individual Voluntary Arrangement (IVA) was introduced to counter such pitfalls of Bankruptcy. The IVA allows you to keep your home and clear off your debts in a reasonable manner.
How this becomes possible is described in the rest of the article.

How does IVA protect my home?

In the Individual Voluntary Arrangement you pay your ‘disposable’ or extra income to your Creditors th according to an agreement signed by both parties.

The process of an IVA may take up to five years (sixty months), however, when it comes to an end, it eliminates all of your outstanding unsecured debts. Unlike Bankruptcy, your home and other assets are not in any kind of risk if you adhere to the IVA agreement.

The IVA has different impacts on different kinds of property i.e. mortgaged and rented.

How IVA effects my mortgaged home?

If you are residing in a mortgaged home, your Creditors will demand you to present the details of the equity, if any. If your property equity has not been evaluated, your Insolvency Practitioner or Creditors may ask you to get it valuated in the fourth year of the IVA agreement. This equity may be released for the Creditors benefit during the last year of the IVA.

What is equity and what percentage is released to my Creditors?

Equity is the difference between the value of your home and the total amount of loan obtained against it. Usually, up to 75% of the share of the equity can be released towards the Creditors.

This is usually done via re-mortgage i.e. paying off one mortgage with the proceeds from a new mortgage using the same home as security. This is one of the biggest advantages of an IVA that your home remains in your custody and still you can clear your debts.

How IVA effects my rented home?

If you are living in a rented home, the IVA has no effect on it. However, for the sake of your own interest you should check the tenancy agreement whether your landlord has a clause pertaining to the tenants entering an IVA. If the agreement has such a clause you should seek help from a legal expert.

If the landlord himself enters an IVA then the equity may be released as described above.

What happens to my home if my IVA fails?

If your IVA fails, it could have extremely serious impact on your property. If there is equity obtainable on your house, your Creditors or your Insolvency Practitioner will force you into Bankruptcy. If it happens, your home can be sold to release the equity.

The amount released will be paid to the Creditors to clear off your outstanding debts. If the amount is more than the debt owed, the extra amount will be handed over to you. If the amount is less, you will have to make up the difference.

Therefore, you must be sure that you will be able to maintain the agreed monthly payments before entering an IVA. If you do not want to release the equity from your property you can consider a Debt Management Plan as your debt solution. A Debt Management Plan does not require you to release equity from your home. It is also stretchy as your monthly payments can go up or down according to your comfort.

If you own a property you should be very careful in evaluating your personal situation. We suggest you to seek professional help from certificated and professional advisors.

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