What Will Happen to My House in an IVA?
An individual voluntary arrangement (IVA) is a legally binding agreement which allows you to pay off your debts in a controlled and manageable way. However, if you own your home, this arrangement has serious implications.
What Does IVA Mean for a Property?
An IVA prevents your home from being sold to pay off your debts. You retain ownership and you can still live there. This is a much better solution than being declared bankrupt, wherein control of all your assets passes to the official receiver or trustee of bankruptcy. This means you no longer own your home, and the trustee can do whatever is necessary to pay your creditors, including selling the property.
However, even if you participate in an IVA your house is still an asset. If there is equity in the property, it can be used to contribute to your debt repayments.
Your insolvency practitioner (IP) decides whether equity release is necessary once they’ve thoroughly assessed your financial situation, and in consultation with your creditors.
Valuation and Equity Release
Your IP needs to know how much equity is available in your property so the house must be valued. If you were selling, equity is the amount left once the house is sold and the remaining mortgage paid.
Although you’re not actually selling in this instance, equity can used as part of your debt repayment plan. If a reasonable amount of equity is available (usually £5,000 or more) it may be possible to release some of this as a lump sum.
Will an IVA Affect My Property?
You’ll need to remortgage your property to access the equity. However, it’s important to note that restrictions apply.
One IVA restriction on property is that you can only remortgage with the approval of your IP. If your IP deems it necessary, they will include this information in the initial IVA proposal (which provides a comprehensive breakdown of your finances).
Can I Sell My Property If I Have an IVA?
You can only sell your house with the approval of your IP – another important IVA restriction on property to be aware of. If you’re permitted to sell, you’ll be obliged to use the equity to pay into your IVA, as per the original agreement (less the amount already paid). Your IVA advisor can also take their fee from the equity released. You won’t be able to keep it all.
It’s essential to adhere to the terms of your IVA. If you’re unaware of a vital IVA restriction on property, the arrangement can fail – if you try to sell without permission or you default on repayment for example. If this happens your creditors can insist the house is sold to cover your debts.
Trustworthy Advice from Irwin Insolvency
How will an IVA affect your home? Our experienced insolvency advisors will tailor an individual voluntary arrangement to suit your personal circumstances and stop you from falling foul of an IVA restriction on property. Contact our team of experts today to see how we can help you.