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What will happen to my house, car and other assets in an
IVA? |
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One of the main benefits of an IVA is that your
home is always protected. However, if you do
have significant equity, this will be released.
When your IVA is nearing completion, a
specialist mortgage advisor will help you
release equity to offer to your creditors; this
will mark the end of your IVA.
Typically, the release of equity will happen in
the 3rd or 4th year of the agreement and your
IVA will not need to run into the 5th year. Thus
a benefit of releasing equity is that your IVA
period is shorter. Moreover, where there is a
large amount of equity involved, the length of
the IVA can sometimes be reduced even further.
In exceptional circumstances a full and final
settlement can be negotiated on equity release
alone; but this obviously demands a large amount
of equity.
One positive point to bear in mind is that an
IVA equity release will never leave you in
financial difficulties – this would be clearly
absurd! You will be left with larger mortgage
repayments, but these will always be affordable.
The agreed figure of your IVA payment will act
as the bench-mark for future mortgage
repayments.
This means that if you are paying £300 towards
your IVA, then when equity is released and your
IVA is finished, you will typically be left with
new mortgage payments of not more than £300 – an
amount you can definitely afford.
It is worth bearing in mind that if you do not
want to release the equity in your property,
there is an alternative – if you can persuade a
friend or family member to put forward the value
of the equity, the creditors will accept this
instead.
The important thing from their point of view is
that you offer them the lump-sum value of the
equity in your property; this money does not
necessarily have to come from the property
itself.
Other valuable assets must be assessed on a
case-by-case basis. Usually it is possible to
keep possession of a car worth less than £10000,
especially if it is required for work or family
reasons. If your car is financed on a Hire
Purchase, the outstanding balance cannot be
included in the IVA because the finance company
will simply repossess the car. More often than
not, an IVA can take place even while you are
making HP payments.
However, once the HP is completed, the monthly
payments must be contributed towards the IVA
instead. In some cases it is best to ‘cut your
losses’ and sell the car back to the finance
company straight away. If this leaves you with a
debt to the finance company, this debt can be
included within the IVA.
If you have an endowment policy or a savings
account, the capital will have to be released
and offered to the creditors as part of the IVA
agreement. For further details, contact a
professional Debt Advisor.
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