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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.
Do you qualify for an IVA?
For more information see:
What is an IVA?
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