If you have personal unsecured debt that you are considering using an IVA for, you should bear in mind that any assets that you have may be incorporated into the IVA.
An Individual Voluntary Arrangement is a way of reaching a compromise between you and your creditors in circumstances where you cannot meet the terms of your existing agreements. Naturally, your creditors will want to recoup as much of your borrowing as possible. An IVA ensures that this will only be done within a framework that is realistically manageable to you.
Assets
An IVA is a way to settle your debts through a renegotiated deal. Any assets that you have, such as a home or other property, may be taken into the IVA deal in some form. For example, the IVA may require you to release equity from your home and pay a portion of this towards the debt.
Your Insolvency Practitioner will take into account the details of your finances including income, assets, outgoings and debts. They will be able to advise you as to what your options are, one of which is sometimes an IVA. If you own property you may find that you have more choices, as you can, for example, release equity and use these funds to help settle your other debts.
Overview
When you put forward an IVA proposal you will be required to include details of your assets and liabilities, so that the creditors can take these into account. The creditors will consider any equity that you have, i.e. the difference between your home’s value and the amount that you still owe towards the mortgage on it. Creditors are entitled to regard up to three quarters of the equity on your home as potentially payable towards your debt to them.
Your home
For this purpose, you may need to have a valuation carried out on your home as part of the IVA proposal process. You will also need to enclose details of your mortgage, such as a recent mortgage statement from your lender.
Equity
Depending on the stage you are at with your mortgage payments, the creditors may request that your property is valued at a later stage in the IVA, when you will presumably have paid a greater portion of the mortgage off.
There are different choices when it comes to releasing equity from your property, and you should explore your options fully if this is indeed a necessary part of your IVA. Re-mortgaging is one option that many people use but you should ensure you understand fully the implications of such actions, as they essentially amount to further borrowing on your home.
If you have unmanageable debts and are a homeowner, you are likely to find that you have a few more options to choose from. However, it’s always advisable to think carefully about these decisions, and to get the best advice you possibly can before going ahead with anything. Finance options that involve further borrowing should only be entered into with due thought, and should promise to leave your finances in better shape in both the short and long term.