Can I keep my car and house with an IVA?

To save people in the UK from bankruptcy,various new schemes and solutions have been initiated. One such scheme by the UK Insolvency Act 1986 is the introduction of the concept of IVA( individual voluntary agreement), for people in serious in debt. According to the rules of an IVA , the debtor is given a period of 5 years to pay off his/her loans. The best part is that even after five years if you cannot pay the entire amount, you will not be declared bankrupt and the amount pending will get deducted and you will be debt free and no longer need debt help. However, educational and secured loans cannot be a part of IVA.

The most frequently asked question by people enrolling in IVA is whether they can keep their car and house under this scheme or they have to sell it off. There are no clear cut rules for the treatment of a car in an Individual Voluntary Agreement. However there are certain aspects to it, considering which the car/vehicle is not considered an assets by the lenders and therefore not considered for forced sale .

Firstly, if the car/vehicle is a secured loan through a hire purchase agreement, than technically the car is still owned by the finance company and lenders technically don't have a say in it.

Secondly, if the owner proves that the vehicle running cost is not too high and unreasonable, which means little is spent on its running and maintenance cost and services.

Thirdly, if it proved that the vehicle is an integral part of the owners lifestyle, for example as a means of transport to work, or as a work vehicle.

Fourth point is if the value of the car is less than £6,000 and the running cost are also not high.

Fifth point is if the vehicle is a necessity for the owner and not a luxury/expensive item. For example, if you owe around £65,000but have in your possession a Jaguar worth £40,000 , then it will come under strict scrutiny and creditors are likely to ask for it's sale. Lastly, if there is no excess equity value attached to the car than it will not be put on sale. The rules about cars however are interpreted by the Insolvency Practitioner and the creditors on a ''case to case'' basis.

In an IVA creditors expect to see some sort of commitment from the debtor to release some of the equity held in their house as part of the IVA proposal. This would normally be via re-mortgage. However , if you do not have more than £5,000 of equity in your home, then it is unlikely that the house will be included in an IVA. But if the amount of equity is large than the creditors will ask for part of that share to be included. An individual can contribute to the share by re-mortgaging the property during the course of IVA, usually near the end. However if there is no equity or re-mortgage taking place the debtor is asked to makeup to a year's further contribution. But not more than that in any case.

Around 50% people have successfully become free from debts by enrolling in an IVA. It is definitely a much better option than filing for bankruptcy. IVA is seen by most people today in UK as a realization of being set free from overwhelming debt, meaning less financial pressure and overall stress.

Click Here to speak with an IVA expert about clearing your debts forever.