One of the biggest misconceptions about IVAs is that you will lose all the assets you own. Some people even think an Insolvency Practitioner will come in and ‘strip the house’ and ‘sell everything off in front of the neighbours’. Nothing could be further from the truth, yet often people hold off from even investigating an IVA as a debt management tool because they fear the worst.
In reality, an IVA gives you a great deal of flexibility in how your assets are used to help you get out of debt, and the following are some of the asset classes your IP could be interested in besides the equity in your property.
Financial assets are considered to be anything that deals with the transfer of money between different accounts, such as savings accounts (eg regular or ISAs), investments such as stocks, shares and market funds, insurance policies or pensions. Where possible, your IP will release as much money as possible from these. In the case of your pension, your IP is likely to want you to stop making contributions until your IVA is complete.
Transportation and recreational assets
If you have any vehicles of a reasonable value that you own outright, such as a caravan, boat, car trailer or leisure vehicle, your IP is likely to want these sold to pay creditors. If you own an expensive everyday vehicle, again you might be asked to downsize to a less expensive model unless you have a business and run a specific vehicle for that.
But just what is expensive? A caravan worth £500 is not likely to attract the attention of an IP, as oppose to a motorhome worth £40,000. Likewise a car for daily use worth £3,000 would probably be ok, but one worth £10,000 would almost certainly be considered important to sell.
These might include jewelry (but not your engagement or wedding rings), artworks, antiques, and maybe even valuable animals (such as alpacas or horses) if they are not part of a business.
As you can see, most of what an IP would consider an asset would be far outside what you need to live comfortably, and certain things are excluded including:
Furniture, fixtures and fittings
Cooking equipment and white goods such as washing machines and dishwashers
Televisions, computers and recording equipment
Items for the care and upbringing of children in your household, including toys
Medical aids or medical equipment
Books or other items required for the education or training of you or a any member of your household (not exceeding £1000)
Implements, tools of trade, books or other equipment needed in the practice of a household member’s profession, trade or business, not exceeding £1,000
Finally – a word about asset investigations
An IP is legally obliged to look at how you have bought and sold some of your assets in the past, in some cases up to five years in the past.
Specifically, the IP is looking to ensure they were sold for a fair market value, as transactions ‘under value’ could be an indication of fraud. In this case, the IP can apply to the courts to have the sale revoked. For example, you cannot gift your share of a matrimonial home to your spouse for less than its worth in the run up to an IVA.
In a similar vein, you cannot dispose of large sums of cash into a pension or to your children to avoid giving it to creditors. Again, an IP can apply to the courts to have the gifts revoked.