How Do IVAs Affect Property Assets?

How Do IVAs Affect Property Assets?

Fear of losing the roof over their heads is one of the reasons many people don’t consider an IVA when they’re in financial trouble, yet most of the information people know about IVAs (Individual Voluntary Arrangements) and properties is incorrect. Whether you’ve spent decades paying a mortgage or are living in rented accommodation and in fear of the landlord, this guide will help you sort out the truths from the misconceptions.

Do you have to own a property to have an IVA?

No, both homeowners and renters can take out an IVA.

I own my own home – will I lose it if I have an IVA?

No. It is in no-one’s interest to see you lose your home, however if you have any equity you should expect to be asked to release up to 75% to pay your creditors within the five years of the IVA by re-mortgaging following an evaluation. If you have little or no equity in your home, your IP may wait to until the latter stages of your IVA to do the evaluation to give your property a chance to increase in value.

If I rent, does the landlord have to know?

The landlord does not have to know you want to take out an IVA, but you should check your tenancy agreement to ensure there is no clause preventing you from entering into an IVA while a tenant in that property. However, if you want to move to another property and a credit check is done before you move in you will almost certainly not pass it as the IVA will be recorded on there.

What if I live with my parents?

Only your property assets are considered under an IVA, not your parents or anyone else’s. An IVA does not grant any kind of automatic right over another’s assets.

What if I own a property with someone else?

Your IP will need to obtain the other owner’s permission to re-mortgage the house to extract the equity, and has the power to force this process through the courts if the other owner does not agree. Once completed, a rightful share of the proceeds will go to them and your share will be paid to your creditors.

Will I have to sell our holiday home?

It depends on the demands of your creditors. It is likely they may be satisfied if you re-mortgage to release some of the equity, rather than force you to sell.

What if I’m in negative equity?

Usually if you’re in negative equity your property will be assessed at the end of the IVA term rather than at the beginning to allow it a chance to increase in value during the intervening 4-5 years. However, it is possible to buy out the IP’s ‘interest’ in the property with a one-off payment from a third party.

Can I claim my mortgage as an IVA debt?

Unfortunately not! A mortgage is a secured debt, as your mortgage lender effectively owns the property until you have paid them the mortgage back. Only unsecured debts can be included in an IVA.