Chartered Accountant
Licensed Insolvency Practitioner

41 Kingston Street, Cambridge CB1 2NU
Tel: 0800 1953605 (Free call) or 01223 367022
Fax: 0844 5048737


IVA - What will happen to my house, car and furniture ?

Under bankruptcy, if you own your house, either solely or jointly, your interest (ownership) will pass to the Official Receiver or Trustee.  While this doesn't mean you'll be out on the streets straight away, it does mean that unless you can afford to buy it back, eventually the house will have to be sold, by Court order if you don't agree to do it voluntarily.  You get given one year's grace during which time you can continue to live in your house as long as you continue to pay the mortgage, then after that year's up either you buy back the Official Receiver's interest or the house will have to be sold.

Under an IVA you'll be expected to propose that in the latter part of the term to release any share of your interest in the equity of the property if it is practical to do so i.e. there's enough equity to obtain a remortgage to release some money into the pot.

The way it works is this:  you propose that in the 4th or final year of the IVA you will obtain a market valuation of the property and redemption statements on the mortgage and any further secured charges against the property.  Creditors realise that it's next to impossible to get a 90-100% remortgage for a debtor in a IVA so they will settle on a remortgage up to 85% of the property's value.  If the charges against the property at revaluation time are therefore less than 85% of its value you will take the remortgage offer to release the equity into the IVA, your monthly payments to the IVA will then also be reduced by the amount of any increase in payments that the remortgage has over the old mortgage.

If you cannot get a remortgage offer at that time, but equity in the property has arisen, then creditors may instead agree that the IVA continues for at most one extra year in lieu of release of equity from the property.  They are only likely to agree to this though if the amount of equity release being forgone is similar to what one year's extra IVA payments would amount to.

If the amount of equity you have in the property is more than the amount of your unsecured debts at the outset, you can't do an IVA, the creditors would simply expect you to remortgage your house to pay off the unsecured debts in full.

If the property is jointly owned with significant equity but only you are are subject to the IVA, then creditors will expect to see only your share of the equity go into the pot, so your partner's share remains untouched.

If you live in rented accommodation and your rent is up to date, then the landlord will be unaware of the IVA and you can continue to remain in the property without any problems.

You will be allowed to retain your furniture and domestic effects, as these would be exempt i.e. untouched were you to be adjudged bankrupt instead.

You will be able to retain your car as well, but if it is particularly valuable then creditors would expect you to propose to sell it and buy a cheaper one.  Above about 5,000 value, you'd be expected to sell the car and get a cheaper one for 2,000, with the difference going into the IVA.  If your household requires two cars for work or domestic reasons, then creditors will allow for this too.

Philip Beck is a Chartered Accountant and Licensed Insolvency Practitioner operating since 1996 with substantial experience in undertaking IVAs.

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IVA Questions and answers.

I have serious debt problems. What are the options ?

How do I know whether an Individual Voluntary Arrangement (IVA) is the best answer to my problems ?

How do I work out how much I can afford to pay per month ?

OK I'm considering an IVA . How does it work ?

Do I have to attend meetings, or can this all be done by correspondence ?

What do creditors expect from it and how likely is it they'll accept it ?

Are all of them forced to accept the majority decision ? I've got one hell bent on making me bankrupt.

What happens if they don't like the deal ?

If the IVA is rejected, do I owe you anything ?

I've buried my head in the sand, now I've got a bankruptcy petition hearing next week. Is there something that can be done at this late stage ?

Will it really write off all of my debts ?

Will I live in poverty for the duration of the IVA ?

What if I win the lottery or get a big pay rise ?

Will it appear in the newspapers ? Will people know about it ? Will I ever be able to get credit again ?

Is an IVA more expensive than just going bankrupt ?

What will happen to my house, furniture, car and domestic effects ?

I run a business. What will happen to my business ?

I'm a professionally qualified person. Will I lose my livelihood ?

My partner has no debts, and I'm living with him/her. Will he/she have to contribute to the IVA ?

My partner and I have joint debts. Can we lump them all together in the same IVA ?

How do you get paid ? What does this all cost ?

There are plenty of Insolvency Practitioners or debt advice companies around. Why should I instruct you ?

What happens if I'm unable to keep up with the payments ?

What happens at the end of the arrangement ?

What other web sites do you suggest I look at for bankruptcy/IVA advice ?

Please note that this site deals only with personal insolvency law in England, Wales and Northern Ireland. By law, only a Licensed Insolvency Practitioner can undertake an IVA for you. If you need an Insolvency Practitioner in Scotland, visit The Institute of Chartered Accountants of Scotland.   Interested in members voluntary liquidation ?

Copyright © Philip Beck Insolvency Practitioner, Cambridge UK, 2005. Bankruptcy and individual voluntary arrangements explained. Free IVA Advice. How to avoid bankruptcy with an Individual Voluntary Arrangement. Debt, debt advice, debt management, debt consolidation.