What will happen to my home in an IVA?

19 June 2009

If you`re in debt, the thought of losing your home can be one of your biggest worries.

Any homeowner considering an IVA (Individual Voluntary Arrangement) or other debt solution will undoubtedly want to know what effect it would have on their property before they commit themselves to anything.

And tenants may be equally worried about being evicted.

I`m a homeowner: what will happen to my home in an IVA?

If you enter an IVA, it`s very unlikely to end up forcing the sale of your home. For homeowners, this can be a huge reason (possibly the most important reason) to enter an IVA rather than declaring themselves bankrupt - something which would almost certainly result in them losing their home.

Having said that, your property is worth money. If you`re able to, your creditors will expect you to use that to increase the amount you`re paying them - if they`re agreeing to write off a portion of your debt, they`ll expect you to do everything in your power to pay them as much as you can, and this includes freeing up some of the equity* in your property.

This would normally happen in the 54th month of the IVA (halfway through the fifth and final year of most IVAs). The new mortgage, however, would be taken out in your name and would be your mortgage as much as the original one was. In other words, the house would still legally belong to you, not your creditors - although you`d owe more money to your mortgage lender than you do at the moment.

I`m a tenant: what will happen to my house in an IVA?

In most cases, your landlord wouldn`t even know you were in an IVA - it`s true that IVAs will appear in the Individual Insolvency Register (which is publicly available), but they`re not published in newspapers (as bankruptcy would be).

An IVA may actually make you less likely to be evicted.

Why? Basically, it`s because you`ll need to pay less towards your IVA every month than you`re currently expected to pay towards your unsecured debts. Your payments will be based on what you can afford after your rent, utility bills and other essential expenses have been taken into account, so they won`t be taking up funds you need to pay your rent.

* Equity is the portion of the property`s value on which you owe nothing: the value of the property minus the value of any outstanding mortgage / secured loan.

Back to debt consolidation blog home