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If you’re struggling with debt and considering an Individual Voluntary Arrangement (IVA), you may be wondering what will happen to your property. One of the key concerns for many people entering into an IVA is whether they will be able to keep their home, especially if they are pensioners or retirees who may rely on their property as a secure base for their retirement.

How Does an IVA Affect Your Property?

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors to repay a portion of your unsecured debt over a set period, typically 5 to 6 years. During this time, you make monthly payments toward your debts based on what you can afford.

But what does this mean for your home?

In most cases, UK citizens can keep their property when entering into an IVA. However, there are certain conditions that may affect your ability to retain your home, particularly if you have significant equity in it. Here’s how it works:

Can I Keep My Property in an IVA?

Mortgage Payments: If you have a mortgage on your property, you will continue to make regular payments on that mortgage. Your IVA will not affect your mortgage payments, and as long as you keep up with these payments, you can keep your home.

Equity in Your Property: If you own your home outright or have substantial equity in it, your IVA may require you to release some of that equity toward your creditors. This could mean remortgaging your property or selling it to raise funds for your creditors. However, this only applies if your equity is above a certain threshold, typically around £5,000 or more.

Selling or Remortgaging: Toward the end of your IVA, your insolvency practitioner (IP) may review your property’s value to determine if there is any equity that can be released to help pay off your creditors. If it is possible to remortgage, you may be required to do so. If remortgaging is not an option, your IVA payments may be extended by up to 12 months to make up the shortfall.

Protecting Your Property: If you are pensioners or retirees and do not have significant equity in your home, it’s likely that you will not need to sell or remortgage. The IVA is designed to help you manage your debt in a way that minimizes the risk to your assets.

What Happens If I Can’t Remortgage My Property?

In some cases, remortgaging your property may not be possible, especially if you have little equity or face financial challenges such as pension income or other limited resources. If you can’t release equity, your IVA may be extended for an additional 12 months. This extension gives you more time to pay off your debts without forcing you to sell or remortgage your property.

What About Bankruptcy?

One of the key differences between bankruptcy and an IVA is how your property is treated. In bankruptcy, your assets, including your home, can be sold to pay off your creditors. This is not the case with an IVA. While you may have to release equity or extend the duration of your IVA, you are more likely to keep your home compared to a bankruptcy situation.

Key Considerations for UK Citizens Entering an IVA

If you’re considering an IVA, there are several factors you should keep in mind when it comes to your property:

Communication with Your IP: Be transparent with your insolvency practitioner (IP) about your assets and property. They can help you understand your options and ensure that your IVA is structured in a way that protects your home.

Property Value: If your home has significant equity, it’s essential to consider how releasing that equity will affect your finances in the long term. In some cases, your IP may be able to negotiate a solution that allows you to retain your property.

Secured vs Unsecured Debt: Remember that your IVA only applies to unsecured debt, such as credit cards, personal loans, and overdrafts. Secured debts, like mortgages, are not included in the IVA and will continue to be your responsibility.

How We Can Help

At Apply for IVA, we specialize in helping UK citizens navigate the IVA process, ensuring you understand the implications for your property and how to protect your assets. Whether you're a pensioner, retiree, or simply looking for a way out of debt, we are here to guide you every step of the way.

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