When not to go for an IVA part 2 - my house is involved
Homeowners need to consider implications of an IVA on their property
Homeowners need to consider whether an IVA is the right solution for them. It might well be – but it’s important to understand all implications of undertaking an IVA. If we have debt issues, an IVA can provide legal protection for the house. Assuming the mortgage payments continue and the IVA payments are met – the house is safe. No creditor can file for bankruptcy or insist that the property is sold in order to repay more of the debt.
However, homeowners will be asked to see if equity is releasable towards the end of the IVA. And although our initial thought may be that it won’t be due to there being not enough equity and/or a poor credit score, 4 years plus into an IVA – the picture may have changed. On a repayment mortgage the mortgage will reduce and the equity likely to increase. And house prices and therefore the value of our property, is beyond our control and unknowable certainly some years ahead. And in some cases, IVA companies will insist that secured loan companies are involved in seeing if equity is releasable by adding a secured loan to the property – thus providing more funds for the IVA.
There are some safeguards in place regarding the cost of the secured loan/remortgage – but the important thing is that we need to be aware of what will happen towards the end of our IVA.
Furthermore, the Land Registry will be informed of the interest of the Insolvency Practitioner in the property, so if the property was sold during an active IVA, the IP would be informed and profit would be expected to be added to the IVA. So any thoughts of maybe moving in the foreseeable future would have serious implications for the seller and their IVA.