IVAs and Your Possessions
A common myth, surrounding the concept of IVAs, is that you will lose all your worldly possessions as these are used to fund the payments being paid to your creditors. But this simply isn’t the case.
When it comes to an IVA proposal, creditors will look at the value of your items but they will only request the sale of them if they are considered to be a luxury and if they believe the money from that sale could be put to better use – i.e. paying off your debts to them. They won’t ask for your wedding ring or your laptop; instead it will be something like that sports car on the drive that needs to be downgraded to a cheaper model.
While completing an IVA your IP supervisor will work with both you and your creditors to ensure you still enjoy a comfortable, affordable standard of living while still repaying your debts.
What financial assets will I need to include in my IVA?
Creditors will want to know about any significant assets you have, such as shares, insurance policies, endowments, ISAs and investments.
These may be redeemed or sold to then put towards your debt repayments but it’s important to note that you have the power to reject or accept the creditor requests. However, if you do reject them this could prevent your IVA from being set up and you will need to find an alternative debt management solution or put forward a new proposal at a later date.
However, creditors won’t always ask you to sell your assets. A good example of when this could occur is if you have an ISA that is linked to your mortgage. If you must keep this in place as a condition of your mortgage, then your creditors will normally refrain from asking for it to be made part of your repayment arrangement.
Life insurance is another example of an asset that creditors may not ask to be included, especially if it is a ‘pay on death’ policy simply because it has no value for them once you have died.
Your creditors may ask you to amend your insurance premium if they believe you are paying too much for it and could source a cheaper option. This in turn will lead to higher repayments on your IVA that would work in their favour.
What about my car and other vehicles?
Here at PayPlan, we understand a car is a necessity for everyday life and creditors understand this too. This is why they will only ask you to sell your car immediately, if they assess the value and believe that you could drive something cheaper and release some excess cash from a sale.
The same principle applies if you own two cars and your creditors believe you could manage with just one – remember, you are free to reject any requests they put forward if you feel you could not cope.
You will never be left without a vehicle, assuming you need it, however, if you have to sell an expensive car they will allow you to purchase a cheaper one. If you have any other vehicles, such as boats, caravans or trailers, that are not deemed necessary your creditors may also request that you sell these and to put the proceeds towards your debt repayments.
All assets are considered on a commercial basis, so if your caravan is worth just a couple of hundred pounds then your creditors may leave this alone in their requests as it is not considered a luxury.
Do I have to sell my other valuables?
Assets, such as jewellery, artwork and other valuables will be assessed by your IP and if they are considered valuable, creditors may request that they are sold.
What items are restricted from being sold?
There are a number of everyday items creditors will not request the sale of. These include:
- electrical items such as TVs, computers and cameras
- furniture and fittings
- cooking equipment and white goods
- medical aids or equipment such as mobility scooters and wheelchairs
- children’s’ items such as prams or toys
These items are considered to be everyday essentials and are generally not included in asset valuations by creditors or by IVA companies.
What about any future assets?
If you gain access to any assets in the future these must be declared to your IP supervisor immediately. Not doing so could be in breach of your IVA agreement and in turn could cause it to fail.
Your IVA will more than likely include a ‘windfall’ clause which covers any unexpected payments and request for these to be released to your IVA. Examples of a future windfall could be inheritance or even a lottery win!
If you have more questions and are considering an IVA don’t hesitate to get in touch with one of our debt advisors. You can call for free on 0800 280 2816 or request a callback.
*In the case of a one-off lump sum settlement