Will An IVA Affect My Car?

Will I lose my car in an IVA?

You will usually be allowed to keep your car if it is seen as a necessity for work or important family transport reasons. However, the car value cannot be too excessive. In an IVA, a car that is valued at less than £5,000 would usually not be of concern to creditors. Anything above that valuation and creditors will argue that it is not cost-effective enough to do the basics.

Can I keep a more expensive car in an IVA?

An IVA can last more than five years, in some cases, and you might argue that a cheaper car will not suffice for that period of time. Location will play a part in that case. For example, London has a very sophisticated public transport system and a car with a relatively high value will probably be considered as a luxury in that instance.

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IVA Car Finance

Can I keep my car on finance with an IVA?

If you are paying for your car via HP, PCP or leasing then you don’t own the car directly and you will be expected to pay a set of monthly payments. 

Your IVA firm is going to question the payments if they feel like they are too high. They might suggest for you to find an alternative travel solution such as public transport, for example. 

Alternatively, your car finance company could also pull the plug on your arrangement with them. There may be a clause in the contract that allows the provider to end their contract if you go into an IVA solution. Thoroughly read the contract through to see if there are any mitigations to your agreement.

What do the technical terms HP, PCP and leasing mean?

HP stands for Higher Purchase. This means you own the car at the end of your payments. Usually, you would pay a deposit before paying off the car in monthly instalments. 

PCP stands for Personal Contract Purchase. This is a way of buying your car over three or five years, but you don’t have to buy the car outright. Essentially, it’s like a form of rental but please be aware that PCPs usually involve a balloon payment at the end of the agreement.

Leasing is when you are simply renting a car. You will give the car back after your rental agreement has ended.

Can I get car finance with an IVA?

You can, but it’s difficult! 

An IVA illustrates a determination to resolve historial credit issues but it also negatively affects your credit rating. 

If you wish to get more than £500 of credit then you will need to get the authority of the Insolvency Practitioner (IP) that is dealing with your case. Not doing this will breach the terms of your IVA. You will absolutely need to gain IP approval if you would like to obtain car finance. 

Your IP will approve your request if it is considered to be reasonable based on your circumstances. If you can commit to a car finance loan within your current budget and cost of living then you may be allowed to get it. However, it’s worth remembering that IVA’s involve putting a significant amount of income towards repaying existing debts. With that in mind, you will have to think carefully before trying to get any car finance.

Can I get car finance after I have completed an IVA?

Your IVA information will be taken off the Insolvency Register after it has been completed. Unfortunately, that information will remain on your credit file for roughly another year, depending on the length of the IVA. This is likely to drag down your credit score. 

While you will not need anybody’s permission to apply for credit, it could still be a challenge to find a suitable lender.

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    Purchased your car with a personal loan

    If you bought a car via a personal loan then this is the easiest case because that loan is not secured on the car.

    If you start an IVA, the bank loan will be one of the debts included in your IVA, so you won’t need to carry on paying this loan in your IVA.

    You already own the car so it will be one of your assets when you look at setting up an IVA. If it’s worth a lot, the IVA firm may suggest you should sell it, buy a cheaper one and pay in the difference to your IVA.

    Will an IVA affect my car insurance?

    Generally speaking, you can keep your car or other vehicles you need if you are in an IVA. You will have to declare the value of the vehicle. However, that should not be an issue unless the value is unusually high.

    Having a vehicle obviously comes along with additional costs to keep it running. These include fuel, insurance, and maintenance. You are allowed to include a reasonable monthly amount in your living expenses budget for these things.

    Renewing pay monthly car insurance can be a bit more hassle if you are in an IVA. You should be able to renew with the same insurer, however, shopping around may be difficult. New insurers are unlikely to offer pay monthly deals due to your poor credit rating.

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    What is an IVA?

    An IVA (Individual Voluntary Arrangement) is a formal agreement made between the person in debt and their creditors. Once you enter into an IVA, your creditors can no longer take further action against you to recover any outstanding debts. All interest and charges associated with your debts are frozen.

    All IVAs are set up and managed by an Insolvency Practitioner (IP). An IVA is a form of insolvency that can potentially cover up to 90% of your debts. It is an alternative to bankruptcy and other debt solution plans.

    In an IVA, a single payment is agreed based on your financial situation. The payment is then divided between the unsecured creditors over a set period of time (usually five years), after which any remaining debts are usually dealt with in a different way.

    Once you enter into an IVA, your creditors are legally bound by the terms and conditions imposed by the agreement.

    There is no legal maximum or minimum amount you must owe to get an IVA. Usually, however, you must owe at least £5,000 to get your creditors to agree to the IVA. You can owe this amount across more than one debt, with more than one creditor.

    An IVA is open to residents of England, Wales and Northern Ireland. Scottish residents can find support in the form of a Protected Trust Deed (PTD).

    Who can get an IVA?

    An IVA (individual voluntary arrangement) is normally only suitable for those who have a regular income and are struggling to maintain payments to their current debts.

    In order to get an IVA, you must have spare income after you have met your essential living costs each month.

    Your creditors will be more obliged to agree to an IVA if you meet the other criteria needed to get an IVA plan. Your insolvency practitioner will be able to offer you more specific advice once they know your circumstances.

    In order to qualify for an IVA, you must:

     Live in England, Wales or Northern Ireland.

     Have at least £5,000 of unsecured debt.

     Maintain a minimum payment of £70 per-month.

    Debts included in an IVA

    ▪️Credit cards

    ▪️Unsecured loans

    ▪️Payday loans

    ▪️Catalogue debts

    ▪️Store card debts

    ▪️Personal loans

    ▪️Overdrafts

    ▪️Utility bills

    ▪️Tax credit

    ▪️Benefit overpayments

    ▪️Debts to family and friends

    ▪️Other outstanding bills

    Debts not included in an IVA

    ▪️Mortgages

    ▪️Hire purchase agreements

    ▪️Debts incurred through fraud

    ▪️Court fines

    ▪️TV licence arrears

    ▪️Student loans

    ▪️Child support arrears

    ▪️Other secured loans

    How does our IVA calculator work?

    ▪️Based on the details you provide, the IVA calculator will determine whether you qualify for an IVA or not

    ▪️It will also calculate the amount of debt you can write off with an IVA

    ▪️Our IVA calculator will send your results to your dedicated adviser

    ▪️We do not charge any setup fees

    IVA FAQs

    Who can get an IVA?

    An IVA (individual voluntary arrangement) is normally only suitable for those who have a regular income and are struggling to maintain payments to their current debts.

    In order to get an IVA, you must have spare income after you have met your essential living costs each month.

    Your creditors will be more obliged to agree to an IVA if you meet the other criteria needed to get an IVA plan. Your insolvency practitioner will be able to offer you more specific advice once they know your circumstances.

    In order to qualify for an IVA, you must:

     Live in England, Wales or Northern Ireland.

     Have at least £5,000 of unsecured debt.

     Maintain a minimum payment of £70 per-month.

    Which debts can be included in an IVA?

    All unsecured debts can go into an IVA. Here are some examples of the debts you can include:

    Credit cards – Here are a few examples: Vanquis, Barclays, Natwest, Lloyds, HSBC, Tesco, Capital One

    Unsecured loans – Barclays, Lloyds, Tesco, Wonga, Adverse Credit Loans Apply now

    Payday Loans – Wonga, Lending Stream, Amigo, Satsuma, QuickQuid

    Catalogue and store card debts

    Credit Cards

    Personal Loans

    Overdrafts

    Gas, electricity, and water bill arrears

    Tax credit/ benefit overpayments

    Debts to family and friends

    Other outstanding bills

    What are the pros and cons of an IVA?

    Pros of an IVA:

    ▪️ No upfront fees.

    ▪️ It’s affordable. You only pay back what you can afford and that is normally only an agreed percentage of your debts.

    ▪️ You only make a single payment each month and that payment is distributed to creditors on your behalf.

    ▪️ You can be debt free, usually after 5 years.

    ▪️ All creditors must agree to the terms and conditions of the IVA, once approved. You are protected by the rules and regulations of the agreement.

    ▪️ By law, all interest and charges are frozen as long as you maintain your payments.

    ▪️ Creditors will not be able to excessively pressure you while they are under the influence of the legally binding IVA.

    ▪️ You won’t be forced to sell your home. Your home is a protected asset in an IVA.

    Cons of an IVA:

    ▪️ IVAs can be refused. Your creditors can refuse your IVA proposal but, in most cases, we can negotiate with your creditors to get your IVA approved.

    ▪️ An IVA is a formal agreement. You need to make sure you comply with the terms and conditions attached to an IVA.

    ▪️ Your monthly repayments may leave you with a tight budget while your debts are being repaid.

    ▪️ It will affect your credit score. IVAs remain on your credit file for 6 years from the day they starts. Some IVAs can last longer, however, and this will show on your credit file for longer.

    ▪️ Not all debts can be included in an IVA. Some examples of these debts include student loans, child support and maintenance, magistrate court fines, and social fund loans. However, an allowance can be given to enable you to continue repaying these specific debts.

    ▪️ If you fail to make the payments due under the terms of your IVA then your arrangement could fail.

    What is the process of an IVA?

    An IVA (Individual Voluntary Arrangement) was introduced as part of The Insolvency Act 1986 to help debtors come to an arrangement to pay debts over a set period of time as an alternative to bankruptcy.

    An IVA is a legally binding agreement made between a debtor and their creditors. Due to the legality and regulations imposed on Insolvency Practitioners, there is a set process each IVA application must follow. You must:

    ▪️Complete a review & budget

    ▪️Prepare your proposal

    ▪️Create a meeting of creditors (MOC)

    What's the cost of an IVA?

    An IVA (individual voluntary arrangement) is not free. Legally you cannot set up your own IVA. The insolvency practitioner who will set up your IVA will charge a fee.

    This fee is normally taken as regular instalments from the payments you make towards your IVA (debts). The fee is to cover the cost of the advice offered by the insolvency practitioner, the time spent putting together the legal aspects of the IVA and negotiating with your creditors, also managing the IVA once it is set up.

    What if I miss an IVA payment?

    Missing your IVA payment can be very risky, At all times you must keep your insolvency practitioner up to date with your current financial situation. Late payments may be acceptable if you have a good enough reason to why this has happened

    Once you have missed 3 payments or equivalent then your practitioner will send you a ‘Notice of Breach’, Normally you will be allowed between one and three months to correct the problem explaining the missed payments and paying as soon as possible. Once you do this, no more action will be taken against you

    Talk to your practitioner as the terms of your arrangement may be changeable but they can also terminate your IVA or apply to the court to make you bankrupt

    You should always speak to your IVA provider as they will be able to help you in such a situation

    Is my house protected in an IVA?

    If you own your home, you will almost certainly be asked to get a valuation on your house in the last year of your IVA. If remortgaging the house would raise more than £5,000, you will be asked to remortgage it and any money raised will be put towards paying back your debts. You will not have to sell your home. If remortgaging would extend the mortgage beyond its existing term, or put you beyond the state retirement age when it ends, you will not be expected to remortgage the property.

    If you can’t remortgage your house for any reason (refusal by the bank, or complications with a jointly owned property, for example), you will have to pay your usual monthly payments under the terms of the IVA for an additional year.

    It is possible but unlikely that you will be able to keep your home out of the IVA and thus avoid remortgaging it. If your insolvency practitioner feels that you will be able to pay back enough of your debts without including your house in your IVA, they may propose that it be excluded from the IVA when negotiating with your creditors, but this rarely happens.

    An IVA is a preferred option by many homeowners as your asset is protected whereas the alternative of bankruptcy you would in most cases be asked to sell you home.

    If you rent your home, nothing will happen as long as you keep paying your rent but we would always advise for you to check your tenancy agreement before entering any agreement.