Banking with IVA

Hello again,


So, it does seem that you have done some research into this option however, I am still concerned that an IVA may not be suitable for you. An IVA is a form of insolvency and is a 5-6 year repayment plan. If your equity outweighs your total debt, you are not technically insolvent so the initial concern is that you could repay more than what you owe overall, and the purpose of an IVA is to get some debt written off at the end.



It is also quite a restrictive option and is subject to a 12 month review. If your circumstances improve (through extra hours, student income, completing the payments on the car) then the payments are likely to increase, however, they are unlikely to decrease (much if at all) even if things get worse. If you cannot maintain the payments then the IVA can fail and there is a risk you can be declared bankrupt, which can risk your assets, including your home.



As a homeowner you can be asked to take out a secured loan in the 4th or 5th year of the IVA known as an equity release clause. The idea is that this will secured loan is taken out to end the IVA early, however, not many people qualify for a secured loan in this situation because of the damage to your credit file, and that is why the IVA is typically extended.


There are a lot of variables in your situation, and an IVA would be quite a high risk for the situation you have described, plus you could end up repaying all of the debt (plus the fees). I would suggest posting a SOA, and even if something like a DMP would take longer, it may be more suitable overall. Any of the free debt advice charities can discuss your options with you in more detail if you prefer.


Laura
@natdebtline

Hello again,

You really need to post a SOA or work through one with one of the free debt charities. If your student income is not for living costs in the first year, and will be paid directly to the University then it shouldn't influence the IVA payments, but if you would have income for living in the years to come this would very likely cause the IVA payments to increase.


With regard to your property, the equity release clause is something that normally occurs in the 4th year, so although you are on a zero hours contract now, you may not be then - especially if your course has finished and you are in a steady job. This may mean obtaining a loan is more feasible and if your equity outweighs your debt you could end up repaying the full debt and IVA fees (and potentially more).


You will be asked to take out a secured loan to end the IVA early. A protocol compliant company will not ask the loan to be for more than 85% of your total equity and shouldn't cost more than 50% of your current mortgage payments. If you use a protocol compliant IVA company and the secured loan doesn't meet these rules, the IVA will be extended.


Failure to maintain the IVA payments/ terms and conditions can result in the IVA failing, which means there is a risk of bankruptcy, which will risk your assets. Your situation is unsettled and subject to change a lot over the next 5-6 years, and an IVA doesn't allow for much flexibility which is why it doesn't appear suitable.


Laura
@natdebtline