Assets and property

Your home and mortgage

An IVA does not automatically put your home at risk. Unlike bankruptcy, an IVA does not vest your assets in a trustee — you retain ownership throughout. However, if you are a homeowner, your proposal will almost certainly contain an equity clause. You must continue to pay your mortgage separately throughout the IVA. Falling behind on your mortgage is entirely separate from your IVA and could put your home at risk through your lender.

The equity clause explained

Equity is the difference between your property's current value and the total outstanding on mortgages or secured loans against it. Most IVA proposals include a clause requiring you to attempt to release equity in the final year of the arrangement. In practice: in the final year, your IP will arrange a property valuation; if equity exceeds a threshold (often around £5,000), you will be asked to try to release it by remortgaging; if you cannot remortgage (as many lenders will not lend to someone in an IVA), the arrangement may be extended by up to 12 months instead; if equity is below the threshold or release is genuinely impossible, the IVA completes without any requirement to sell.

The exact wording of the equity clause in your proposal is crucial. Read it carefully or ask your IP to explain it in plain terms.

If you rent your home

If you rent, there is no equity clause. Your tenancy is not directly affected by your IVA, though some tenancy agreements include insolvency clauses — check yours if concerned. Going forward, you may find it harder to pass referencing checks for a new tenancy while in an IVA, as many agencies check the Insolvency Register.

Your vehicle

Generally, if your car is of modest value and needed for work or essential transport, it will be allowed as an expense and will not need to be realised. If it has significant value (say, above £5,000), your IP may ask you to sell it and replace it with a cheaper vehicle, with any surplus paid into the IVA. If your car is on finance (HP or PCP), the finance is separate from the IVA and you must continue payments; if you stop, the finance company can repossess the vehicle.

Savings and investments

Any savings or investments at the IVA start should have been disclosed to your IP. During the IVA, you are generally permitted to maintain a small emergency fund, but accumulating significant savings may be questioned at your annual review. If you receive a significant lump sum, this will likely be treated as a windfall subject to your proposal's windfall clause.

Your pension

Pension funds are generally protected in an IVA — the fund itself is typically excluded and creditors cannot access it. However, if you draw down pension income during the IVA, that income will be treated as income for calculating your disposable income and may increase your monthly contribution. Tell your IP before accessing your pension during an IVA, particularly if you plan to take a lump sum, as this could be treated as a windfall.

Other assets

Other significant assets — such as valuable jewellery, collections, or shareholdings — should have been disclosed in your proposal. If they were not and come to light, your IP may need to consider them as realisable assets. Everyday items of personal property with no significant resale value are not affected. If you acquire a significant asset during the IVA through inheritance, this may be treated as a windfall.