As more and more families find themselves in dire financial straits, they are looking for options as to what they can do.

The cost of just about everything has gone up and many people, in addition to rising costs, are seeing their wages reduced and some even are made redundant; they then may find themselves in a different employment situation earning less than before.

The rising costs of electric, gas, petrol, food, the basics, are forcing many families to decide what to pay and when. They are finding more of their wages go to the basics and now they have less to service any debts they may have.

For many people their options are limited and bankruptcy is the best solution, but not always if you own property, as in bankruptcy you may lose the property.

So the costs of life go up, you cannot continue to service the unsecured debt you have at its current rate, you have property and want to preserve it, what can you do?

An IVA is what you can do.

In an IVA you make payments of what you can afford each month for five (5) years.  The creditors freeze the interest and charges on the accounts.  At the end of the five years, the remaining balances on the accounts are written off and you are out of debt.

Now if you own a property, at the end of the five years, you are expected to release a portion, 75%, of any equity in the property, this portion of equity is based on today’s valuation, not a valuation five years from now.

This equity release can be though re-mortgaging or other means.

But what this means for many people is this: they get their unsecured debts in a manageable position, avoid bankruptcy, and preserve their home.

This an excellent option for households whose incomes seem sufficient to maintain their mortgage, utilities, and maintenance on their home, in addition to their basic debts, and have a surplus of income that fits the guidelines for a minimum payment into an IVA.  They cannot continue to pay the agreed minimum payment, but have something to offer.

In addition, if they have equity in the property, the equity release at the end of the five years, can be structured to assist them with the payments during the five years if they have changes in their situation, or can only make smaller monthly payments at the start of the IVA.

Not only are they preserving the property, but it is a benefit to them in the IVA.

So, in looking at what options families who have property and also unsecured debts they cannot service at the contractual payments, an IVA is a strong way to go.  It can help in preserving the property, managing the unsecured debts, and relieving the stress associated with struggling as to who and how to pay the debts each month.

CORRECTION:

I recently wrote about having property and using an IVA as a way to save the property if you have significant debts and are looking at options with those debts.

I had stated that in an IVA the current valuation of the property would be viewed for an equity release in the 5th and final year, not a valuation in that year.

It was pointed out to me regarding this that there has been some changes and my information is outdated, so I need to correct this.

The valuation of the property is based on many factors and how the IVA is written.  There is usually an amount given to be released or paid at the end of the IVA.

The protocol for IVA’s states that in the 54th month of the IVA the debtor is expected to re-mortgage up to 85% of the LTV (loan-to-value) of the property.  The amount you receive over and above the current mortgage balance is to be paid into the IVA.  If this amount is under 5K, it is not expected to be released or paid into the IVA.

If you cannot re-mortgage for whatever reason, the IVA can be extended for 12 months to have the additional payments paid into the IVA.

This is really a simplified version of the protocol and you can view the entire protocol here.

My thanks to those who pointing out my outdated information and error, and I do apologise for any confusion.