I receive many calls and emails from people who are struggling to service their unsecured debts and are looking for options, but they own property.

Owning property and if there is equity in the property, has a huge impact on what options are best for them.

If you own property with equity then bankruptcy may want to be your last resort as in bankruptcy the property would be viewed as an asset and as such could be taken/sold to pay into the bankruptcy.

So that leaves an IVA or a Debt Management Plan as options.

If you own property with equity and place your unsecured debts in an IVA, you are expected to release a portion of the equity on the property in the fifth and final year of the IVA.  This is usually done through re-mortgaging the property.

However, if the amount of equity in the property exceeds the level of unsecured debt you have, an IVA is not going to be an option.

If your unsecured debts are say 25K, and the equity in the property is 40K, or 50K or more than the unsecured level of debt you have, technically you are not insolvent; you could simply sell the property and pay off the debts.

Of course it is not that simple, to sell a property or let go of your home, but an IVA is not going to be an option as your creditors will not accept it as you can pay them in full by the sale of the property.

That leaves a Debt Management Plan as an option.

In a DMP you do not receive the concession on the balances, but your property is not considered in the plan.

Now while this sounds like a perfect option, there are drawbacks as it is not a formal arrangement and as such your creditors could reject it, request more payment, or continue to look at CCJ’s, Charging Orders, etc.  But you will find it is the best option, and one your creditors will work with you on, if you do have property with substantial equity.

It also is your only other option short of selling the property.