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Home - impact of an individual voluntary arrangement

This advice applies to Wales

An Individual Voluntary Arrangement (IVA) is a formal and legally-binding agreement between you and your creditors to pay back your debts over a period of time. An IVA must be set up by an insolvency practitioner.

An IVA can be flexible to suit your needs but it can be expensive and there are risks to consider.

This page tells you how an IVA may impact your home.

Remortgaging your home

If you own your home, its value will be taken into account as part of your IVA. This means, in the final year of your IVA, you will have to get a valuation of your home to find out how much equity is in it. Equity is the money you'd make from the sale of a property, after any mortgages are paid off.

If the valuation shows there is more than £5,000 equity in the property, you will usually have to re-mortgage your home to raise a lump sum to put into the IVA. But you should not have to sell your home to do this.

With most IVAs there is a limit on the amount that you will be expected to raise by remortgaging. The limit is based on the value of your home and the amount of the mortgage that you already have. You will not usually be expected to remortgage if the new mortgage would extend beyond the existing mortgage term or beyond your state retirement age.

If you can't re-mortgage, you'll continue to pay the usual monthly contributions under the IVA for a further twelve months instead.

Can you keep your home out of an IVA?

In extreme circumstances, you may be able to keep your home out of the IVA. But your creditors may not want to agree to this. An insolvency practitioner will be able to advise you about your particular situation. If you’re not sure, get advice.

Future income or assets

Having an IVA may affect any future income or assets that you receive. For example, if you decide to move house while you have an IVA, any money you make from the sale may have to be paid into the IVA.

If your income increases while you have an IVA, you must tell your insolvency practitioner. If you don't, you could be breaking the law.

When an IVA is set up, it usually contains a windfall clause. A windfall is money you receive unexpectedly, for example, a lottery win, inheriting a house or getting a bonus payment. If your IVA has a windfall clause, you will have to pay any windfall money into your IVA.

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