Borrowers using IVAs to stop repossession

Insolvency practitioner Phillip Allen, managing director of Debt Lifeboat, says many home owners are looking towards IVAs as a way of avoiding repossession.

He says: “We have seen a big increase in the number of people choosing Individual Voluntary Arrangements to protect their mortgages and save their homes from creditors. Indeed, it’s now recognised as one of the best reasons for choosing an IVA over bankruptcy.

“If you file for bankruptcy, your home is often the very first thing that the trustee in bankruptcy will seek to sell. They may even seek to force a sale against your will.

“With an IVA you scale back the levels of unsecured debt through an agreed plan in which creditors accept that mortgage payments take priority over any payments into the IVA. This means that as long as you maintain your monthly mortgage and IVA payments your home will be safe.”

He says if you own most of the equity in your home, typically 75% will need to be paid into your IVA. However, this money is generally paid within the last two years of your IVA, enabling you to remortgage your property.

He adds: “The summer period has seen many taking stock and looking at ways of dealing with their debt problems, but for the majority of referrals we get from the debt advice agencies, the priority is to keep the mortgage going and keep the family home, not just to live in but as a long-term investment.

“While, there has been much talk of the current credit crunch making rental more attractive, we are certainly not seeing this option as one that people would prefer over owning their own home.”