Equity IVA's
'Equity IVA' is the term used to describe an IVA that includes an equity clause within the IVA proposal, placed there to determine how the equity held within a property owned or part owned by the IVA applicant should be treated under the terms of the IVA.
It should be noted from the beginning that only equity belonging to the IVA applicant can be considered for inclusion within the IVA agreement.
This means that if you own a property jointly with someone else, your creditors cannot lay claim to your co-owners share of the equity.
In most circumstances an equity clause in an IVA will be dealing solely with the equity held within a family home, but it also can be used to tackle situations where the IVA applicant has multiple properties.
In fact, it can be used to deal with any equitable interest an Insolvency Practitioner might have in any property owned by the IVA applicant.
The equity clause exists purely to ensure that the IVA applicant agrees to specific commitments and undertakings before the IVA begins. There are simple rules that govern what actions must be undertaken to release equity under the terms of an IVA, though these rules can, and are, often misunderstood.
So, if you own or part own a property and you are considering entering into an IVA, it is important to ensure you understand how an IVA will affect the equity in your home before you commit yourself.
This is a brief outline of what the IVA equity clause is trying to achieve.
Creditors will expect people who own property to commit to the principle of remortgaging their property at some stage during their IVA, normally towards the end of the 4th year.
This is done with the intension making the IVA applicant release as much equity from the property as possible, though there is normally a cap of 85% of the property's value.
When the remortgage can take place, the IVA will often be brought to an early conclusion, with the IVA payments being used to repay the extra remortgage payments.
But if it's not possible to remortgage the property and generate funds in this way, the creditors will sometimes insist on a 12 month extension clause to the IVA, in lieu of the equity that may have been in the property but could not be released.
If you co-own a property and you are concerned about the equity release clause of an IVA you should contact IVA.org where we will endeavour to address your concerns. We have years of experience in helping people come to understand any equity clause issues.
But to be dead sure you understand the IVA equity clause and how it may effect your IVA and the equity in your home, you should call our helpline on 0800 856 8569 and talk to an IVA expert now.
