Single - Homeowner - Fixed Term IVA
As it would suggest, this type of IVA is to people who are having trouble maintaining their unsecured debts and are considering applying for an IVA to tackle just their own debts, with no other person being party to their IVA.
It doesn't mean that the IVA will only be able to deal with debts in their sole name, however, because joint debts can still be included. In cases where there are joint debts to be included, the IVA will only tackle the liability of the IVA applicant. It will not, therefore, provide any help to the other party who, due to the inherent nature of 'Joint and Several Liability', will need to approach the creditor for themselves and provide their own plan on how they intend to deal with their liability to the joint debt.
People typically falling into this category will be homeowners, or people who part own a share in their home and, consequently, will they be expected to introduce the 'Equity Clause' into their IVA.
Under the 'Equity Clause' they will be expected to have their property valued towards the end of the 4 year of their IVA. If there is sufficient equity in their property, they will be expected to attempt to release it, then introduce the released equity into the arrangement. If, for whatever reason, they are unable to release the equity they will, instead, be expected to contribute a further 12 months payments into the IVA, in lieu of the equity they were unable to release.
Important note : For those people sharing ownership of a property with someone who is not party to the IVA, it should be understood that the IVA creditors cannot lay claim to the other owners share of the equity. In this case, all releasable equity would be divided into two, with the IVA creditors only being entitled to lay claim on the half owned by the IVA applicant.
The 3rd aspect of this scenario is the fixed term. Normally an IVA will have a fixed term of 5 years of affordable payments. But with this scenario, there is the potential for an additional 12 month extension in lieu of equity that couldn't be released from the property. If there is no equity or even negative equity, there will be no 12 month extension.
This means that this type of IVA could last of 6 years altogether.
Whilst that might seem unfair, it does have an upside for, by definition, the extension can only happen if there is equity in the property which can't be released. Creditors have a sole opportunity to benefit from the equity before the IVA ends. If that equity can't be released, they lose their chance at getting hold of it for good, which means, irrespective of the value of equity held, if it can't be released it is protected for the future benefit or the applicant.
Summary:
This type of an IVA helps a homeowner, consists of 5 years of affordable repayments and will deal with a sole applicant's unsecured debts. Towards the end of the IVA's fixed 5 year term the applicant will be obliged to try and release their share of any equity in the property and introduce it into the IVA. If it can't be released, the IVA will carry on for 12 extra payments and then conclude in the normal way. At that point, any remaining balances from the original debts not repaid by the IVA will be legally written off and the applicant will be free of their unsecured debts.
To discuss this type of IVA in more detail with one of our IVA consultants simply call 0800 856 8569
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An IVA can help a single person or two people sharing joint living costs deal with their debts.
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