Investments and Shares in an IVA
Most people would like the chance to be able to generate some savings.
Indeed, having the foresight to keep some money aside for a 'rainy day' is considered prudent and should form part of a healthy financial plan.
However, what happens if the 'rainy day' turns out to be a 'hurricane', where the savings that have been accumulated turn out to be insufficient to provide any realistic level of protection.
In the worst cases, bankruptcy may appear to be the only solution, but there is sometimes another solution which can be explored, and it's call an IVA.
An IVA acts as a less impactive alternative to bankruptcy for people whose personal finances are beyond recovery without some formal intervention.
It makes sense, therefore, to learn how an IVA will deal with investments, shares and savings before a commitment is made.
How an IVA deals with Investments and Shares
As mentioned above, an IVA is designed to assist people struggling with their personal finances, but only really becomes a viable option where someone is actually insolvent.
Being insolvent means not having the necessary wealth in assets, investments, shares or savings to be able to pay off all ones debts.
To ensure this is true, during the application process a complete account is taken of the applicant's financial position, including details any investments and shares they may have.
It is important to note that, as part of the IVA's terms and conditions, there is a legal requirement placed on the IVA applicant to give full disclosure of their assets. To withhold information on any could be considered a breach of the IVA if the assets are later discovered.
Shares are amongst the type of assets usually considered by the creditors as 'fair game'.
As such, creditors will expect shares to be evaluated and sold, with the funds from the sale being surrendered to the Insolvency Practitioner to form part of the IVA's overall funds.
Where the applicant is partaking in a company share scheme, the creditors would normally insist that the share purchasing is stopped and the shares are sold. The funds would then be introduced into the IVA. Furthermore, the applicant's IVA contributions would then rise in line the amount being saved by not buying the shares.
Where there are longer term investments, such as Buy To Let properties, an assessment will be taken to establish the equitable value of the portfolio and to establish whether the portfolio is generating a profitable rental income.
A decision would then be taken as to whether the portfolio ought to be surrendered in full or in part to the Insolvency Practitioner, to release the equity into the IVA or whether it should be included in the IVA as part of an ongoing income stream. This would be particularly likely if the portfolio holds no real equitable value but is generating a profitable income for the owner.
Obviously, because each case will be unique, the outcome of any assessment would be based on each case's own merit.
Almost all other financial investments, such as ISAs and endowment policies will need to be surrendered for the benefit of the IVAs creditors, unless there is a credible reason for not doing so that can reasonably be put to creditors.
For instance, under certain circumstances some investments such as endowment policies can be considered to be legitimately beyond the reach of creditors.
An example of which would be when an endowment policy was being used as a repayment vehicle for a secured loan, such as a mortgage.
Sometimes the endowment policy will be 'signed over' to the lender or mortgage company. In this situation the asset is considered 'assigned' to the lender and no longer forms part of the applicants financial assets.
Applying for an IVA
If you would like to make an enquiry into how an IVA may help you deal with a debt problem and how, in turn, your investment and shares will be treated, then call our helpline on 0800 856 8569.