Assets & self-employed IVAs

One of the biggest worries many of our customers have when enquiring about a self-employed IVA is how it will affect their assets.

We always explain to them that a self-employed IVA – unlike bankruptcy – should allow you to avoid the sale of your assets, so you won’t have to worry about losing your home or car.

Your home (and any other property you own)

One of the most common misconceptions regarding self-employed IVAs is that you will be forced to sell your home. This is not the case at all.

In a self-employed IVA proposal, all your assets do have to be declared – this allows your creditors to see how much equity you have your home (and/or any other properties you own).

If you have a significant amount of equity in your property(ies), your creditors may raise the possibility of selling up and paying the equity into your self-employed IVA.

However, you don’t have to agree to this. You can choose to simply reject this stipulation, and look at alternative debt solutions that may be available to you.

You will always know – before signing your self-employed IVA proposal – what your creditors expect you to do with your property. It is then up to you how you choose to respond to this – you always have the choice to accept it, or reject it.

More often than not, your creditors won’t ask you to sell your property. Instead, they may refer to the ‘equity clause’.

The ‘equity clause’ in a self-employed IVA asks you to try to release equity from your property(ies) towards the end of your arrangement – either by re-mortgaging or taking out a secured loan. This money is then paid into your self-employed IVA for the benefit of your creditors.

For many people in a self-employed IVA, this simply isn’t a viable option – because their credit rating isn’t in a good enough state to get approval for the additional borrowing.

If you can’t release the equity, you may have to extend your self-employed IVA for an additonal period of up to 12 months – to compensate your creditors for the equity you can’t release from your property(ies).

If you do have to extend your self-employed IVA, it is guaranteed that you won’t have to make any more than 12 additional payments.

If you decide to sell your property to raise money to pay into your self-employed IVA, you could propose a ‘full and final settlement’ offer to your creditors.

This means you would use the money from the property sale to pay off your self-employed IVA ahead of the originally agreed end date, and become debt-free sooner. But this is your choice – your creditors can’t force you to get rid of your property in a self-employed IVA.

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Most people who enter a self-employed IVA will get to keep their vehicle. As long as you use and need the vehicle, you won’t be asked to get rid of it.

However, if you have a particularly valuable vehicle, your creditors may ask you to downsize to a smaller model, and pay the leftover funds into your self-employed IVA.

If you have more than one vehicle, with no necessary use for all of them, you may be asked to sell one or more of them to raise funds to pay into your self-employed IVA.

Also, if you have a vehicle in your household which is not essential for transport to work – or carrying out your daily duties – your creditors will usually ask you to sell it, with the proceeds paid into your self-employed IVA.

Rest assured that you won’t be left without a vehicle just because you have entered a self-employed IVA.

A self-employed IVA allows you to pay back some of your debts and have the remainder written off – but it doesn’t help anyone if it leaves you struggling financially.

A self-employed IVA should allow you can live comfortably – and if you need your car, you will be able to keep it. You will also be allowed to put money aside for reasonable running costs like fuel and car insurance.

The same principle applies to business vehicles. However, creditors tend to be a bit more sympathetic in these cases.

For example, if you run a chauffeur business – and have executive clients – creditors are likely to understand that you need a certain type and age of vehicle in order to continue trading.

If continuing to trade will provide a greater return to your creditors than the alternative of bankruptcy, they are highly likely to allow you to keep the vehicle(s). 

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Business equipment

If you need specific equipment, tools, books (or anything else for your business), you won’t have to get rid of it. Assets that help with running your business are seen as necessary items that are required by you.

Mobile phones

You won’t be left without a mobile phone when you enter a self-employed IVA. Mobile devices are typically seen as everyday pieces of equipment that people need.

If you are paying a high amount on your phone bill and can’t negotiate a lower tariff, your creditors might ask you to cancel your contract, add the debt to your self-employed IVA, and take out a cheaper deal.

You might struggle to get a new mobile phone contract after entering a self-employed IVA, as mobile providers will typically do a credit check on you. Having said that, many of our customers have still been able to sign up for a new mobile contract after entering a self-employed IVA.

Mobile phone arrears

If you have arrears with your mobile phone provider and the service has been cut-off as a result, the arrears can be added as a debt into your self-employed IVA – as long as the arrears occured before your self-employed IVA is agreed.

You can then make allowances in your expenditure budget and take out another mobile contract, or switch to Pay As You Go if you have trouble getting a new credit contract.

If you have arrears and the phone hasn’t been cut-off – and you still need it – you’ll need to negotiate with your mobile phone provider to make a realistic repayment each month to clear the arrears as soon as possible.

This repayment amount can be added to your expenditure budget, allowing you to pay off the arrears in an affordable way, and keep using your phone.

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