An IVA proposal should show your creditors that the amount that they will get back from the IVA is more than if you became bankrupt.
If you are a homeowner and became bankrupt then you would have to buy back the value of your share of the equity in the property, failing which the property could be sold for the benefit of your creditors.
For this reason it is vital that the IVA proposal takes in to consideration your equity in the property. There is now an agreed set of rules that:
- Guarantees that you will never be forced to sell the property, provided you can maintain any mortgage repayments.
- Protects the property from legal action by your unsecured creditors.
- Requires you to try to release equity from your share of the property by remortgaging or refinancing any equity in the final year of the IVA but with some very important safeguards for you.
The safeguards that are there to protect you are:
- You do not have to take a remortgage or refinance that exceeds more than 85% of your share of the property value, even if one is offered to you.
- Any additional cost of the new mortgage must not exceed half of your monthly payment in to the IVA.
- You are not required to extend the mortgage term beyond the existing mortgage term.
- If you can show that you have been unsuccessful in remortgaging or refinancing then it is agreed that you will extend your IVA for a further 12 months as an alternative.