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Can I use an IVA to pay my mortgage arrears?

26 June2009

For people struggling with unmanageable debts, an IVA (Individual Voluntary Arrangement) can offer an alternative to bankruptcy.

However, as with any debt solution, an IVA is not right for everyone. IVAs do not cover all kinds of debt - and it`s possible that bankruptcy (or another debt solution) may be a more suitable solution to your problems.

What will an IVA cover?

An IVA will only cover unsecured debts - debts that are not secured against your home (or other expensive assets). That means your IVA could include the following kinds of debt, for example:

Unsecured personal loans
Credit cards
Overdrafts
Store cards

An IVA will not cover secured debts. This is because the terms of a secured debt already set out that if you fail to keep up with your repayments, your home may be sold to recoup the money owed to the lender.

This means that an IVA will not cover the following:

Mortgage arrears & payments
Secured loan arrears & payments

However, an IVA can cover bill arrears (money that you should already have paid) - but only if you`ve changed provider since then. So this could only apply to cases where you`ve been able to change providers. If there`s only one water provider in your area, for example, you`d owe the arrears to the company you`re still paying, so there`s no way your arrears could be included in your IVA.

Can an IVA help in any way with my mortgage arrears?

Although an IVA won`t help directly with your mortgage arrears, it could help you indirectly.

After all, your IVA payments will be based on what you can afford, after your essential commitments have been taken into consideration. This will include your secured debts - and so long as you can come to an agreement with your mortgage lender on how to repay the arrears, your IVA payments may fit around this. If you approach Think Money about entering an IVA, we may be able to negotiate with your mortgage provider on your behalf.

You must have a certain amount of disposable income available to put towards your IVA each month (in many cases, this works out to be a minimum of £200). If your payments to your mortgage arrears would mean you do not have enough disposable income for an IVA, this isn`t necessarily a barrier - we may be able to negotiate terms that your unsecured creditors and your mortgage provider can accept.

For example, they may agree that the IVA can start with lower payments, which would then increase when your mortgage arrears have been paid off and you can afford to make larger monthly payments to your IVA.

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