Mortgage in an IVA

Geff · Joined: 30 Nov 2006 Posts: 2

Hi,

I have an IVA already and am making my monthly payments.
It is set to end August 2009. I am under the impression that people with an IVA who borrow money can then be declared bankrupt. I have not done this. I am paying rent at the moment and live with a friend. It has been suggested that we should buy a place because the mortgage would be less than the rent we have to pay. I am aware the bank would not lend me money but my father owns a 350k house (no mortgage) and would be willing to guarantee my half of a potential mortgage. Would this be allowed under IVA rules?

Caroline · ClearDebt Advisor Joined: 27 Nov 2006 Posts: 10

Hello there,

Whether you can obtain credit whilst in an IVA depends on the terms of your IVA Proposal.

If you are allowed to take credit (and the bank is willing to lend) then you should advise them that you are in an IVA, even if the loan is to be guarenteed by your father.

Obtaining a mortgage could potentially change your circumstances:You may have higher monthly costs and the surplus that is available may reduce. Although you state that the mortgage payments are lower, generally speaking there are higher costs for general upkeep when you own a house rather than just renting.

You will have to discuss this matter with your IVA Supervisor.

If becoming a home-owner genuinely reduces your costs you may be asked to contribute more to the IVA, if it increases your costs you may get short shrift from creditors if you try to seek a variation in the terms of your IVA – as this is something you’ve entirely brought on yourself.

Other potential issues:-

There may be a clause in the proposal for after acquired assets. Any available equity in the property toward the end of the IVA could form part of the IVA estate – You would need a letter from the Supervisor assuring you that the property is exempt from the estate.

If you became bankrupt (for example if the IVA failed because you could no longer afford to pay) then the property vests in the bankruptcy estate - if there is any equity in the property this will have to be brought from the Trustee.

Bit of a minefield I’m afraid. This is just a general response – make sure you get specific advice from someone who knows all the facts of the matter.