Can Hire Purchase debts be included in an IVA?

IVA: those three simple letters can have a big impact on people who are seriously struggling with their debts.

The common term for an Individual Voluntary Arrangement, an IVA is a formal insolvency solution available in England, Wales and Northern Ireland. If you have significant unsecured debts that you can't repay in a reasonable period, it could help you.

You can read all about IVAs by clicking here.

You won't be able to include any secured debts in an IVA. This means that if you have a Hire Purchase agreement that you can no longer afford, e.g. for a car or an electrical appliance, you may have to cancel the agreement and return the goods to your lenders, which will increase the amount you have available to pay towards your debts.

However, in the case of a car, you may be able to carry on with your Hire Purchase agreement if you really need the car, e.g. for work. An exception to this would be if your car is very expensive and you could make do with a cheaper one.

Either way, entering an IVA could help you to stay on top of any secured debts that you are keeping up with, e.g. your rent/mortgage or household bills. Let's take a look how.

An IVA explained…

An IVA is designed to help seriously struggling borrowers repay as much of their debt as they can realistically afford, before writing off what they can't on successful completion.

Once an IVA has been agreed by enough of your unsecured lenders (75% by debt value), you will:

•  Make a single payment per month, calculated to fit around your essential expenses (rent/mortgage, food, Council Tax, essential Hire Purchase payments, etc.)

•  Stop any further action from your unsecured lenders

•  Have any remaining debt included in your IVA written off when it successfully ends.

As your IVA payments will be calculated to fit around all your essential outgoings, you should still have enough room in your budget every month to afford these costs.

Do you have more questions about an IVA? You could find the answer you're looking for here.

How will an IVA affect me if I'm a homeowner?

Unlike bankruptcy, which is another form of insolvency, you won't lose your home on an IVA - and as long as you keep up with all your payments, you'll be able to stay in your home throughout the IVA process.

However, you may have to release some equity at some point during your IVA. If so, you'll have a smaller deposit when it comes to remortgaging (because your equity includes any money you've paid towards your mortgage).

Is an IVA right for me?

You'll need to weigh up all the pros and cons before you enter an IVA. For example, entering an IVA will affect your credit score for six years. Having said that, if you're really struggling an IVA could be the most suitable way of getting your debt problems under control.

You can apply for an IVA on this page.

By Daniel Culpan.