Mortgages and Poor Credit Ratings - IVAs
An Individual Voluntary Arrangement, also known as an IVA, is an agreement between the homeowner and their creditors. Sometimes a preferable alternative to declaring bankruptcy, this often involves making one monthly payment out from income for a specific period of time, usually 60 months.
An IVA can sometimes be confused with a debt management programme which basically involves a specialist company liaising with the creditors on the customer’s behalf. An IVA however involves obtaining court protection.
An IVA is arranged to help pay off debts in a way that is affordable to the debtor, who is closely involved in calculating the monthly repayment. This will mean that assets, liabilities, income and cost of living need to be considered. The amount payable to creditors is determined by the amount which the customer can afford to pay after the normal cost of living expenses have been deducted. This ensures that homeowners will not get into more debt.
An IVA proposal is prepared by a licensed Insolvency Practitioner (IP). The debtor is then sent a copy of the proposed agreement for approval. Further alterations can be negotiated at this stage. The IP will then present it to the creditors. Once the proposal is approved the debtor will take it to their local County Court to have it registered. A copy of the proposal is sent to each creditor. Creditors vote to accept or reject the proposal but with the debtors consent they can add their own modifications.
When an IVA is accepted, the IP monitors progress, ensuring that the terms and conditions are adhered to. They make sure that the payments are distributed to all creditors on a pro-rata basis. In some cases the debtor may not have actually paid off all of their debts by the end of the IVA so sometimes the outstanding balances are written off. The debtor is considered free and can make a new financial start.
If the debtor has an endowment policy linked to their mortgage, then they may have to cash it in to use the proceeds to pay the creditors or equity in the property may have to be released and their credit history will reflect the IVA.
However, mortgages and re-mortgages are available for those who have had credit problems. It is therefore a good idea to approach a specialist mortgage provider to avoid damaging a credit rating any further. Our mortgage advisers are experienced in finding the right mortgage for anyone who has problems recently or in the past or who has wrongly been given a bad credit rating.
If you would like us to help you to find the best deal available for you or for help and advice, please click on our Mortgage Enquiry Form above and one of our experts will contact you. Alternatively, you can give us a call on 0845 108 0505.
