IVA and your car

One of the most common questions we get asked is whether you can keep your car whilst in an IVA. This is understandable as it's a difficult time and you may worry about living your life without a vehicle. The rules about cars in an Individual Voluntary Arrangement are generally interpreted by the Insolvency Practitioner and the creditors on a “case to case” basis.

It is difficult to give any exact guide as to what the rules are but you can bear in mind the following points. Creditors will accept that ownership of a modest car is acceptable. There will also be a modest allowance in the debtors budget to enable reasonable running costs to be available within the IVA.

Only if the vehicle has a high value and is owned outright is it likely for creditors to expect the sale of a car. If it can be demonstrated that you need the car for work, and that work entails a high mileage, then it is possible that a higher value car, of which may be more reliable, may be acceptable in the IVA.

If your vehicle is a collectors item and has high worth then it is very likely that creditors are highly likely to insist on the sale of the car for the IVA to be accepted.

Hire Purchase Agreements. If the car is subject to a hire purchase agreement, then technically the car is still actually owned by the finance company. This would mean that if repayments for the car stop, the car will be repossessed.

The actions available in this situation depends on the circumstances of each individual case.

1) Stop making payments to the hire purchase company. If you stop making payments to the hire purchase company then the shortfall between the cars value and the amount still outstanding on the finance, will be added to the Individual Voluntary Arrangement, and the value of the monthly payments will be added to the debtors budget

2) Keep making repayments to the hire purchase company. Creditors will usually allow for payments to continue until the end of the finance agreement, so long as the payments are not excessive, i.e. more than £300 p/m. This is always under the understanding that when the payments to the hire purchase company finish, the Individual Voluntary Arrangement contributions will increase accordingly, until the end of the Individual Voluntary Arrangement.

If you are still unsure how your vehicle would be affected in an Individual Voluntary Arrangement, and would like further information from our in-house specialists please call 08454 751 851.