Can I sell my house during an IVA

Can I sell my house during an IVA

You are allowed to sell your house or flat while you are in an IVA. However you should first agree the amount your IVA company will take from the equity released.

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What happens to your equity if you sell your house during an IVA?

If you want, you can sell your house or flat while you are in an IVA. However, there are significant implications in terms of any equity that is released as a result.

You will not be allowed to keep all of the equity you get from sale. This is because your agreement will usually state that your share of this money must be treated as a windfall. It will therefore have to be handed to your IVA company.

The cash will first be used to pay off your debt. The total of your original debt less the amount you have already paid into your IVA. Then, they can take 100% of their costs and fees so far incurred. Some agreements may also allow them to take interest on the total original debt as well.

This means that you end up paying back more than you originally owed.

If there are sufficient funds to cover all these amounts, your IVA will be completed. Any funds left over are then returned to you. If there are not sufficient to cover everything, your IVA will not be completed. It will remain in place and you will have to continue making your monthly payments as normal.

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Can you protect any equity released from the sale?

With some planning, it might be possible to increase the amount of equity you can keep if you sell your house. This can be done by making an agreement up front with your IVA company on how much they will take if the sale goes through.

As a starting point you could offer a lump sum equal to your remaining payments in return for the full settlement of the Arrangement. They might ask for more, but you might be able to agree a figure you are both happy with.

This negotiation can take place because ultimately they can’t force you to sell. If you are not happy with the amount demanded, you have the choice of not selling until after your IVA is completed.

It is not wise to simply go ahead with the sale in the hope your IVA company won’t find out. They almost certainly will. Then they are likely to suspend or even fail your IVA unless the funds they ask for are handed over.

Do not sell your property until you understand and are happy with the amount of equity your IVA company will take. Make sure this is done before starting the process.

Should you wait to sell your house until after your IVA?

Whether or not it is sensible to sell your house during an IVA depends on two things. The amount of equity that will be released and the attitude of your IVA company about what will happen to this money.

If there is a significant amount of equity, you should only proceed if you have a prior agreement about how much your IVA company will take.

Make sure the agreement is in writing and you are happy with it. A verbal agreement on the telephone may not be honoured and after the sale has gone through it will be to late.

If you can’t get a written agreement you can accept regarding equity released, going head with any sale is unlikely to be a sensible idea.

In these circumstances the best option is likely to be to delay the sale until after your IVA is over and you have your written completion certificate. You are then entitled to keep all of the equity released.

Do you have to move before your IVA is completed? One option to consider is moving to rented accommodation and renting out your property to someone else.

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18 thoughts on “Can I sell my house during an IVA

    Kyle says:

    I was wondering what happens if the sale of my house does not cover the debt owed on my IVA

      Hi Kyle

      If there is still outstanding debt after the sale of your property, your IVA payments simply continue as normal. You will still have to continue making the payments until the end of the Arrangement.

    Stelvio says:

    Hi, I’m currently in an IVA and will be selling my house – there was no restriction placed on my property, does this still mean the creditors have a claim to the proceeds of sale? if so, do I have more bargaining power with how much they receive? My current agreement states creditors are paid their full amount, plus IVA fees and 15% of outstanding debt to the IVA company – all from proceeds of the house, Thanks

      Hi Stelvio

      If you are a home owner and sell your property during your IVA, your share of any money you release as part of the sale is caught by the Agreement’s windfall clause. In other words, the money you get has to be paid into the IVA. This is regardless of whether a restriction was placed on your property or not. The fact there was no restriction gives you no additional bargaining power.

      Under the terms of the windfall clause, the IVA can claim up to 100% of the original debt you owed (less any money already paid in) plus the IVA company’s costs and fees and in some cases interest on the original debt from the start date of the IVA. You can read more about the windfall clause here: What happens to a windfall during an IVA?

      You could choose to go ahead and sell your house and then refuse to hand over any money to your IVA company. However, they will then be forced to terminate the IVA. You would then be back to square one and still be liable for most (sometimes all) of the original debt you owed.

    Lana C says:

    I have mental health issues. I am a home owner and in an IVA. My counsellor had advised me to sell up and move to be nearer my family plus my eye condition has got worse so a downstairs flat would suit. I have since been awarded PIP as my sight is so bad. My cottage is selling for 165k. I have to pay the rest of my mortgage of 15k + Solicitors 3k + Estate agents 2,500k. An ex council flat will cost me 142k

    Please could you advise me with this situation. I have tried asking the IVA staff but they just tell me they will email the right dept. My solicitor has also tried to get answers. If any funds are left over I will willingly pay what’s left toward my IVA. I would like to transfer my IVA to my new property.

    The stress of this is making me quite poorly.
    Kind regards

      Hi Lana C

      Sorry to hear about your situation. I suggest that you show your solicitor the article I have written on this (above).

      If you sell your property during an IVA, the standard rule is any equity released by the sale (after the mortgage and costs are paid), first has to be used to pay off your IVA. This is before you use any money to buy a new property.

      The total amount payable into the IVA would be 100% of the original debt owed (less any payments you have made) plus all the IVA company’s costs and fees incurred to date. Some agreements also allow interest on the original debt to be charged.

      Clearly the problem with this is that you may not be left with sufficient funds to buy the new property you have your eye on. Given your personal circumstances, it is possible that your IVA company would settle for less but there is no guarantee of this.

      Has your IVA company issued a restriction against your property at the Land Registry? Your solicitor should be able to confirm this for you. If not, then one option you have is simply to sell your property regardless of what your IVA company say and buy the property you are looking at.

      Note, if you do this, your IVA company might argue that you are in breach of your IVA and as a result they will fail the Arrangement. If that were to happen, you would be back to square one as far as your debt is concerned. However, you could then consider starting a new IVA or setting up a debt management plan to manage your outstanding debt.

      If you would like to discuss your options, please give me a call (0800 011 4712). The advice is free and confidential.

    Leanne says:

    Hi. I am separated from my long term partner. He is living in our home. The mortgage is small and there is a lot of equity. He has promised me half of the equity to ‘buy me out’ so to speak in the next year. He has just informed me his is doing and IVA and I have received land registry forms to sign.

    He assures me he can still sell the house and give me my share during the Iva but I think he would have to wait the 6 years, as if he sells during the Iva the equity would be used to pay off the Iva. Am I right with that? I’m not sure where I stand and I cannot wait 6 years for my money. We have 2 children who both live with me.

      Hi Leanne

      You have nothing to worry about.

      Firstly, despite your ex being in an IVA, your share of any equity in your jointly owned property remains yours. The document you have received from the land registry should simply be a notification that his IVA company has put a restriction on the property. This is standard practise.

      That said, given the IVA is nothing to do with you, I suggest you do not sign any documents regarding the property without first getting legal advice. If you can’t afford this, then simply don’t sign anything. It will not effect his IVA….

      It would be possible to sell the property during his IVA. If this were to happen, your share of any equity released remains yours. It would paid to you by the conveyancing solicitor. Only his share would go towards paying off his IVA.

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