Meeting unaffordable debt payments can result in rent arrears as you rob Peter to pay Paul. Rent arrears in an IVA – is that acceptable?
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- What rent arrears can be included in an IVA?
- Arrears from a previous property
- How can an IVA help you pay your rent in the future?
What rent arrears can be included in an IVA?
Whilst possibly the most pressing issue, arrears with your existing landlord are unlikely to be included in an IVA. This particularly true if you have a private landlord. They will usually be able to evict you under the terms of the tenancy agreement and then seek another tenant.
As such rental arrears in your current property would be excluded and a reasonable repayment plan set up. So in a way the IVA does manage the current rental arrears for you. You would pay less to your IVA until the arrears are cleared. Bear in mind that once they are cleared you would have to pay the extra amount to your IVA each month.
It might be possible to put current rent arrears into an IVA if you rent from the local council or a housing association. Provided you can prove that you can afford ongoing payments you may be able to negotiate how the arrears are dealt with.
Your rent is a priority payment. When calculating your household budget, your home and core living costs should always be considered a priority over other debt payments.
Arrears from a previous property
So, arrears for the property you currently rent are kept out of the IVA. This stops you from getting evicted. However if you have arrears from a previous property then these are just another unsecured debt.
All unsecured debt you have should be included in an IVA. So previous rent arrears, however far back they go, can and will be included in your IVA. As with your other debts, once the IVA is finished the remainder of these debts will be written off.
The only situation where arrears from a previous property might block an IVA is if they are a large portion of the overall debt. For an IVA to be accepted 75% of the value of the debt has to agree to the proposal. If they do then it is legally binding on all of the creditors.
If the rent arrears from a previous property are more than 25% of the total debt and the landlord refuses, the IVA would not be accepted.
How can an IVA help you pay your rent in the future?
An IVA takes control of all of your expenditures. The budget at the heart of it ensures that all of your priority expenditures are covered; your home, food, council tax and utility bills – all accounted for. The budget even allows for the periodic expenses so you don’t get any nasty surprises.
One of the problems with spiraling debt is that priorities get confused. Not paying bank loans, credit cards or payday loans can be scary. These companies are quick to employ debt collection agencies who can feel intimidating. So what happens? They go to the front of the pile and they get paid first.
What next – you run out of money and start to use your credit cards for normal living costs. Rent and mortgage payments move further down the queue when in reality the should be at the top!
An IVA allows you to take control of your finances. If you follow the budget it will ensure that you can not only pay your rent on time every month, but all your other bills and living costs too.