Tuesday, 24 November 2015
IVAs or bankruptcy and your tenancy
A closer look and IVAs, bankruptcy and your tenancy
An IVA is an Individual Voluntary Arrangement that you enter into with your creditors, whereby you pay all or part of your debts off gradually through regular payments. With an IVA your debts will be managed by an insolvency practitioner, who will help you set up the agreement with your creditors, sort out a repayment plan and handle the administration for the repayments you make. IVAs can make it hard for you to get IVA insurance, but they may be the best solution depending on your situation.
When you have an IVA in place, your creditors will stop contacting you directly. An IVA is usually discharged after five years, as long as you have managed to stick to its conditions and make all of your payments on time. At the end of your IVA agreement, you should be debt free. Another benefit is that all of the interest rates and additional charges incurred on your debts get frozen, so you will not have to worry about your debt spiralling further out of control. It can be hard to get a quote for IVA insurance, as most mainstream providers will see your credit history as a non-standard risk.
A last resort
Bankruptcy is often seen as the last resort when it comes to debt repayment, and usually applies when an IVA will not suffice. Unlike an IVA, as well as applying to make yourself bankrupt, your creditors can also apply to have bankruptcy forced upon you. Though bankruptcy will free you from debt within a year, it often involves you loosing most of your assets. This includes your home, any shares you may have and any high-value objects in your possession. As well as causing difficulties getting bankruptcy insurance, it can also impact on your chances of getting a future mortgage and even employment.
Speak to your landlord
When you are made bankrupt the official receiver will usually inform your landlord, so it is a good idea to speak to your landlord about your situation first. In some tenancy contracts or agreements there will be clauses to prevent un-discharged bankrupts from residing in the rental property. If this is the case, you may be required to move out. If you are falling behind on your rent payments, then your landlord may also be entitled to seek a possession order to evict you from your home. In this situation, you are advised to seek aid from your local housing office as soon as you can. If you are permitted to remain in your home, then you should inform your insurer as you may not be covered and need to find specialist bankruptcy insurance.
With IVAs there is less impact on a tenancy agreement, and you are less likely to lose your home. However, you should read your tenancy agreement carefully to make sure there are no clauses that forbid tenants from entering an IVA while living on the premises. These are not as common, but it is important that you make sure. You will still be required to pay your rent; otherwise the landlord will still have the right to seek eviction. You must make sure that you prioritise obtaining IVA insurance, particularly if your current insurer decides to cancel your existing cover when you disclose your situation.
You are required to disclose IVAs, CCJs and bankruptcy as material facts to your insurer. Unfortunately many mainstream insurers are unwilling or unable to offer cover to people with an adverse credit history, but this is not the case with HomeProtect. With homeprotect you can get a competitive online quote for IVA insurance, bankruptcy insurance or CCJ insurance, no matter what type of credit issues you've had in the past.