Money Advice, Debt Advice & Debt Help
What will happen to my Car in an IVA

What will happen to my Car in an IVA

What will happen to my Car in an IVA

You will usually be allowed to keep your car if you start an IVA. However you need to be aware of the implications particularly if your vehicle is on finance.

Included in this article:

Rather speak to a person? Call 0800 077 6180 or fill in the form below and we’ll call you

Is my car at risk if I do an IVA?

You will normally be able to keep your car if you start an Individual Voluntary Arrangement (IVA). What happens if your car is on Hire Purchase (HP)? To find out more please visit:

Can you keep your Car if you start an IVA?

Owning a car is not generally an issue if you start an IVA. Given you need it you should be able to keep your vehicle as long its value is not excessive.

A sufficient amount for running costs can be included in your Living Expenses Budget. When completing this budget you will need to include amounts to cover things like annual servicing as well as fuel and insurance.

If you have pay monthly car insurance when it comes to renew you will normally have to stay with the same insurer. A different insurer is unlikely to give you a pay monthly deal as you will fail their credit check.

If your vehicle is worth more than the debt you owe it is unlikely that your creditors will agree with your IVA proposal without you replacing it with something less valuable.

What happens if your vehicle is on HP?

A car HP agreement is a secured debt. As such it cannot be included in an IVA. Given you need the car you will be allowed to keep the agreement running. You can include a specific budget for this in your living expenses.

The only time you may not be allowed to maintain an HP agreement is if the payments are unreasonably high. There might be an issue if the amount you are paying towards your car each month is more than you are offering to pay into your IVA.

Before starting your application you should contact your HP company to inform them of your plan. Most will not be concerned about you starting the Arrangement as long as you maintain the payments.

If your HP agreement finishes during your IVA the money you save must be added to the Arrangement. As a result the amount you repay to your creditors increases. It does not reduce the length of the the IVA itself.

What if your Car is on a Lease Agreement?

A car lease agreement is treated in the same way as HP. You should be allowed to continue making the payments during your IVA as long as they are not unreasonably high. However you may face problems when the lease period ends.

The issue is you do not own the vehicle. If you want to keep it you have to pay a lump sum known as a balloon payment. However you will not have the cash available to do this unless you can borrow it from a friend or relative.

One solution may be to refinance the amount owing on the car. Alternatively you could hand back the vehicle and look to take a new one on a new agreement.

Because your credit rating is poor you will only be able to get vehicle finance from a sub prime lender. They will be more expensive. As such you may have to choose a cheaper vehicle so that the monthly payments remain within your budget.

When can you include Car Finance Debt in an IVA?

If you want to keep a vehicle which is on finance the monthly payments have to be maintained. As such in normal circumstances the debt cannot be included in an IVA.

However you may have decided that you no longer want the vehicle. Perhaps it is worth less than the finance outstanding and so is not worth paying for. Alternatively the ongoing monthly payments may simply be more than you can afford.

In these circumstances you can stop the payments and ask the finance company to repossess the car. An estimate of the debt that will still be outstanding after it is collected and sold can be added to your Arrangement.

Your finance company may tell you that you are not allowed to break the finance agreement and they cannot take the vehicle back. In these circumstances you simply stop paying. You can be sure they will collect it soon enough.

Arrange a call with an IVA Expert

    Need help to start a Individual Voluntary Arrangement?

    Privacy Policy
    Your information will be held in strictest confidence and used to contact you by our internal team only. We will never share your details with any third party without your permission.

    26 thoughts on “What will happen to my Car in an IVA

    1. Marty Malone says:

      Hi James,

      RE my second question.

      Sorry – I was more interesting if this creditor was bound by the terms of the IVA.
      As the company they passed the debt to is listed, and not them.

      Marty M.

      1. Hi Marty

        Given the debt was originally included in the your IVA then regardless of who is now trying to collect it, it is bound into the Arrangement. It is quite common for a debt to be sold to a 3rd party during an IVA. Where this happens the 3rd party are still bound by the terms of the agreement. They cannot make up their own rules just because they are a new owner.

        I am not sure exactly what has happened in your case but the principle still applies. If the debt itself was originally included in the IVA then whoever is now trying to collect it is legally bound to the Arrangement. The cannot force you to pay outside of this.

    2. Liam says:

      I entered an IVA December 2018 and continued to pay for my car, however my situation has changed and now I can no longer afford the payments. Can I now give the car back to the finance company and include the debt into my IVA?

      1. Hi Liam

        It is possible to add a new debt to an existing IVA however the options largely depend on how much the debt is. The first thing you need to do is estimate what the shortfall on the car finance will be. You can do this by taking the total outstanding on the finance and deducting a prudent estimate of the 2nd hand value of the car.

        If the expected shortfall is less than 10% of the total debt currently included in your IVA, your IVA company should be able to add it easily. If it is more, they will have to ask all the creditors (including the car finance company) to accept the change. If agreed it will certainly result in your IVA being extended for at least 12 months. Also your payments may increase because you will no longer have the cost of paying for the car payments each month……

        Once you have estimated the value of the shortfall I suggest you speak to your IVA company and discuss the options with them. If they say it is not possible to add the debt or the terms are not acceptable to you, then you could consider stopping the IVA and going bankrupt. It is certainly possible to do this and it would mean all your original debt and the car shortfall would be written off. If you are not a home owner it is a very sensible option to consider. You can read more about it here: Stop your IVA and go Bankrupt

    3. Leon says:

      Hi ,

      I’m looking at getting an IVA for my credit cards but Ive currently got a HP finance for my car which won’t be going in the IVA , it will be fully paid in 2 half years , my IVA will last 5 years , would I be able to keep the car once fully paid off ? Or will I have to sell my car as it will become an asset an be forced to buy a cheaper car ?

      1. Hi Leon

        If you start an IVA you should be able to continue paying your car finance no problem. I assume it is an HP agreement so once it is paid the car will be yours. If so you will be able to keep the car and continue using it. You will not have to sell it. However it is important to remember that the payments you were making towards the finance will then have to be added to you IVA payment. As such you will not have more cash in your pocket.

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    Learn how your comment data is processed.