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:
- Can you keep your Car if you start an IVA?
- What happens if your vehicle is on HP?
- What if you have a Lease Agreement?
- When can you include Car Finance debt in an IVA?
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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: http://beatmydebt.com/individual-voluntary-arrangement-frequently-asked-questions/what-will-happen-to-my-car-in-an-iva
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.
Struggling to get your head round all of this? We can help. Call us (0800 077 6180) or complete the form below. The advice is free and confidential.
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.
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I stupidly have two cars on hp finance and can’t afford the payment all together £22,000 and don’t want the cars just want to Cleer my dept can I get a iva for this
Hi Matthew
Any shortfalls on the finance agreements after the cars have been repossessed and sold can be included in an IVA. This is because these debts are then unsecured.
You will need to stop making the payments and inform the finance companies that you want them to come and repossess the vehicles. They will do this and then sell the vehicles (normally at auction). The funds raised from the sale are used to off set against the debt owed on the finance. Any debt not paid off and still outstanding is what is known as the shortfall.
If you would like to discuss this please don’t hesitate to give me a call (0800 077 6180).
Hello
I have an IVA. My car finance is included but my IVA company said its fine if I want to sell it and buy another one with the money. But when I do a vehicle check on it, it says there is still finance on it. Its confusing and wondering if it will course problems if I sell it. Thank you
If the car finance debt is included in your IVA and the finance company have not repossessed the vehicle you have to assume they have decided they no longer have any interest in it. As such what your IVA company have said is correct.
If you want to be 100% confident I would call up the finance company and ask them whether they would object if you sell the vehicle. If they say no then you can go ahead.
The only remaining issue is whether a potential buyer would be put off if the finance is still registered against it. I think the only way around this would be to see if you can get a letter from the finance company confirming it can be sold.
Hi,
I couldn’t keep up with the payments of all my debts. I defaulted on my car finance and they closed my account and passed it to a debt collection agency. After this I entered into an IVA which was approved.
However, shortly after approval the debt collection agency after then closed my account and passed this back to the original finance company. I called them and advised of the IVA as I believe they are still legally bound by it.
Can they still repossess the car? I need it for work but would like to sell it and get something which is cheaper to run.
Thanks
Marty M.
Hi Marty
When you start an IVA you list the original creditors not the debt collecting companies employed by them. As such in your IVA your car loan should by listed as owed to the original finance company. Given this is the case I think you can safely assume that they are not interested in repossessing the car and would allow you to sell it. If they were they would have done it already…..
In terms of the practicalities of selling the car you would need to check if it is still listed on the HP register as having finance outstanding. If it is you might have difficulty finding a buyer. If it is listed you will have to contact the finance company and asked them to confirm in writing that they no longer have any interest in the vehicle and you can sell it if you wish.