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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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.

Need help to start an IVA? Give us a call (0800 077 6180) or complete the form below. The advice is free and confidential.