are very high costs involved with a bankruptcy which become even higher when there is a property with equity that needs to be released. As much as the first ?15,000 of equity released from a forced sale could be taken in costs in a bankruptcy. Also, it should not be assumed that a bankruptcy will force the sale of a property. Indeed, if there is little or no equity in the property, the Official Receiver may offer the debtorIn some cases, equity issues that surround an IVA can have a serious impact on the decision as to whether or not an IVA remains the most suitable debt solution available. As a debt adviser that specialises in IVAs, I know how essential it is for clients to understand what the requirements of their creditors will be, and in turn, how those requirements will be applied to their IVA case.

Many people do not know what an IVA is, so here is a very brief overview of the IVA concept:

An IVA, or Individual Voluntary Arrangement, allows a person in financial difficulty to reach a new formal agreement with their creditors. An IVA allows a debtor to make repayments, of an affordable amount each month, to their creditors for the term of the IVA (normally 5 years) after which period, and so long as the debtor does not have any equity in a property, the debtor will be considered debt free. By the terms of the IVA, the creditors are legally bound to write off any outstanding balance when the IVA finishes.

However, as you can imagine, there are conditions attached.

It is important to understand from the outset that an IVA is a "Voluntary" agreement, and both parties must voluntarily agree to be bound by the IVA terms. Therefore, for the IVA to be acceptable to the creditors, it must make financial sense. Creditors will not likely accept an IVA that does not return a dividend (rescued pence in the pound) comparable with, or in excess of, their expected dividend from the debtor's bankruptcy.

This does not mean that the IVA proposal must return more money than a bankruptcy might return, but rather be a realistic alternative to it.

There are very high costs involved with a bankruptcy which become even higher when there is a property with equity that needs to be released. As much as the first ?15,000 of equity released from a forced sale could be taken in costs in a bankruptcy. Also, it should not be assumed that a bankruptcy will force the sale of a property. Indeed, if there is little or no equity in the property, the Official Receiver may offer the debtor

VA is, so here is a very brief overview of the IVA concept:

An IVA, or Individual Voluntary Arrangement, allows a person in financial difficulty to reach a new formal agreement with their creditors. An IVA allows a debtor to make repayments, of an affordable amount each month, to their creditors for the term of the IVA (normally 5 years) after which period, and so long as the debtor does not have any equity in a property, the debtor will be considered debt free. By the terms of the IVA, the creditors are legally bound to write off any outstanding balance when the IVA finishes.

However, as you can imagine, there are conditions attached.

It is important to understand from the outset that an IVA is a "Voluntary" agreement, and both parties must voluntarily agree to be bound by the IVA terms. Therefore, for the IVA to be acceptable to the creditors, it must make financial sense. Creditors will not likely accept an IVA that does not return a dividend (rescued pence in the pound) comparable with, or in excess of, their expected dividend from the debtor's bankruptcy.

This does not mean that the IVA proposal must return more money than a bankruptcy might return, but rather be a realistic alternative to it.

There are very high costs involved with a bankruptcy which become even higher when there is a property with equity that needs to be released. As much as the first ?15,000 of equity released from a forced sale could be taken in costs in a bankruptcy. Also, it should not be assumed that a bankruptcy will force the sale of a property. Indeed, if there is little or no equity in the property, the Official Receiver may offer the debtor

in a property, the debtor will be considered debt free. By the terms of the IVA, the creditors are legally bound to write off any outstanding balance when the IVA finishes.

However, as you can imagine, there are conditions attached.

It is important to understand from the outset that an IVA is a "Voluntary" agreement, and both parties must voluntarily agree to be bound by the IVA terms. Therefore, for the IVA to be acceptable to the creditors, it must make financial sense. Creditors will not likely accept an IVA that does not return a dividend (rescued pence in the pound) comparable with, or in excess of, their expected dividend from the debtor's bankruptcy.

This does not mean that the IVA proposal must return more money than a bankruptcy might return, but rather be a realistic alternative to it.

There are very high costs involved with a bankruptcy which become even higher when there is a property with equity that needs to be released. As much as the first ?15,000 of equity released from a forced sale could be taken in costs in a bankruptcy. Also, it should not be assumed that a bankruptcy will force the sale of a property. Indeed, if there is little or no equity in the property, the Official Receiver may offer the debtor

the IVA to be acceptable to the creditors, it must make financial sense. Creditors will not likely accept an IVA that does not return a dividend (rescued pence in the pound) comparable with, or in excess of, their expected dividend from the debtor's bankruptcy.

This does not mean that the IVA proposal must return more money than a bankruptcy might return, but rather be a realistic alternative to it.

There are very high costs involved with a bankruptcy which become even higher when there is a property with equity that needs to be released. As much as the first ?15,000 of equity released from a forced sale could be taken in costs in a bankruptcy. Also, it should not be assumed that a bankruptcy will force the sale of a property. Indeed, if there is little or no equity in the property, the Official Receiver may offer the debtor

are very high costs involved with a bankruptcy which become even higher when there is a property with equity that needs to be released. As much as the first ?15,000 of equity released from a forced sale could be taken in costs in a bankruptcy. Also, it should not be assumed that a bankruptcy will force the sale of a property. Indeed, if there is little or no equity in the property, the Official Receiver may offer the debtor an opportunity to buy the equity interest on the property, and therefore remove the property from bankrupt's estate.

So looking at how any equity would be dealt with by the Official Receiver in the bankruptcy of each particular case, is a useful technique to help gauge the creditors reaction when faced with an IVA.

In the main, most IVAs will require a release of equity at the end of the 4th year, and how much money needs to be released will be governed by 5 factors.

• The size of the original debt.
• The amount expected to have been paid into the IVA after 5 years.
• Is there any releasable equity, and if so how much?
• Can the debtor afford the costs of the remortgage required?
• Can the debtor find a company that will agree to the remortgage?

The general requirement for the remortgage is that as much as possible is released to the creditors, up to, but no more than the original debt that was owed at the outset of the IVA. This offers the creditors a full repayment, but only where possible, and offers the debtor the reassurance that should it not be possible to raise the full repayment, there will be a debt write off at the end of the IVA.

So, the answer to the big question, "Will I be made to sell my family's home?" is NO.

Each case is different, and it is not always an easy choice, but reaching an agreement through an IVA will protect your property from your creditors. Once the IVA is accepted, the creditors can do nothing to change the terms, and providing the debtor continues with the monthly repayments they can be assured that they will be debt free in 5 years.