Keeping my car in an IVA

What will happen to my car in my IVA?’ is a question often posed by persons who are insolvent and considering doing an IVA. In most cases, the answer is nothing and you will be allowed to retain the car. However it depends on a number of factors whether the IVA will affect the situation.

First question is: do you own the car?

Second question is: what is the value of the car?

Third question is: do you or your family need your car for travelling to and/or from work or school or for general transport purposes?

Fourth question is: do you use the car in the course of your work?

For example, are you a taxi driver using your car for taxiing purposes or for providing courier services? In such a scenario, your IVA proposal also needs to address the question of whether you may have to change the car during the term of your IVA for reasons of safety, condition or excessive running costs.

Fifth question is: is the car the subject of a HP agreement?

If so, what are the monthly payments, what if any final balloon payment is payable, how long is the term remaining on the agreement and do the terms of the HP agreement allow you to enter into an IVA (or any other financial arrangement) without jeopardizing the HP agreement. (Many HP agreements do not allow such a course of action and may state that it is a breach of the HP agreement to enter into an IVA or other such financial arrangements). You may also be required to obtain a current valuation of the car, even though it is subject to a HP agreement.

Keeping my carIf you own the car outright and it is not of an exorbitant value then you will usually be permitted to retain the car for normal transport purposes such as travelling to and from work and for the normal transport needs of your family. If you own a car of excessive value, creditors may require you to sell it, purchase a more modest vehicle and contribute the difference in value to your IVA. In rare instances, if public transport is available and could serve all of your transport needs and those of your family, creditors could request that you sell your car and contribute the proceeds and any savings on transport costs to your IVA. However, this approach is hardly ever taken by creditors.

If you are in the process of purchasing your car on HP, it might be in positive or negative equity, depending on its current value and the amount remaining to be paid on the HP agreement. Creditors will expect all of this information to be provided in your IVA proposal. Not only that but creditors will expect your proposal to offer increased monthly contributions to your IVA, once your HP Agreement expires. For example if you offer proposals for an IVA of five years duration, and your HP Agreement expires after three years, your creditors will expect to see enhanced monthly contributions to your IVA for the last two years. All of that is of course providing that the party with whom you have the HP agreement permits the agreement to continue while you are in an IVA.

It may of course be that you will need to change the car at the end of the HP agreement, due to its age or condition at that time. If for example, you were a self employed taxi driver, changing the vehicle might be absolutely necessary because of safety, condition, excessive running costs or other valid reasons. Your IVA proposal should anticipate such a scenario and state so up front, allowing for the need to obtain a replacement vehicle, also on HP, during the term of your IVA. This is preferable to offering your creditors a variation to your IVA after two or three years and seeking their permission then to change your vehicle. In a nutshell, full disclosure of your car HP and all associated circumstances is not just desirable, it is essential for the acceptance, maintenance and successful completion of your IVA.