Need a car whilst in an IVA? Whether it is for work or general commuting, an Individual Voluntary Arrangement (IVA) may provide some restrictions on car ownership and the type of car you can buy. This article answers some common questions, such as whether or not you can or lease a car while on an IVA.
Can I get a car if I’m in an IVA?
You aren’t usually allowed to take out credit without the permission of your IVA supervisor. If you can make a case that you need to get a car on Hire Purchase (HP) you may be able to get permission, if you are already in an IVA. But you should be able to budget for a car in your expenditure.
Can I lease a car while in an IVA?
There isn’t anything in law to say you cannot have a lease agreement whilst involved in an IVA and there are many people using an IVA to solve their debt difficulty and have a vehicle on Hire Purchase or lease agreement.
It is likely that different companies will have different criteria for setting up a lease agreement and you would have to ask them directly if your IVA will prevent it.
The answer to your question will depend on a lot of things and you may need to speak to your Insolvency Practitioner (IP) if you are not sure.
A couple of examples could be; replacing a vehicle is the only way that you can continue to work and make a contribution to the IVA, or it could be that the payment needed means that you no longer have sufficient money available for your IVA to continue.
Can I renew the lease on my car during an IVA?
The leasing company may have declined because of reasons completely unrelated to your IVA or it could be that their policy has changed since your last lease agreement. There may be other lease providers who are happy to provide this facility or it may be possible to speak to your IP to see what is acceptable.
As an example; you could see if your creditors will allow a short payment break or a period of reduced payments. If the only way to maintain payments to the IVA is to purchase a 2nd hand vehicle and make reduced payments now then this could be a possibility.
As the lease ends next April you would then be able to set some money aside for additional costs of repairs and maintenance as you now own a vehicle and the payments could then increase for the remainder of the IVA. The IP may have come across similar situations to yours before and may be able to look at your case and provide some guidance on how to proceed.
Can I keep my car if I plan to get an IVA?
You are allowed to keep a car in an IVA but it really depends on the value of the car and the amount of the debt (whether it will make a difference to the return for creditors.) Different IPs will have different opinions and different methods. If the car has been modified for your use then there shouldn’t be a problem – wheelchair users for example.
If you have an expensive car, you might be asked to sell it during the arrangement and buy a car worth £2-3,000 then pay the balance into the arrangement. Second-hand cars are not worth much now. Check if your car is really worth more than that which is the sort of thing a good IP would do.
Can I get car finance if in an IVA?
The simple answer to this question could, in fact, be yes, there isn’t anything in the Insolvency Act that prohibits this, there are however several areas of consideration that may mean that this is not possible to achieve.
There is a section within the IVA proposal that references further credit facilities. It generally states that you must not take any further credit which is greater than £500 (with an exception being made for utilities) without written approval by the Supervisor of the IVA.
The Supervisor would look at the reasons why the vehicle is required to see if they are justified and to ensure that this is not going to be to the detriment of the creditors who are being paid by the IVA.
Perhaps an HP agreement is needed as part of a promotion or a new job, the vehicle is required in order to achieve the higher salary, which may mean that the creditors receive more of the money back that they are owed. So they are not likely to complain.
Another consideration would be lenders attitudes. It may be difficult, although not impossible, to find a company willing to provide the finance for the HP agreement.
It is likely that your supervisor will try and help you by talking to your creditors as you need a car for work and if you can’t work you can’t pay your debts back. Depending on who your IVA is with, you may find they can help you with the finance for the car.
Can I get car finance when my IVA is finished?
There is nothing to say that you are not allowed to take out credit agreements after an IVA has finished. It could be that a previous IVA is of no interest at all to the lender and that they are more interested in how you have managed your finances since the IVA ended.
When making a decision, there are many things that a lender will look at and it may be that previous records of how finances have been managed are part of that checking process.
The car finance company will ask you to fill in an application form and this will contain questions that them in making decisions. If you have been in the same property, with the same bank account and the same employment for many years you may well fare better than someone who has been in 5 different rented properties had 12 jobs in the past 3 years, switched banks 4 times.
The difficulty we have is knowing what a particular lender is assessing you on for any specific product.
If you check your credit reference agency file today the IVA should not be showing and the debts from before the IVA should show as having no balance outstanding. There is useful information on all of the credit reference agency websites (Experian, Equifax and Callcredit) that can help you rebuild your credit rating.
Please note, you may find it difficult to be approved for any type of financial product, as your credit rating will have been affected through having an IVA. A record of your IVA will stay on your credit report for up to 6 years after the IVA has started.
Why can’t I get car insurance with an IVA?
If you pay your car insurance by instalment, you are setting up a credit agreement with the insurer. Usually, you are paying the annual premium plus interest over 11 or 12 months. As this is a form of credit, you may find it quite difficult to get any insurance company to agree to you paying monthly.
Can I use an insurance payout to buy a new car when in an IVA?
Any windfall you receive during the IVA should be paid into the arrangement. However, an insurance payout is a windfall but there is a twist since it is usually broken down into different parts; loss of earnings, and injury/stress/illness etc. You need to discuss with your IP how each element is treated.
Most IVAs state that any windfall over £500 or £1000 or some such figure should be paid into the IVA so we certainly think you should be able to keep that portion, then negotiate with your IP according to how much you need to replace your car.
Can I give my car away before getting an IVA?
You shouldn’t give away or hide any assets before going into an IVA. If you give your car to your son that is called a “transaction at an undervalue”. It would be ok to sell your car to your son for a fair market price but you would have to account for what you did with the money.
Your IVA advisor is there to give you their best advice and you should trust them. If they later find out you have not been truthful your IVA could fail and you could even be made bankrupt. Remember an IVA is your proposal to your creditors and you are in control of it.
Can someone else buy me a car while I’m on an IVA?
If somebody wishes to buy a car for somebody else then it is entirely their decision and the IVA does not stop them doing this. How this will impact your IVA would be impossible to predict here but a quick conversation with your IP will answer your questions specific to your IVA.
A couple of examples may show why it is not possible to answer fully here. In one case being given a car may simply mean that life is easier and travel to and from work is a shorter length of time than public transport.
The car is not of any interest to the creditors of the IVA if it does not have any value to them and it has not affected the ability to maintain payments to the IVA as it’s running costs are the same as the public transport costs.
Alternatively, the car could have a value that would qualify it as a significant asset in the IVA and running costs could mean that it removes the ability to maintain payments at the levels agreed by creditors at the start of the IVA.