You can normally keep your car if you start an IVA. However you need to understand the implications if it breaks down or you are paying for it on finance.
- What happens to your Car in an IVA?
- What if your vehicle breaks down?
- Can you buy a new Car during an IVA?
- What if you are paying for your vehicle on Finance?
What happens to your Car in an IVA?
Generally speaking you can keep your car or other vehicle you need if you are in an IVA. You will have to declare what it is worth. However there will not be an issue unless the value is unusually high.
You will have various costs associated with running the car. These include fuel, insurance and maintenance. Reasonable monthly amounts to cover these can be included in your living expenses budget.
Renewing pay monthly car insurance can be a problem. You should be able to renew with the same insurer. However shopping around may be difficult. New insurers are unlikely to offer pay monthly deals due to your poor credit rating.
If your vehicle is extremely valuable your creditors may not agree to your IVA unless you sell it and get something cheaper. Any money raised would have to be paid into the Arrangement.
What if your Car breaks down during an IVA
You will need maintain your car during your IVA. A reasonable amount for this and paying for the annual MOT will be included in your living expenses.
Service and MOT bills generally come up annually not monthly. As such you will need to save your maintenance budget each month until you need it
It is a good idea to open a saving account. Physically moving the cash out of your normal bank account will increase the chances of it being there when required.
Saving your maintenance budget each month may not generate sufficient funds to cover unexpected repair bills. If this happens ask your IVA Company for a payment break to help cover the cost.
Can you buy a new Car during an IVA?
There is nothing to stop you buying a new car during an IVA. The issue is how to fund the purchase. The best option is if a friend or family member can lend you the money.
Car finance might be available. However because of your poor credit rating you will have to use a specialist lender. The problem is they will charge a high rate of interest. As a result the monthly repayments will be relatively expensive.
Taking a new finance agreement may affect your ability to pay your IVA. Your creditors might agree to lower IVA payments. However they are likely to require you to pay for longer.
If you are buying your first vehicle you must also consider the running costs. How do they compare to the travel budget currently agreed in your living expenses? If they are higher the purchase might not be possible.
What if you are paying for your Car on Finance?
If you already have a car on finance this debt cannot be included in an IVA. It is secured. As such you must continue to pay or your vehicle will be at risk of repossession.
Generally speaking a budget to cover the payments can be included in your living expenses. There will only be a problem if the payments you make are unreasonable high compared to what you can pay towards your debts.
If you have an HP agreement which ends during the Arrangement what you were paying has to be added to your IVA.
If you need to renew a lease agreement the payments are likely to go up due to your poor credit rating. This will be a problem if it affects your ability to maintain your IVA. This situation must be anticipated and planned for before you start the Arrangement.