An IVA, on the other hand, is extremely unlikely to force the sale of their property. True, they’d probably have to commit to releasing equity* from their property towards the end of the IVA, so they could increase the amount they’re paying into the IVA.

In most cases, this would happen halfway through the final year of the IVA – most IVAs last 5 years, so they’d release equity in the 54^th month of the IVA. Once they’d done this, they would owe more money to their secured lender(s) than they used to, but the property would still be theirs.

Far from losing you your home, an IVA can actually help you stay in it. How? An important aspect of an IVA is that it’s affordable – that your payments would be set at a level you could commit to. So they’d be as high as you could afford after you’d accounted for all your ‘essential expenditure’. In other words, your payments would be based on your disposable income – the money that’s left after you’d set aside enough money for payments to your mortgage, secured debts, utility bills, petrol, clothing, food, etc.

So your IVA payments wouldn’t take up money you need for your mortgage. It’s an important point, as many people find they’re falling behind on their mortgage payments because their unsecured debts are taking up too much of their income – not because their mortgage payments themselves are too high.

The same goes for tenants. People who rent their accommodation and are in an IVA will be making payments based on what they have left after they’ve taken their rent and other essential expenses into account. So they won’t be using the funds they need for their rent just to stay on top of their payments towards their unsecured debt.

Even so, an IVA isn’t always the best solution – even for homeowners. An IVA will affect your credit rating for 6 years from the time it starts, which can make credit more expensive and/or harder to obtain for that time. Plus, some people can’t commit to the monthly payments which an IVA would require.

Others may be put off by the thought of making payments to an IVA for 5 years. Most people tend to be discharged from bankruptcy within one year, although they may be required to keep on making payments for a further two years – people who can afford to contribute money to their bankruptcy will probably be required to do so for a total of three years, from when the bankruptcy starts.

* Equity is the portion of the home’s value you owe nothing on, in the form of mortgage / secured loans. If you’re a homeowner, you can find out how much equity you have in your home by taking the value of your property and subtracting the value of any mortgage / secured loans you have.