Which debts can be included in an IVA? IVA FAQ

Summary: Which debts can be included in an IVA? - Those considering an IVA need to know the kind of debts that must be included or excluded from an IVA. This article seeks to answer this question.

An IVA can be a very good way to deal with debts that you cannot afford to repay. However before proceeding with an IVA, it's important to understand which can and which can't be included in an IVA.

Unsecured debts

You can - indeed must, include all unsecured debts in an IVA. This will include credit and store cards, catalogues, bank loans and overdrafts, credit agreements and certain types of arrears. You will include business debts that you are personally responsible for. Though for some reason you may want to keep a particular unsecured debt out of an IVA, this is not possible as it would be showing preferential treatment to a particular creditor.

Tax and VAT

One of the advantages of an IVA compared to a Debt Management Plan is that HMRC debts such as income tax and VAT can be included in the agreement. This can make an IVA a very appropriate solution for people who run their own business and have become personally liable for unpaid income tax, PAYE or VAT. Directors who have given personal guarantees on company debts will include them in an IVA.

Mortgage or secured loan

A mortgage or secured loan cannot be included in an IVA and nor can any arrears that have accrued. For this reason an allowance for the required monthly payments towards your mortgage and any secured loans must be included in your monthly outgoings budget. If you have a shortfall on a mortgage or secured loan following the repossession of a house you no longer own, the debt effectively becomes unsecured and will be included in an IVA.

Car HP or mobile phone contracts

A car HP or lease agreement is secured against your vehicle and cannot be included in an IVA. Like mortgages and secured loans, failure to maintain payments will lead to repossession and a following debt. However if you decide you can no longer afford to maintain your car payments, you can stop the payments and give the car back. Any outstanding debt you are liable to pay can then be included in an IVA. You can do the same thing with a mobile phone contract you no longer need. Again, the debt can be included in the IVA, though obviously you can no longer use the phone.