We consider whether you can include hire purchase debts in an individual voluntary arrangement.

HP or hire purchase debts are debts which are secured against some kind of property. They are most commonly used to purchase cars. However hire purchase may have also been used when paying for other expensive items such as a caravan, mobile home, motorbike or any other items of significant value.

The key thing about HP debt is that the debt is actually secured against the goods that are being purchased. This means that if the payments are not maintained, the seller ultimately has the right to take the good back - repossess them.

For this reason you cannot usually include HP debts individual voluntary arrangements (IVA) as the normal monthly payments would stop and the goods would then be at risk of being taken away.

Voluntarily surrendering goods on HP

It is possible to include an HP debt in an individual voluntary arrangement if you are prepared to voluntarily give up the goods and let the seller take them back. This process is known as voluntary surrender.

You speak to the lender in question and tell them that you are no longer in a position to make your HP payments and that they should arrange to collect the goods involved.

Once the goods have been repossessed they will probably be sold at auction. As a result there may be an element of the original debt which is not paid in full. This is known as a shortfall.

You will be personally liable for any shortfall. However because this debt by definition is unsecured, it can then be included in your IVA.
 
Keeping Car HP

Today, the most common form of HP is car HP. If you are purchasing your car on HP and want to start an IVA the problem you have is that you need to keep the car either to get to work or for other valid reasons. As such you cannot afford for it to be repossessed.

For this reason a car HP is one of the few secured debts (other than your mortgage payments) that you will be allowed to keep if you start an IVA.

Generally you can continue to pay your car HP payments as part of your IVA living expenses budget.

If the HP agreement ends before the end of your IVA, the money you save by no longer having to pay your HP is then added to your IVA payment for the remaining months of your IVA.

Of course if your car HP payments are unreasonably large you may still not be allowed to keep your vehicle. Instead you may need to surrender it and arrange to drive a cheaper car.

Non Car HP

If you have other non car HP agreements, for example for the payment of a caravan or motorbike that you use for pleasure rather than your primary means of transport, you may not be allowed to continue paying these as part of your IVA living expenses budget.

Your creditors will argue that you should not be allowed to continue pay for a luxury item like this while they are not going to be paid in full.

As such in order to gain their acceptance of your IVA solution, you may have to voluntarily surrender the goods in question and add any shortfall debt to your arrangement.

Overall this will be of benefit to all of your creditors as your monthly IVA payments will be greater and therefore the return to them maximised.

This can be seen as one of the significant advantages of the IVA debt solution. It allows you to get out of HP agreements that you may not want to keep up but were otherwise stuck with because you would have had to find the money to pay the shortfall debt.

The individual voluntary arrangement gives you a way out as the shortfall is simply added to the IVA you were going to start anyway.

Always get IVA advice

If you are considering the IVA debt solution, before making your decision you should always get IVA advice from an expert debt advisor.

You should make sure you understand exactly what the implications will be for any HP debt that you have.

You must be clear about and whether or not you will be able to continue to pay your HP debt as normal or whether you can stop the payments and add any shortfall debt into your IVA.

Either way, it is extremely important that you continue to pay your HP agreement until you are told to stop doing so by your insolvency practitioner.

If you stop paying your HP debt too soon and then for some reason it is not possible to get your IVA up and running you will still be personally liable for any shortfall debt.
  

Related IVA articles

If you are interested in reading more news and expert articles about IVAs, please click on the following link:

http://www.beatmydebt.com/forum/viewforum.php?f=50

What to do next

If you are struggling with debt and are considering an IVA, visit www.beatmydebt.com

Our experts are available to speak to you about the IVA problem and offer further help and advice.

Our vibrant debt forum gives free access to experienced industry experts and others who have suffered with debt problems and have been through the IVA process themselves.

Useful guides, calculators and information are also available designed to help you understand how to manage and resolve debt problems.

@#ContactIconBlock@#