How Does IVA Affect Renting a Property?

Facing debt can be tough, but don’t worry, you’re not alone. Each month, over 12,000 people like you visit our site to understand their debts.

This article is for people who have a debt and are worried about how an Individual Voluntary Arrangement (IVA) may affect their housing situation. We’ll cover:

•  What an IVA is and how it works
•  How an IVA considers your rental payments
•  If an IVA affects your property and credit check
•  What landlords look for when you have an IVA
•  How to continue renting, even with an IVA

I know how scary it can be to face debt collectors or worry about losing your home; I’ve been in your shoes. Don’t worry; I’m here to help you understand how an IVA could affect renting a property and how you can manage this.

What is an IVA?

An IVA stands for Individual Voluntary Arrangement. It’s a formal debt solution, which means it’s a legally binding agreement by all parties. There can be serious consequences if your IVA fails, including the potential to be made bankrupt by creditors. 

You cannot set up an IVA on your own. It has to be organised and monitored by an accredited professional called an Insolvency Practitioner (IP). This person will assess you for an IVA against other debt solutions and try to agree with your IVA proposal with creditors. 

IPs charge fees for their work, which are taken from your debt repayments rather than an additional expense you need to worry about. But, how do IVAs work exactly?

Do you have to pay?

There are ways to have debt written off in the UK.

If you genuinely can’t afford your debt repayments then looking into whether you could have your payments lowered or written off might be just what you need. 

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How do IVAs work?

To get an IVA approved, your IP works with you to make an IVA proposal to creditors. Your creditors vote on the proposal at a remote meeting. If an IVA is accepted even the creditors that voted against the proposal will be included. It’s an everybody or nobody deal. 

The IVA itself will require you to make one monthly payment, which the IP then distributes to each creditor proportional to the amount of debt you owe them against the other debts. 

For example, if you owe one creditor £9,000 and another creditor £1,000 then the former would get 90% of your monthly payment (minus IP fees). 

This arrangement usually lasts for five years, but IVAs can be extended and go on for much longer, especially if you have had an IVA payment holiday or missed repayments during the five years. The IVA might not necessarily end after five years (read below!) but once it does end all remainign debt unpaid is written off. 

Do IVA repayments consider existing rental payments?

Yes, your IP will consider all your essential living expenses including ongoing rent payments when making an IVA proposal to your creditors. 

This ensures you won’t be worried about keeping up with repayments and not affording your essential living costs. 

Can you lower your repayments?

If you’re struggling to pay back your debt, then you might qualify for a debt solution.

Some solutions lower your monthly payments while others write off a portion of your debt. 

To find out whether they could work in your situation, hit the button below.

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Does an IVA affect the property?

An IVA can affect any property you own. You will be asked to try and release equity from your property to make a final lump sum payment to end the IVA. 

As long as you have more than £5,000 of home equity, you’ll be asked to try and release it to make a final payment. This is called the IVA Equity Release Clause. If you cannot release any equity or don’t own property, you have two options to end the IVA:

1. Get a third party such as a family member to make a lump sum payment for you
2. Extend your IVA repayment for one more year, at which point, the IVA will end  

Will an IVA show up on a credit check?

Yes an IVA is recorded on your credit report from the date it’s approved. It will stay on your credit report for six years and then be automatically deleted. 

It stays on your report for this period of time even if the IVA fails or the IVA is settled early due to a windfall. Having an IVA on your credit history will severely damage your credit rating and make it harder to get approved for credit during and immediately after the IVA. 

You might find some willing lenders, but most of these will probably charge a higher rate of interest because you’re now seen as a greater lender risk. 

Interestingly, if your IVA is extended significantly, the length of time it appears on your credit report will also be increased. 

Do landlords check for an IVA?

Sometimes landlords and estate agencies will carry out a credit check before approving you to rent one of their properties. If they do, they will see that you have an IVA. 

However, some landlords and estate agencies might not check your credit report, so there’s no 100% certain answer. 

Can I still rent a property if I have an IVA?

One of the big questions from people who enter into an IVA is how the IVA affects renting property. Here is one of the most asked questions I receive, which is also common on forums:

Source: https://forums.moneysavingexpert.com/discussion/386456/renting-a-house-with-an-iva 

There is nothing in the law that says you can’t rent a property because you have an IVA. But some landlords might reject your rental application if they see you have an IVA on a credit check. 

Your ability to continue renting a property or rent a new property with an IVA will hinge on other factors.

In the sections below, I’ll be covering if an IVA affects a current rental property or the ability to move to a new rental.  

Will an IVA affect my current rental?

Possibly, but it’s not very likely. 

For starters, your landlord won’t be directly informed that you’ve entered into an IVA during your tenancy. The landlord could look this up on the public insolvency register, but this is highly unlikely to happen. 

Even if your landlord did find out that you entered into an IVA to deal with your debts, there might not be much they could legally do to get you out of the property. 

The letting agent or landlord will only have grounds to make you leave – which could also be a lengthy process – if there is a clause in the contract for this situation. 

Some estate agents and landlords add an insolvency clause in their rental agreements, which basically states that the tenancy agreement can be terminated if the tenant becomes insolvent. 

So you might want to check your current tenancy agreement to see if there is an insolvency clause or not. It’s quite unlikely but not impossible. 

What if rent arrears were included in the IVA?

It’s highly unlikely that a landlord will agree to let you repay rent arrears through an IVA. Rent arrears and secured loans don’t usually get included in an IVA.

When you wish to use an IVA with rent arrears, the IP will usually allow for additional expenses in your repayment plan to help you cover these arrears while paying into the IVA. Although, this will reduce your repayment proposal and may make it harder to get the IVA approved by creditors. 

But in the highly unlikely event that your rent arrears were included, the landlord will already know about the IVA. Even then, the IVA doesn’t prevent the landlord from taking legal action to evict you from the property. 

Does an IVA affect renting a new property?

You can run into trouble if you’re trying to move to a new rental with an IVA. It depends on whether the new landlord or letting agent performs a credit check to see if you have an IVA.

There is nothing to say that the new landlord has to reject your rental application if they do see you’re using an IAV to get out of existing debts, but they might be more apprehensive.

Just as a lender sees you as having a greater lending risk when you have an IVA on your credit file, the landlord will also see you as having a greater risk of not paying rent on time because of your history of missing debt repayments.

This can sometimes be unfair because lenders and landlords only get a small part of the information and don’t always know the full story. 

How to rent with an IVA and a pending credit check

You might be able to sure up your chances of getting your rental application approved despite an IVA and a credit check on the way. You could:

1. Rent with someone else who has a strong credit history
2. Rent in your partner’s name if their sole income also meets the landlord’s requirements
3. Rent using a guarantor who agrees to pay your rent if you miss payments
4. Send the landlord a letter (read on)

If you know your landlord is performing a credit search, you might want to accompany your application with a personal letter to explain your IVA and financial circumstances. This could help you get your rental application approved. 

What other IVA rental problems could you face?

One issue you could face is raising a large enough deposit when starting the rental agreement. Unless you will get back the same or a higher deposit from an existing rental before you move, you may not have the immediate funds to put down a deposit on the new rental.

Although your IP will consider existing rent payments in the IVA proposal, they won’t account for you need to raise money to increase a rent deposit amount as part of a move. This might be something you need to consider.

“It will only get worse” 😩

It’s cliché to say, but with debt it’s true; the longer you leave it, the worse the problem gets. 

There are straightforward and effective ways to deal with debt, but you have to know your options. 

Fill out the short form to find out about the debt solutions that could reduce your monthly payments or even write off some of your debt.

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Learn about other debt solutions

If you haven’t already signed up for an IVA, you may want to know about other debt solutions which might be a better option, especially for renters. 

You can learn about those on my Get Out of Debt page, and you should always seek personalised debt advice before choosing your preferred debt solution. Debt charities provide confidential and personalised advice for free!