IVA and Hire Purchase: Can You Keep Your Car?

Is Car Finance a Secured or Unsecured Debt?

Hire purchase (HP) and personal contract purchase (PCP) agreements are secured against the vehicle - the finance company retains ownership until the final payment. This makes car finance a secured debt, excluded from the IVA.

This is different from a personal loan taken out to buy a car outright, which is an unsecured debt and could potentially be included in your IVA.

Can I Keep My Car During an IVA?

Yes - if you continue making HP or PCP payments. Your monthly car finance payment is included as an essential living expense in your IVA budget. Your IP will assess whether the payment is reasonable for a standard commuter vehicle.

• Continue making HP/PCP payments on time - these cannot be included in the IVA
• Your IP includes car finance as essential expenditure in your monthly budget
• The finance company is notified you have entered an IVA as a standard process
• Most lenders will not terminate the agreement if payments continue
• Check your HP/PCP agreement for insolvency clauses - some lenders reserve this right

What If I Can't Afford the Payments?

If car finance is unaffordable within your IVA budget, you have options:

1. 1Speak to your IP - they will assess whether the payment can be included in your budget
2. 2Consider voluntary termination (VT): if you have paid 50% of the total amount payable, you can return the car and owe nothing further (Consumer Credit Act 1974)
3. 3Return the vehicle before 50% - the remaining shortfall becomes an unsecured debt that can be included in your IVA
4. 4Speak to your finance company about a payment holiday or restructure

Voluntary Termination (VT) Explained

Voluntary termination is a legal consumer right under the Consumer Credit Act 1974. Once you have paid 50% of the total amount payable (including all interest and charges - not just principal), you can return the vehicle and owe nothing further.

If you haven't reached 50% and return the car, the shortfall (remaining balance) becomes an unsecured debt - which can usually be included in your IVA.

Getting New Car Finance During an IVA

Obtaining new hire purchase or car finance during an IVA is extremely difficult. Most lenders will decline. You also need your IP's consent before taking on any new credit. Doing so without permission could breach your IVA.

This information is for general guidance only and does not constitute financial or legal advice. An IVA is a formal insolvency solution - fees apply and your credit rating will be affected. Seek independent professional advice before making any decisions.