Debt Solutions for Homeowners

As a homeowner, you may be concerned about the impact of your debt to your property or properties. Deciding how you manage your debt will play a vital role in the protection of your assets, so it’s good to understand the options you may have when it comes to debt solutions.

What debt solutions are there for homeowners?

Ultimately, the level of equity in your property will affect the solutions you’ll be suited to.

Bankruptcy – if you have equity in your home, it’s usually advisable to avoid bankruptcy, if protecting your home is important to you. If you have equity, you could be forced to sell your home and the proceeds would go towards clearing your debts.

Individual Voluntary Arrangement (IVA) – your loan to value (LTV) is important when assessing if an IVA is right for you. Your LTV is the ratio of your debt to property value, expressed as a percentage. If your LTV is 85% or higher, an IVA could be a good option for you, that would protect your home from the unsecured debts.

Debt Management Plan (DMP) – if you’re a homeowner and can afford to pay something each month to your debts, you’ll qualify for a DMP. The level of equity in your home doesn’t matter with regards to a DMP.

Debt Relief Order (DRO) – as a homeowner, you won’t qualify for a DRO. This solution is suited to anyone who doesn’t own property.

Why does the equity in my home matter when it comes to debt solutions?

The amount of equity in your home matters, as some debt solutions require a certain level of equity for you to qualify. Essentially, equity is the amount of money you’d receive once the mortgage and any secured debts are repaid if you were to sell your home.

For example, if your home is worth £250,000, your mortgage is £50,000 and you have £10,000 of unsecured debt outstanding, your LTV is 24%; so, it’s possible that you could use the equity to pay off the debts, meaning you don’t need a formal debt solution, such as Bankruptcy or an Individual Voluntary Arrangement.

The only solution where your equity doesn’t make a difference is a Debt Management Plan. Anyone that can afford a monthly payment to their debts can enter one, whether a homeowner or not.

Will an IVA protect my home?

In short, the answer is yes. Whilst in an IVA, you’ll be legally protected from your creditors taking further legal action against you, whether this be a CCJ, bailiff action or a charging order, if you meet your side of the arrangement.

Which debt solution is best for me?

We’re on hand to offer confidential, and tailored debt advice in complete confidence. There’s a lot to consider, especially as a homeowner, which makes it important to get debt advice. We’ll utilise the information you offer to help you understand each solution and how it will impact you and your situation. You can use our Online Debt Advice Tool, contact us via telephone on 01925 599400 or email info@angeladvance.co.uk.