IVA Mortgage or individual voluntary mortgage is an alternative to bankruptcy. It offers an opportunity to the debtor to settle his debt through a formal agreement with the creditor to return a percentage of his debt over a prescribed period of time, the debt to be paid being generally smaller than the total amount due to the creditors. Although it is an alternative to bankruptcy, it has certain advantages over it, as it does not affect the debtor’s credit history. It is also advantageous to the debtor as his property remains untouched. Though an IVA mortgage puts additional strain on one’s borrowing capacity, it nevertheless allows one to have a mortgage when all other options have exhausted.

One of the greatest advantages offered by IVA mortgage is that it is treated as a priority debt, and therefore it has priority over payment to the rest of the creditors. The payments under IVA mortgage is calculated based on one’s disposable income, i.e. after making allowances for essential living expenses each month. As long as one continues making payment on IVA mortgage, one’s property is not affected. However, a default on payment against it may result in bankruptcy and eventual loss of property. This is one clause that is inserted in most of the IVA mortgages about the payment to the creditor. Any additional income received during the life of the IVA may, however restrict one’s option of changing the size of the property during the life of the IVA. Most of the time, it also requires the borrower to make a payment to the creditor against the equity build-up on the property, especially when the sale value of the property exceeds the outstanding balances on the mortgage. The creditors usually require a large chunk of this equity build–up, usually to the tune of 75%.

Due to the formal nature of the IVA, licensed professionals are called upon to set up the agreement. The IVA agreement is approved even if only one of the creditors votes in affirmative. However, if any of the creditors vote in the negative, representing less than 25% of the total debt, the IVA proceedings are suspended and all those creditors who did not vote earlier are called upon to participate in the proceedings later on. It is legally binding in nature and as long as one keeps making payment on one’s IVA, one is free of the debt once the period of the agreement is over, irrespective of how much has been paid into the mortgage.