If you're retired or close to it, the main questions tend to be about your home and your pension. Can you get an IVA on a fixed income? Would equity release be better? Is it worth downsizing? This guide works through each one.
Can I get an IVA when I'm retired?
Yes, if your pension income leaves a regular surplus after essential costs. There's no upper age limit for an IVA. Your State Pension, any workplace or private pension and benefits such as Pension Credit or Attendance Allowance all count as income.
Many retired people in Morpeth have a mix of State Pension and a workplace pension from a career elsewhere. The challenge is that pension income rarely rises much, while some costs, such as heating and care, can increase with age. Your budget needs to allow for that. If your income is low and you have few assets, other solutions may be more suitable. Free advice services can also check whether you're claiming all the benefits you're entitled to, which many older people aren't.
Lifetime mortgages and equity release: an alternative to an IVA?
Homeowners in Morpeth often have substantial equity. If you're over 55, a lifetime mortgage could release some of that equity as a lump sum to clear your debts in full, without any form of insolvency. It's an important alternative to consider, but it isn't right for everyone.
Points in favour
- Debts cleared in full
- No IVA on your credit file
- No monthly payments to creditors
- You stay in your home
Points against
- Interest builds up over time
- Reduces what you can leave to family
- Can affect means-tested benefits
- Set-up costs and early repayment charges
Equity release is a regulated product and must be arranged through a qualified adviser. Get independent advice before deciding, and involve your family if you can. A good adviser will compare equity release with downsizing and with an IVA, rather than recommending one product.
Downsizing in Morpeth
Selling a family home and buying something smaller, perhaps closer to Morpeth's town centre shops and services, can release money to clear your debts and reduce running costs at the same time. For many people, this is a better long-term answer than a five-year IVA, particularly if the house has become too large or costly to maintain.
If you decide to downsize after starting an IVA, tell your supervisor before you put your home on the market. Some or all of the released equity may need to go into the IVA, and it may allow the IVA to end early.
Expected inheritances and gifts from family
An inheritance received during an IVA is a windfall and usually has to be paid into the arrangement. If you expect to inherit within the next few years, factor that into your decision, because it could clear your debts without an IVA at all. Gifts from family to help with debts are possible too, but if they're made during an IVA, talk to your supervisor first so the money is used in the most effective way.
Home insurance, flood risk and essential costs
Parts of Morpeth were badly affected by flooding from the River Wansbeck in 2008, and flood defences have since been built. If your home is in an area with a history of flooding, buildings and contents insurance may cost more than average. That's an essential cost and belongs in your budget. The Flood Re scheme helps many households in flood-risk areas find affordable cover, so ask your insurer whether your policy is part of it.
Paying for care and support at home
If you or your partner receive care at home, the charges you pay towards it are an essential cost and belong in your budget. Northumberland County Council carries out a financial assessment to decide how much people contribute towards council-arranged care, so use the figure from your assessment. Arrears of care charges are usually unsecured and can be included in an IVA, but get advice first, because care arrangements need to stay in place. Attendance Allowance and other disability benefits count as income, while the extra costs they're meant to cover count as spending.
Council tax at County Hall
Northumberland County Council has its headquarters at County Hall in Morpeth, and it collects council tax across the county. Arrears can usually be included in an IVA, but the current year's bill must be paid. If you live alone, make sure you're receiving the single person discount, and if your income is low, ask about council tax support.
Next steps for people in later life
Our team is based in Newcastle and handles enquiries by phone and email, so wherever you live in or around Morpeth, there's no need to travel. You're welcome to have a family member or friend with you when we speak. Send the form at the top of the page and choose a time that suits you. The enquiry is free and there's no obligation.
Free, impartial advice is also available from Citizens Advice Northumberland, Age UK and MoneyHelper, which also offers free pension guidance through Pension Wise for people aged 50 and over. You may also find it helpful to read IVAs and your home and our comparison of debt solutions.
Later-life questions
What happens to my IVA if I die?
An IVA usually ends on death. Any remaining debts are dealt with by your estate in the normal way. Your family doesn't take on your debts personally unless they were jointly responsible for them.
Is equity release available on every Morpeth property?
Not always. Lenders look at the property's value, type, condition and location, including any flood risk. An equity release adviser can tell you whether your home qualifies.
Can I still help my grandchildren financially?
Small gifts are generally fine, but large gifts during an IVA should be discussed with your supervisor, as money that could go to creditors may be expected to go into the IVA.