Advice, considering IVA

fileep

Just been through the CCCS site and the reccomendation is an IVA, the thing that worries me is when they value the house. I have little to no equity at present, I assume I will have after the 5 years, but I don't have family or friends that would have the capacity to borrow me a large(ish) sum of money, don't want to sell the house either. How as everyone else managed this? The second option was for a DMP but that would be for 8.5 years. Help/advice appreciated.

Neleheel

Hi

I am only just entering into an IVA myself but have £13K of equity but £31K of debt. I have been told that my house will be safe because there is not enough equity to pay off the debt but after 5 years the property will be revalued. If it proves to have increased sufficiently in value then the creditors will request that I attempt to take out a remortage to pay off the balance of debt. (our mortage is with First Direct who will only lend 75% of the value of the property, others will lend 85%) In reality a remortage will be refused as no-one will want to lend me the money as I will be in an IVA and so I will probably have my IVA extended for a further 12 months before any remaining debt is written off.

I would guess that your situation will be the same but your best bet is to arrange to speak to someone, and get a second opinion too.

I have felt much happier since arranging an IP last week and chose an IVA over bankruptcy so that we wouldn't lose our home.

I hope that this helps

Charco_2

It will depend on the amount of equity available.

Take the value of your home and multiply by .85
this will give you the amount you could reasonably be expected to raise by re-mortgaging. Then take the value of your current mortgage away from that figure.

So your house is worth £100k
Multiply by .85 = £85K
Minus mortgage of £80k = £5k

It might have looked like £20k but in reality it's only £5k you'd have to release into your IVA. So that's roughly how you'll work out how much equity you'd need to release.

Next you'll have to think about can you actually release it!?

Under £5k your IP will usually suggest that you make an extra year's contributions to your IVA - this works out a lot better in the long run since it avoids moving your mortgage to subprime interest rates.
Over £5k you may be able to get a friend or family member to make an offer to buy out your interest. So say you've £8k to release but your brother can offer £4,500 now your creditors may accept it.
As the amount of equity increases though it just becomes more likely that you'll be required to remortgage or obtain a secured loan.

Choo_Choo_4

Fileep - I would think that if you're saying you have little to no equity NOW - and presumably you're looking at 100% value of the property (and not 85% as Charco has pointed out) then the chances of you having a huge amount in 4-5 yrs time is unlikely.

That's not to say that there wouldn't be any equity but it would seem that you might have to extend the IVA by a further 12 months to satisfy the creditors and that seems fair enough if they're happy enough to write off the remainder of your debt (and you don't have to remortgage/go sub-prime)

I would definitely arrange to speak with an IP regarding an IVA and if necessary speak to a few different people - advice costs nothing!

Nargleblast

You may have been told a DMP would last for 8.5 years, but that is assuming all your creditors freeze the accounts and stop adding charges and interest. Not all creditors are as co-operative, some will still stack on the charges and interest for several months before they finally cut their losses and sell on the debt to a third party. Therefore your 8.5 year DMP might be more like 10-12 years! It is certainly worth contacting one or two IVA firms (do not, however, have anything to do with a firm that wants cash up front before an IVA is up and running, they are not proper IVA firms but act as agents taking commission for referring you to an IVA firm).