IVA Failure - what next?

Billy_Flint

Due to a change in circumstances my family will need to move house in the near future. We plan to rent out the current property as it is in negative equity and rent elsewhere (albeit at a higher cost) as we need to be near London. The result of this change will mean that we will no longer have any surplus income at all so won't be able to keep up the IVA payments.

Looks as though we will have to stop paying the IVA in the next month or so and I guess ultimately petition for Bankruptcy but any idea how long I can leave things before action is taken?

Also, can the OR force the sale of the current house even if it is in negative equity?

Billy_Flint

Forgot to say that as we have effectively chosen this route, does that mean we will get a hard time from the OR? We are not trying to duck our responsibilities, however the future well being and prospects of our kids are more important.

Ineedaname

As I understand it, the OR will take all your rental income so you wouldn't be able to keep up with the mortgage and would probably therefore lose the house anyway. Hopefully someone will be along shortly to advise further.

mel12

Yes I think ineedaname is right. If the house is your family home and its in negative equity you're unlikely to lose it [they have an interest for 2 years 3 months and if its still in negative equity it'll revert back to you automatically].

But if you rent the house out then the OR will take the rental income. Even if you could afford it without the rental income you wouldn't be able to pay both rent on another house and the mortgage (you will be asked to pay any surplus income towards the bankrupcy for 3 years and would only be able to include either the mortgage or the rental as a living expense).

So you either need to stay living in the house. Or give it up -in which case any shortfall when its sold can be included in the bankrupcy. Do also check whether the cost of the rental would be considered excessive. If its only more expensive because of the part of the country and its an appropriate size for your needs and about the average rental cost in that area it should be fine.