What options are there if your IVA is forced to "fail"?

thinkpositive1

I hope someone can help and advise me on this:

I am a year into an IVA and am going through inc and exp details with my IP as part of my annual review.

I am self employed and last year my income was reduced quite sharply. I maintained my IVA payments but missed mortgage payments and have got into arrears. Probably stupidly I was more scared of scuppering my IVA plan than missing some mortgage repayments.

To agree to an "arrears payment plan", my mortgage lender is requesting the amount I pay to my IVA (£300 a month) to be reduced as this is for unsecued debts and should be priority 2 against the mortgage which is a secured debt - and therefore to "free up" some money in my Inc/Exp budget to pay back the arrears in an agreed plan.

I have a court hearing this week - the mortgage lender has been helpful as much as they can be but we have not agreed a repayment plan to payback the m/g arrears in time to waive the court hearing.

I have been seeking advice and the one option that scares me is that the judge my instruct my IVA to "fail" on the basis that dealing with the mortgage arrears should take priority. I have tried to find out what the implications are but don't seem to get a clear answer. If this happens will I be made bankrupt? Will I be asked to declare myself bankrupt? Or will I have to revert to some kind of debt management plan and pay back the FULL amount owed to those creditors in my IVA?

Is there another option? All 3 options going through my mind fill me with dread.

I have been in contact with my IP and mortgage lender and whilst they are both being helpful I am really worried about what might happen. My ideal plan would be that, for example, my IVA is reduced by say £100 a month and this then is the amount I agree as a monthly sum to clear my mortgage arrears. I know I am second guessing what may happen but if my IVA has to be negotiated down to a very low level, I can't see my IVA creditors agreeing to it and woudln't that blow things out of the water?

Sorry to go into detail ....I am just scared.

immoral_angeluk

It's not the judge's decision about whether your IVA fails, that is for your IP. I do agree with your mortgage lender though that the payments to your IVA and 2nd priority. In court, your lender will be likely to use that against any reduced payment arrangement you offer, with them stating that they should be getting more. I am inclined to think that a judge *may* agree with this argument.
Your mortgage is priority. You need to speak to your IP about a variation to your IVA. At the end of the day there are other options for dealing with your non priority debts, whereas if your house is repossessed you potentially face homelessness.

If your IVA fails one of 3 things might happen:
Your IP might decide to make you bankrupt
One of your creditors might decide to make you bankrupt
Your IVA will just be terminated and you'll be left to deal with your creditors in whatever way you wish.

BUT these are less pressing issues right NOW, compared to the imminent risk of losing your home because you've not been able to keep up with your mortgage payments.

milliemonster

What has your IP suggested with respect to what your mortgage provider wants? The judge at the court cannot 'fail' your IVA as you have been making payments that are up to date, the only thing that will make it fail is if you miss 3 consecutive payments, which may happen if the judge decides you have to increase your mortgage payments by the amount your IVA payments are which would then mean you can no longer afford the IVA.

What has your mortgage provider asked for with respect to the arrears?

I am no expert but I would imagine the judge would probably look at some sort of compromise between the two possibly so you can increase your payments to repay the arrears on your mortgage and decrease the IVA payments but still continue it

thinkpositive1

Thanks both for your replies.

Angeluk - I understand what you are saying. I have been speaking to my IP in any case about a variation and they are aware that they it almost certain we'll need to look at a variation to the IVA.

Milliemonster - my IP is aware of my court hearing and the mortgage arrears issue. They are waiting to see the outcome of the court hearing before they go back to my creditors to try and agree a variation. Regarding my mortgage lender - they, over the phone, seem genuinely keen to sort out an arrangement but have not specified how much or over what timescale. They have had my Inc/Exp details and are looking to sort out an arrears repayment plan but have asked me to get my IVA reduced before they can sort it.

I think all parties (me, my mortgage lender and IP) all want to sort a compromise. I guess the court hearing is where we thrash out a plan that works.

The danger is that I am forced to pay a monthly amount to my mortgage arrears that effectively makes what is left for my IVA insufficient to get an agreed variation with creditors.

milliemonster

It sounds to me that all parties are being reasonable so although going to court must be incredibly stressful, I would try to be positive, as you have a formal debt solution in place, your mortgage provider are understandably accepting that they need to try to work this into their arrears plan anyway. If they just demand such an increase that makes your IVA unviable, then this could push you into bankruptcy which means losing the house and they lose a lot of money so they will be looking to avoid that, the judge will know this too.

However, and I mean this in the best possible way, please learn from this, I think on this occasion the judge will come to an agreement that suits all parties, allows your IVA to continue and provides a solution to deal with your arrears, but if you let arrears build up again, I don't think they will give you a second chance and will just put the mortgage company first. If you do struggle again with your IVA, please please speak to your IP after all that is what they are there for, to supervise it and to help you work your way through successfully to the end

thinkpositive1

Thanks Millie. I took your advice the right way and know I have learned from this already.

I am in no doubt too that if/when we agree a payment plan for the mortgage arrears, there will be no further "flexibility" i.e. one more month where I miss a payment on the mortgage or the mortgage arrears payment plan and that will be that.

Yes I am highly stressed and should have contacted my IP last year when income levels were falling and I was going some months without any income coming in juggling like mad. But I am hopeful we can sort out a fresh way forward.

Thank you for the time to reply and help me