IVA and equity release

Custard_Pie

I have an IVA proposal in front of me. The company arranging the IVA state it's touch and go between IVA and bankruptcy.

The crux are two buy-to-let flats I own with a small equity in both. I want to keep them as I don't have a pension.

The IVA proposal almosts doubles towards the end as they want me to either re-mortgage (unlikely) or sell at least one to service the debt.

Is this normal and want are my options?

Foxy-Stoat_3

If the only creditors are the lenders of the BTL flats then they may not agree to the proposal though and make you bankrupt as they will get more of their money back. Have you not got 25% equity in each one?

I would seriously consider selling them and look for another way to finance your retirement as if they make you bankrupt you will loss the lot and it will effect you for years to come.

Anondebtadvisor

Have you spoken to other IPs? not every IVA company will propose an IVA on these terms.

Are HMRC one of your creditors?

UpToMyNeckInIt

Custard_Pie wrote: »

I have an IVA proposal in front of me. The company arranging the IVA state it's touch and go between IVA and bankruptcy.

The crux are two buy-to-let flats I own with a small equity in both. I want to keep them as I don't have a pension.

The IVA proposal almosts doubles towards the end as they want me to either re-mortgage (unlikely) or sell at least one to service the debt.

Is this normal and want are my options?

Hi Custard Pie,

I too am in an IVA, with a buy-to-let property. Like you, it's my pension.

Definitely seek a second opinion. If the flats were in negative equity, I could see some sense in selling them, and including the shortfall in the IVA. However, if the flats have even a small amount of equity, they will make a sound long-term investment, what with the housing market apparently picking up. So hold onto them if you can.

Speaking from experience, and what I have read from IVA companies allowed to post on other forums: Most IVA providers will allow you to keep rental property (or technically speaking, convince the creditors to allow you to), IF you are left with any sort of rental profit after deducting mortgage, service charge, ground rent payments, allowance for repairs etc.

This is because that surplus Monthly income contributes to what you can afford to repay your creditors.

However, if you make a net loss, then the IP may not be able to convince the creditors to allow you to keep the property - for exactly the opposite reason. Particularly as the possibility of equity release in month 54 is still going to be extremely unlikely in most cases.

Google 'Insolvency Practitioner Reviews' - takes you to a nice little comparison site. Speak to 2-3 providers and make a decision on who you think you would be most comfortable working with (very important, as you will not be able to 'switch' companies once the IVA is up and running).

All the best, and let us know how you get on.

longtermplanner

Custard_Pie wrote: »

The crux are two buy-to-let flats I own with a small equity in both. I want to keep them as I don't have a pension.

how much profit are they making? what will happen in a couple of years when mortgage rates go up? what happens if you have a long void period or tenant that has to be evicted or trashes the place? what if the boiler blows up and the guttering blows down?

I don't think people should be landlords if they don't have enough savings to weather the ups and downs of letting. Sure it may make a profit on average over a large number of years, but that doesn't mean that you will be be able to get through the next few years.

The IVA proposal almosts doubles towards the end as they want me to either re-mortgage (unlikely) or sell at least one to service the debt.

Is this normal and want are my options?

An IVA including BTLs is NOT 'normal'. Each case will be individually determined. Your options are to cross your fingers and hope that it all works out or to take a hard look at what can go wrong and decide to walk away from it.

Exactly how much equity is there in these BTLs at the moment? In your own house? And how large are your debts?

Custard_Pie

Yes, HMRC are one of the creditors, although for a small amount, as are the IVA company themselves, who liquidated my company and transferred the debt over to the proposed IVA. The BTL mortgage companies are not part of the creditors and there is a favourable surplus every month due to both being on the standard variable rate. There is a small equity in both properties, hence, why I want to hold onto them. They have given me the option of selling one or both, or how I can keep them, but still pay off a large chunk of what is owed.

Custard_Pie

Also meant to say they have given me two land registry forms to sign. Assume this is to put a covenant against both properties until I pay the extra year after month 54? Is this normal?

Free_Bird

I think you are referring to the RX1 forms? In which case yes, you will have to complete one for each of your properties.

I am also in an IVA, with a let property, and got told by Stepchange that I would have to sell it, but I eventually went with an iva provider who allowed me to keep it.

I remember my IP telling me at the time about another iva client with over 50 let properties !!!

So I agree, you should find an IP who will fight your corner. If you have a decent surplus profit, you should be ok.

Custard_Pie

Free_Bird wrote: »

I think you are referring to the RX1 forms? In which case yes, you will have to complete one for each of your properties.

I am also in an IVA, with a let property, and got told by Stepchange that I would have to sell it, but I eventually went with an iva provider who allowed me to keep it.

I remember my IP telling me at the time about another iva client with over 50 let properties !!!

So I agree, you should find an IP who will fight your corner. If you have a decent surplus profit, you should be ok.

They've been really good I think (hopefully, have nothing to compare to) and advised me to sell one, but at least gave me the option. I'm concerned that it's to late in life to get a decent pension now and wouldn't be able to buy property once I go down the IVA route as credit rating would be destroyed, so am desperate to hold onto them. I know nothing is guaranteed in life, but the surplus to pay at Month 54 is totally covered by the rents coming in currently against the mortgages. Yeah, I know that this may change and there are a hundred possible scenarios that could happen by the time month 54 comes around, but fingers crossed.

A little bird told me to that you can ask for the monthly payment to be reduced and it automatically is upon request by a few %. Hopefully it's true cos I will be asking after a few months.

UpToMyNeckInIt

Not sure I fully understand how your IVA company is one of your creditors. But as they are, all the more reason to seek advice from another IP. Your existing provider may well be advising you with a view to protecting THEIR interests, not yours.

I think however, you have a very compelling argument for wanting to keep these properties, and there is no reason why you should not be able to do so.

I don't know who told you 'you can ask for the monthly payment to be reduced and it automatically is upon request by a few %'. If you are referring to your IVA repayment, then NO, this is not the case.

Your IP usually has the discretion to reduce your IVA repayment by up to 15%, but will normally only apply this after some unforeseen alteration in your financial circumstances. It goes without saying, that this will probably only be applied after a comprehensive review of all your income/outgoings.

You should assume that your IVA repayment is what it is, that you will not be able to readily reduce it, and be comfortable with the proposed repayment accordingly.

A better strategy is to refer to the budget guidelines and maximise your expenditure allowances within reason, to keep your repayment to a minimum from the outset. Have a look:

https://docs.google.com/file/d/0B7LabJy69BP1M0gxeHQ1SDFiN1E/edit?pli=1

(Sorry, have not yet been able to get hold of the latest version that came out in October, but the figures only differ by a couple of quid here and there).

It is well worth a read, as it covers every form of expenditure, right the way down to allowances for hairdressing, kid's school dinners, meals at work, even hobbies etc.

Good luck whatever your plan is.

Custard_Pie

The IP wound up my company for me as HMRC wouldn't agree to a CVA and wanted the directors loan repaid. So they liquidated it for me making the debt owed by me and not the company and included it in the IVA. It's the main creditor.