IVA and equity in house

thejames

Hi everyone,

After a bit of advice if anyone can help out.

My wife and I are currently in a joint IVA which we started in June 2012. Since August 2013 we have not paid anything to the IVA and have been speaking to them regarding lowering the payments due to the fact we completely got our income and expenditure wrong. For whatever reasons, this is still ongoing but is hopefully near a decision as to what a new payment may be.

The advice I need really, is the fact that we have near on £100000 equity in our house. By the sounds of it our IVA is likely to be extended if the payment is reduced, so we will have another 5/6 years of making payments.

Should we consider selling the house and settling the IVA sooner rather than later? And
Will the majority of that £100000 get swallowed up by the IVA company or are they likely to accept a much smaller sum?

Our initial payment was £750 a month, which over the 5 year period would be £45000. We have already paid back £9750 which would leave £35250 of the IVA. I am only assuming these calculations would be a basic kind of what they would use.

Please any advice would be much appreciated

thejames

Sorry, forgot to add that our initial debt was approximately £90000.

UpToMyNeckInIt

Difficult to advise without more information. How much is your mortgage vs what your house is worth?

At this point I assume that £100K equity, means your mortgage is relatively small, and less than 85%LTV. If so, and it is deemed that £750pcm IVA repayment is 'affordable', then it is quite likely that you will be required to 'attempt' equity release via remortgage, as half your IVA repayment is £375. Despite this, the chances of remortgaging are about nil. There are very few products available to IVA customers. I am only aware of one: http://www.magellanhomeloans.co.uk/media/6336/Magellan%20Homeloans%20Product%20Guide%20August%202013.pdf

...So unless increasing your current mortgage payment from your current APR, to Magellan Home's 8%ish releases more than £5,000 AND results in an increased mortgage payment of LESS THAN £375, you should be OK.

But what is the status of your IVA? Having missed a Year's worth of payments, my guess is that your IVA is at imminent risk of termination.

If you are still negotiating with your IVA firm over income/expenditure, it might help to check out the Stepchange guidelines here:

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.

If you are careful to correctly record your income and expenditure, your IVA payment should be set at quite an affordable level.

If you sell up, you will be left I guess with enough to set you up in suitable rented accommodation, but after that, all the rest will be swallowed up into the IVA.

If you can re-negotiate payments and stick with it, that should be your best option.

Good luck.

thejames

Thanks for the reply

Our mortgage is worth £215000 and our house is worth just short of £315000. We have a 100% mortgage and are currently only paying an interest only mortgage. The value of our mortgage is still £215000.

We are hoping to get our payment down to about £330 but was just looking into getting rid of the IVA completely with the sale of our house. However, I don't want the majority of the equity taken, I was hoping to make some kind of offer if that is possible.

The IVA company haven't mentioned any termination of the IVA, but if the new payment is rejected then we are no longer in a position to make the £750 payment so would have to look at other options!

Thanks again

dapast

I don't know a lot but have a possible idea if someone with more knowledge could check and see it makes sense and don't break the law!

When I was in an iva we struggled after my wife had our baby to make any payments, at that point we had been paying in for 3.5 years, they asked if a friend or family member could lend us money to make a settlement offer, at the time we didn't have anyone so they took funds paid as final settlement.

My idea is, ask them what would be an acceptable settlement figure, maybe £25000?? If they go for it could you sell your house to one of these 'we buy any home' companies for £20-25000 less than market value, Pay the iva their £25000 and still have around £50000 left, you would still technically only be down the original £50000 your iva was going to cost?!?!

Is that doable? I don't know the legality or feasibility of it, just an idea.

dapast

Just realised that we buy any home is actually a company, i'm not plugging them, any home buying company will do!!

UpToMyNeckInIt

... That's actually a very clever suggestion, and would at least leave the OP with enough possibly for another deposit.

However, the IP may want to see evidence that this friend already has the money, will usually want it up front from their bank account and in time for the creditors meeting.

So might be an option, but only if the OP knows someone with a significant chunk of change sloshing around to make a f&f offer.

The cheapest option though is to properly consider your income and expenditure and renegotiate the iva repayment. Not sure how feasable that is however.

longtermplanner

The "we buy any house" type places usually pay 20% or more less than the market price. Why on earth would you use them rather than sell the house for a market price?

The proposal to offer 25k to settle the IVA is highly unlikely to work because your IP will know that you have a lot of equity in the house.

UpToMyNeckInIt

longtermplanner wrote: »

The "we buy any house" type places usually pay 20% or more less than the market price. Why on earth would you use them rather than sell the house for a market price?

The proposal to offer 25k to settle the IVA is highly unlikely to work because your IP will know that you have a lot of equity in the house.

...a very fair point, I agree.

But it may be more attractive than allowing the IVA to fail. Indeed, the following comment was placed by an IVA Company rep. on another forum:

'You can propose a full and final settlement based on some of the sale proceeds. You could retain enough for rent in advance, deposits on utilities, decoration etc and creditors could have the balance. This is quite common and better than failing the IVA as this could lead to bankruptcy whereby you would have nothing left.'