IVA help

Amjaco

I am about to enter an IVA and would welcome any advice. I owe approx 30k and have been told my payments will be £90 a month which is all I can afford but that means I will hardly be paying anything back.
The paperwork says I need to remortgage in month 54 and has some examples of what I may be to remortgage, one says 25K but it also says I wouldn't have to pay more than 50% of my monthly payments.
This seems to contradict each other as half my payment is £45 and I will be 51 so will only have 16 years before pension. I've worked out that would mean I could remortgage for 8k but on my paperwork the figures are 25K.
I understand that it's my debt so I should pay it, I just don't want to totally mess up and end up with debt until I retire.
Any advice would be welcome.
Thanks.

National_Debtline

Hi Amjaco,

You are right to try and check things before starting an IVA in order to make sure it is the right option for you. Within IVA’s there is something called an ‘Equity Release Clause’ this is the section that can ask you to take out a secured loan to try and end the IVA early, rather than making payments for the full term (normally 60 months – but this can vary).

If you cannot obtain a secured loan, then your IVA should continue until the end of the term and any remaining debt would be written off, if all payments have been made successfully. What you should do is check whether or not your IVA provider follows the IVA protocol? This is a set of guidelines that IVA companies are not required to follow (it is elective) and it gives the individual more protection. For example, one part of the IVA protocol states that you would not be asked to take out a secured loan for more than 85% of the equity in your property and this should not cost you more than 50% of your monthly mortgage payments at the time. Also, the secured loan should finish by the end of your existing mortgage, or state retirement age (whichever is the later). If you cannot find a secured loan that meets these rules you would not have one and you would continue with the monthly payments of the IVA instead.

If your IVA provider does not follow the IVA protocol then you will only have the rules that are outlined within your IVA agreement – if these are unclear you need to check with them before carrying on. Once you have agreed/signed into the IVA (normally around the time of the creditors meeting) you will be locked in. You must then maintain the payments and other conditions of the IVA or potentially risk bankruptcy. In bankruptcy all assets are seized and sold and there could be a risk of losing your home. We have a factsheet about IVA’s that may help you - https://www.nationaldebtline.org/EW/factsheets/Pages/26 EW Individual voluntary arrangements (IVAs)/Default.aspx

Laura
@natdebtline

mwarby

Not sure I want to question national debtline, but the explanation given isn't how understand it

The IVA term is normally 5 years (60 months), towards the end of the 5th year the equity release kicks in. Unless you get a big PPI payout or windfall it's uncommon to finish the IVA before then (as you'd have to have paid all debts, all fees and possibly statutory interest)

If at this point there is still debt to be repaid equity then has to be released or your IVA is extended for another year. Its not uncommon to have equity but be unable to release it (as no one will loan it to you). Ideally you want to avoid secured loans as they can be more expensive than the extra year

In short it's 5 years + equity release, or 6 years

toddle2u

It is my view also that mwarby's response is more accurate.

National_Debtline

Hi both,

You’re quite right that IVA payments are likely to continue for an additional year where equity release hasn’t been possible. Sorry for not making this clearer above and thanks for highlighting it.


Laura
@natdebtline

Amjaco

My biggest concern is that they have valued my house at what I think is rather low, I understand that they use a figure that would mean a quick sale but realistically it's going to be worth more in 5 years than they have predicted, also they haven't reduced the mortgage by 5 years of payments which could equate to 15K. This means I could have 60K equity in the house. How much of this can they take?
I am trying to get a better job as I work for a small company, larger companies doing the same are paying 10K more basic and commission. I know I would need to pay 50% of any commission and my monthly payments would go up but what about the lump sum at the end.
If I can remortgage whilst in an IVA would I be better to get another job, forget the IVA and remortgage after qualifying period and clear debts that way.

mwarby

They can only take what someone is prepared to lend, up to the limits in your proposal.

What matters is not the present value but
- value in 5 years
- your circumstances
- state of secured lending market

all of the above will have an impact on what can be released, as I understand it recently many people have found that they have equity but nobody is prepared to lend.

You will find once in an IVA remortgaging will be difficult, lenderes view it pretty much as bankruptcy, your credit file will also be full of unsettled defaults, there are countless threads about mortgages being denied for small value defaults like mobile phone contracts. You might find a lender, but unlikley to get market leasing rates

mwarby

of course one risk is, they find(or partner with) a lender who is prepared to lend but at very unfavorable rates