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IVA and Correct Credit Marks

edited 30 November -1 at 1:00AM in IVA & DRO
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  • Jam99Jam99 Forumite
    8 posts
    Hi PrettyKittyKat,
    It has been a minefield and I really do just want the best advice all round and want to question everything including the correct steps. So to try and answer you’re valid questions:
    “Just to check - have you been made aware that it is not a given that the creditors will accept you getting a second charge on your property to introduce the money?”
    No this has not been mentioned by anyone I have been in contact with.
    However, we have looked at the numbers and it is only because we have negotiated substantial discounts with secured creditors that the unsecured IVA creditors would get there full balance early which is equivalent to going full term. If the IVA creditors don’t accept, then the significant discounted deal with secured creditors is off the table. Equity then goes back to next to nothing. Working on a 5 year forecast with a property growth of around 3%. There would be (taking into account 15% my share and the 5K rule) no equity to introduce. Plus the fact that secured creditors would want there debt settled prior to IVA and put the blockers on Aperture if Aperture tried to enforce equity release. The secured creditors would simply refuse sit back and let the payments continue until the 10 year term has expired and paid back in full.

    “Have you completed the application to ensure that the creditor would definitely give you the funds?”
    The application has not been progressed due to the blooming credit status marks as stated previously. Monies have been offered in writing in principle. That’s why I need the best advice to get these credit marks & status corrected to Default. As the lender has confirmed the application would go through if the defaults were more than 12 months old and therefore should have been marked as D from date of IVA approval.

    “Has your IVA company drafted the variation proposal and send it to you for approval yet?”
    No I have not asked this to be progressed yet until we are confident that the credit status has been corrected to a status that will satisfy the lender and give confidence to approach Aperture to progress the draft for the lump variation offer.

    “Have you completed the application to ensure that the creditor would definitely give you the funds?”
    No I have not asked this to be progressed yet until we are confident that the credit status has been corrected to a status that will satisfy the lender and give confidence that the application will be approved.

    “How soon after the variation is accepted will they then send the money? “
    Lender has confirmed maximum of 5 working days. They confirmed that payments will be made directly to the 2 secured creditors and to Aperture.

    Initial timeline from Aperture in writing was stated back in “April” was 6 weeks waiting time for variations to be drafted.
    I have not asked Apeture to commence drafting yet. Then unsecured creditors are allowed up to 28 days to vote on the variation. So Aperture summarised a 3 months maximum timeline from draft to latest vote date.

    What’s you’re thoughts on the above?

    Many thanks again for yours valued comments and questions. Appreciated.
    Thanks:)
  • PrettyKittyKatPrettyKittyKat Forumite
    1.3K posts
    ✭✭✭
    That timeline sounds reasonable.

    I am surprised no one has mentioned that the variation can be rejected - this is key to know and understand. They can also accept but with modifications (like when you proposed your IVA).

    Be careful with the term 'full balance.' This means their full debt back, but from what you have said I think you mean that amount (p in the £) they were expecting to receive from the IVA if it completed as expected so they would still be writing off debt- please correct me if I am wrong as this does change things if they are getting 100p in the £.

    One thing your creditors may query....
    - Is the payment to the second charge going to be less than the payment to the two secured creditors given that they are given you a substantial discount to end early?
    - If yes, then get the second charge to pay off the secured creditors with the reduced settlement figures (and not the IVA) then increase your IVA payments accordingly and continue the IVA as expected with equity assessment in month 54.
    - If the secured creditors are offering reduced settlement figures now then it is possible they will also offer it in month 54 so the increased equity you are stating is created by them agreeing to a settlement figure would also be created then - therefore no incentive to settle early.
    - Change the equity assessment to now rather than month 54 so you can take advantage of this situation but rather than settle the IVA introduce this lump sum figure as the equity from your property and continue your payments as normal.

    You will need to be very careful that the reasons for accepting the f&f are clear and convincing and that it proves that they are better off doing this now than allowing the IVA to continue as normal. Particularly my last point. Do you have reduced affordability that means you can't afford to continue your IVA payments now which is why you have looked into this?
  • Jam99Jam99 Forumite
    8 posts
    Hi thanks for the detailed advice really appreciated.
    Yes settlement “p in the £” and not 100p.
    Potential new monthly payment to new 2nd charge will be about £50 less than the monthly payment total to the 2 current secured creditors.
    Strategy and end goal from the outset looking into this a couple of months ago. Was to:
    1. Achieve just one 2nd charge at similar £ payment per month (set up to same term as mortgage roughly 20 years to keep payments as low as possible).
    2. Settle and IVA early which would mean £650/month back in to family living.

    The IP did confirm on email that an offer wouldn’t be put forward if it seemed unreasonable and it would only be put forward if the offer would be deemed acceptable and advised that the offer would need to be at least equal to the full term and consideration to the 5K rule.
    So the is have us confidence to to enter negotiations with secured creditors.

    Our thoughts for the incentive for unsecured creditors to end early is that they get there balance in full which would be the same amount as if the IVA ran to full term.
    Yes the equity is available now due to the secured creditors acceptance based on discounted lump sums to be paid in short order. Potentially they could accept a discounted offer in month 54. However, this would only be an option if I approached them under my own initiative and not raised by the IP/enforce me to negotiate discounted lumps on month 54 so to release potential equity as per the “equity release clause”.
    Assuming that the IP cannot enforce me to approach the secured creditors on month 54?

    Payments are manageable, but 650/month would enable me to contribute properly to the household and family living year on year (not just existing). Hope you understand where I am coming from?

    Please forward any thoughts and potential on the above.

    Thanks :)
  • PrettyKittyKatPrettyKittyKat Forumite
    1.3K posts
    ✭✭✭
    Yes i understand where you are coming.

    Putting a creditors 'hat' on so to speak I would say that you should pay off your secured creditors with the second charge and increase your IVA payment by 50% of the reduction in payment (which if you aren't lending as much as no longer settling the IVA will likely be more than £50 saving). The IP would likely give permission for to to do this as it is to the benefit of your creditors. Then review equity in month 54, of which there will now likely be equity that can be released as your second charge amount owed is less than the previous two secured creditors.

    Your variation offer will need to be very convincing so be careful to check what the IP has written when it is send for approval. What you are saying could be interpreted as you don't want to have to pay a monthly payment each month to cover your debts so that you have more money available (fair enough, don't we all!) but you also don't want to pay your creditors back in full (as you are not offering 100p in the £). You need to be very careful as to how it is worded. I would personally offer above the £ in the P to encourage them to accept, as they are also forfeiting any chance of additional monies/income increased over the next 5 years.

    Creditors can vote in lots of different ways and there were times I was very surprised by what was accepted and rejected, but ensure you are cautious that it isn't a given that it will be accepted.

    It would be really interesting to know how this goes so please keep us updated on your progress. Good luck!
  • Jam99Jam99 Forumite
    8 posts
    Thanks PrettyKittyKat.
    Not sure that I get the idea in theory relating to borrowing just the amount required via 2nd charge to consolidate the 2 secured creditors. And still have the IVA to run to term and bearing mind come month 54 equity will still be looked to be released (which there would definitely be more than 5K even when considering retaining 15% equity, as borrowing a lot less. Which would mean another consolidation situation to the now old 2nd charge to borrow more again wrapped up in a new 2nd charge. When it’s potentially possible do that now.
    The idea doesn’t seem to add up. Unless I am completely missing something? Would you kindly demonstrate you’re theory with a calculation detailing monthly payments example(s) using fictitious figures just to help me understand you’re theory please?

    Also to note that my credit status and monthly marks have now been corrected to Default from the date of when the IVA was approved! Yea! Result!
    I also managed to get an email reply from Aperture confirming ok to get 2nd charge equity release (all there bothered about is confirmation of the lender and total funds offered that is enough to be put forward) Also Aperture confirmed the total amount that would be required to put to the creditors in a lump sum variation settlement. Aperture confirmed they would send me a draft for my review/approval prior to proceeding to formal offer.
    The calculated amount required to be put forward is the balance of the term plus the total that 12 additional payments would equate to. As you would expect same principle come month 54 if equity release wasn’t possible/5K rule.
    I have two lenders looking at this,
    one can only off the amount equal to the IVA balance outstanding including settling the 2 secured creditors (so can’t offer the extra that the 12 additional payments totals to). If they would let the smallest of secured charge lender (only £100/month) sit behind them as 3rd charge and not be settled then there would be enough from the new 2nd charge lender to include the sum of the 12 additional payments. However, the lending is conditional to being the only other charge additional to the mortgage lender. So I don’t think this lender is not an option. Ideas??
    I am waiting for the other lender to come back to me.
    Thoughts and any advice appreciated.
    Thanks again for your time in advance.
  • Jam99Jam99 Forumite
    8 posts
    Hi PrettyKittyKat.
    Not sure that I get the idea in theory relating to borrowing just the amount required via 2nd charge to consolidate the 2 secured creditors. And still have the IVA to run to term and bearing mind come month 54 equity will still be looked to be released (which there would definitely be more than 5K even when considering retaining 15% equity, as borrowing a lot less. Which would mean another consolidation situation to the now old 2nd charge to borrow more again wrapped up in a new 2nd charge. When it’s potentially possible do that now.
    The idea doesn’t seem to add up. Unless I am completely missing something? Would you kindly demonstrate you’re theory with a calculation detailing monthly payments example(s) using fictitious figures just to help me understand you’re theory please?
    Thanks and I appreciate your valued comments.
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