Iva

I have recently taken out an iva for £18000 for over five yrs paying back in total £6000 A couple of weeks ago my parents have decided to release equity in there house so I can buy my own home. I live in council property so will get it at a very discounted rate. I have also just got married. The money they are releasing will cover the cost of the house straight out. I should have around £7000 left.
I've just been advised I cannot buy the house whilst I have an iva unless I pay it off. I want to offer the £7000 as a one off payment to my creditors so the iva will finish. Can this be done?
I really don't want to tell my parents about my Iva as I'm very ashamed I got myself into that situation. Would the offer finish the iva to let me buy my house or will I still have to wait five yrs until it's up.

Comments

  • sourcrates
    sourcrates Posts: 28,717
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    Hi,

    You need expert advice on this, whose name will the house be in ?

    Because if it’s your name, the creditors will want the seven grand plus you will have to release equity in the house in year 4, no way will they take 7k at such an early stage, especially as you would also have a house.

    Your timing is not great.
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  • It is possible to offer the £7k, it is called a full and final variation. However you will need to come clean to your parents. To offer it your parents will need to put in writing that they are offering you the money to settle your IVA ONLY and for no other pursue so that you can move forward in your life without the constraints and stress of an IVA, especially given that you are now married. Do not mention the intention to buy a house. They will need to prove where the money is coming from for money laundering, do NOT just get them to pay it into your account and think you can then offer it as this is classed as a windfall and due into the IVA in full anyway.

    It is slightly more than your contributions due into the IVA so the p in £ will be maintained or even slightly higher that may encourage them to accept it. However, the creditors are able to reject the offer.

    In terms of the house, you can NOT proceed with this until your IVA is completed and you have received your completion certificate (which can take several months after the final payment) as you are bound by the terms of the IVA until you get this. If you buy the house whilst on the IVA it becomes an asset of the IVA and must be declared, which then you would be expected to try to get a mortgage on to repay your debts in full. This is messy and not in your best interest, it also is not the purpose of this gift from your parents.

    My advice would be to come clean about your debts, get your parents help to settle this first, and then in approx 1 year time when that is all tied up they could investigate you buying your council house.
  • National_Debtline
    National_Debtline Posts: 7,998
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    Organisation Representative
    Hi Missymel and welcome to MSE,


    Unfortunately, I agree this is a badly timed scenario and you need to be very careful. First of all, if your parents transfer any cash directly to you/ your account, this could be covered under the 'windfall' clause of the IVA and there is risk that they will be able to take a lot more than £7000 (they could take enough to satisfy the debts in full + the IVA fees).


    If your parents are going to buy the property outright, and it will be in their name, then it is not your assets, so no equity release clause should apply, and you will then rent from your parents instead of the council. If they choose to give you £7000 of cash, then, again, you need to check the agreement carefully as that could be taken, plus you need to maintain the payments of the IVA; however you may be able to discuss switching to a lump sum IVA.


    You may need to wait until the IVA is completed before entering into this transaction, but I think you will benefit from some legal advice, and potentially need to talk to your parents about the situation so they don't do anything as a 'surprise' that could cause issues.


    Laura
    @natdebtline
    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
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