Advice with IVA

aliosmond · 21 September 2018 at 12:24PM

Morning all,
Some help for a friend who is trying to manage under the cloud of being tied down by and IVA which was agreed October 2017. Highlights are...
Debt was made up from circa 43k taxes plus all other debt i.e. Credit cards overdraft etc .
The repayment plan is over 6 year paying £847 per month .
Conditional on selling 3 x buy to let property's .
One sold @ 40k loss the other 2 not yet sold but expected to another 70 to 80k loss
on the remaining two .
He is trying to establish whether the losses he has incurred as a result of selling the houses can be off-set against the money he owes as per the IVA (a long shot I know) and/or whether he can carry forward the losses against any earnings that he makes in the future. Given that he is earning a very small amount its likely that he will need to carry this forward for years. Lastly, he is desperate to get back on his feet and work again. What are his option with respect to paying off the IVA (via a settlement figure I believe) and do you guys think this is a good idea. Many thanks all

National_Debtline · 21 September 2018 at 1:25PM

Hi aliosmond and welcome to MSE,

Your friend would need to check the terms and conditions of the IVA very carefully, but I would expect the reason the IVA company wanted the buy to let properties to be sold was because they thought there was equity in them; resulting in an asset/ windfall which they could take towards the IVA. As they have sold at a loss, the shortfall is a debt that has accrued after the IVA began, which means they are very unlikely to be able to be included in the IVA.

I would suggest your friend speaks to Business Debtline - 0800 197 6026 because there were/ are business concepts that need to be considered in this situation and sadly it would seem your friend will repay approximately £61,000 through the IVA and then owe a further £110,000 - £120,000 in shortfalls. Depending on what other assets they may have, it may be the case that bankruptcy could be a more suitable solution overall?

Laura
@natdebtline

DorisTrousers · 21 September 2018 at 2:30PM

Hi,

Have to say that I don't agree with the above at all I'm afraid. If the properties had to be sold, it would have been the creditors who insisted on such a modification, rather that the I.P. firm. With negative equity of that amount, there is little realistic chance of them putting a modification of that nature in unless they were a hindrance to the monthly payment to the IVA, i.e. possibly unoccupied with a mortgage on, or with mortgage payments that were higher than rent received.

A shortfall in a mortgage during the IVA is anticipated and the mortgage company is a creditor at the start, albeit they will rely on the security of the property or properties in question rather than join the IVA at the outset. As such, the shortfalls CAN and SHOULD be included.

Get your friend to speak to the I.P. (personally, if possible). This is not a common occurence, but neither is it by any means unique.

aliosmond · 21 September 2018 at 4:36PM

Thank you both so much for replying. I will pass on the Business debt line number as suggested. I now understand the undying rationale for making him put the properties on the market, namely that they may prove burdensome and affect his ability to may his IVA agreed lumps monthly.
Laura; I'm not sure I understand your comment 'sadly it would seem your friend will repay approximately £61,000 through the IVA and then owe a further £110,000 - £120,000 in shortfalls'. I am new to IVAs but my understanding is that the c40K amount is what was agreed by the creditors as a cash payout by way of instalments. I'm not sure how you arrived at the higher figures but, again, I'm very new to this.
The IVA is very much a noose around his neck and he is desperate to go out and work to build himself up again, but in reality everything he earns will go back into the IVA, which I know is morally fair but very demoralising too. I have done a bit of homework and I see that he can approach his creditors again and try to agree a final settlement figure and that this is likely to be roughly what he owes i.e. no discount is given for early payment as the discount has already been applied in condensing the debts. I wonder would this free his record and allow him to function again in a world where he can get some credit? Any guidance is hugely appreciated, cheers Ali

PrettyKittyKat · 21 September 2018 at 5:57PM

72 months x £847 monthly payment = £60,984 paid into the IVA hence Laura's comment. I am unsure where you have got your c40k figure from.

How if your friend proposing to find a figure of approx 50k from to offer as a full and final settlement?

I agree with Doris that it seems strange the property were requested to be sold at such a loss. The IVA proposal would have included a valuation for each property - did these show equity? If they showed negative equity and it was proposed or modified to say they were to be sold what did the IP say was the plan with the shortfall?

What is the total debts on the IVA? Not the amount agreed to be repaid but the total debts? The reason I am asking is that including these shortfalls will likely means the debts are over 110% of the debts originally expected owed so the dividend will be heavily affected and a variation of the terms may be required.

DannyPearce90 · 13 January 2019 at 10:55AM

Your friend really needs to speak to the IP.

Which IP did they use?

Advice with IVA

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