After completing our IVA we have been told that we have to take out a loan

[Michael Peoples]

I agree that everything should be made clear to clients and I also agree that the property should not be put at risk. However, people are entering IVAs and equity is being offered, yet, it appears some do not intend to release it and expect a twelve month extension.

This is a dangerous assumption as only a few years ago they could have obtained a remortgage and this could happen again. Furthermore creditors are going to get fed up with getting an extra 12 payments of £200 when there is £50,000 equity in the property. If the client genuinely cannot obtain finance because of age, income and affordability that is fine, but to use the wording to duck the equity release will mean creditors will tighten up their wording.

[Goosed]

I agree with you Pennyless,
If I was told, before entering my IVA, that the equity release clause was part of my IVA or 12 month extension - "but, sorry if you can`t get a remortgage, and at that time it suits us, you will have to take out a loan at ridiculous interest rates over a period of many years to meet the equity release requirement", I would DEFINATELY have chosen bankruptcy.

I completely accept full responsibilty for my debts, but I thought the idea of an IVA was to repay as much of that debt back as possible over a reasonable, agreed timescale and then be clear of debt...not to be forced into many years of more high interest debt all over again...and no doubt the beneficiaries of these prospective `loans` would be linked to the IVA companies steering you in their direction, or the IVA companies would be the recipients of `commission`

This is a very dark and dangerous road to go down, Michael mentions that it`s wrong to assume that six year IVA`s are automatic...Why??? If that`s what you`ve been sold and agreed to when you signed your proposal, and it`s not your fault you can`t get a remortgage, then why is it wrong?

Most of our creditors have had many years of repayments on our debts off us at ever increasing interest rates, rates that they increased to exorbitant apr`s at times when they knew you could only repay the minimum so you only ended up paying the interest each month.
I reckon that most creditors rarely lose out when the whole financial history with the particular debtor in the IVA is taken into consideration.

It would seem that the IVA is now in danger of becoming a money making vehicle for some via after term loans, rather than a debt solution.

And Michael, why do you assume that everyone is paying £200 per month into their IVA??? I can only speak for Myself, but I am paying over four times that amount and I have been paying way,way over what creditors agreed to accept for well over half of my IVA because an expected drop in income hasn`t YET materialised.

[herbekj]

I would have to agree that Creditor demands in IVAs seem to be starting to take advantage of the fact that many people who enter IVAs have made that choice becuase they want to pay back more than bankruptcy.

All these things pushing IVAs into 6/7 years and now loans will make many people think again. My house was explicitly excluded in my IVA, no equity clauses etc, the IVA was for 60 months and it finished after 60 months (only clause was min 55p in £1 had to be met). I considered my IVA terms as very fair and acceptable to both sides. Creditors received an additional 43p per £1 over bankruptcy where they may have achieved just 12p in the £1.

The terms that I see people facing now I personally don't think I would have accepted.

[Pennyless]

Michael I dont think its a case (or at least in the majority) that individuals dont want to release equity, after all its clearly stipulated in some "proposals". My main gripe is that where IVA companies begin/are to affiliate themselves with "loan" companies, offering loans where other reputable lenders may not or remortgages refused they are treading a fine line.

These type of loans used to happen in the past......at that time they were called "consolidation" loans and are excatly why some of us managed to obtain so much credit. Loans - IVA - Loans appears like a full circle im afraid......and in many cases I suspect it will not be to the benefit of the debtor or for that matter the economy as a whole.

If Barclays/Halifax, Co-Op or any other "reputable" lender (used in the broadest of terms in the current climate lol) refuse a remortgage then its for good reason...they dont trust the ability of the debtor to repay, then it seems strange that other Companies would be willing to make what effectively is a toxic loan.

[Michael Peoples]

'If Barclays/Halifax, Co-Op or any other "reputable" lender (used in the broadest of terms in the current climate lol) refuse a remortgage then its for good reason...they dont trust the ability of the debtor to repay, then it seems strange that other Companies would be willing to make what effectively is a toxic loan'.

I accept what you say Pennyless except the above statement. If I were a lender I would be looking at people in IVAs as safer bets than first time buyers. They have maintained an arrangement with creditors for 5 years, have no other debts and now seek to borrow money with a repayment of less than half their IVA payment. To me that is good lending and often people in IVAs are actually penalised whereas in my opinion people rarely make the same mistake twice.

During the boom years when you got a remortgage provided you had equity and a pulse, I spoke to lenders who advised that IVA clients had less arrears than mainstream ones. The problems came from self certification IVAs and lending to people who never paid a thing rather than providing finance to people who had previous mistakes or misfortunes and were trying to restart their lives.

[Michael Peoples]

Goosed. I am not assuming that everyone is paying £200 per month and we as a firm do not have a loan company nor do we receive commission. However, you mentioned that you were 'sold' an IVA with the extension effectively guaranteed. I am saying that remortgages may become available again and clients will have to do what they have agreed to and the extension is a concession not an option.

I tell all my clients that they may have to remortgage because it is a possibility in the future no matter how remote. We advise them how much this could be 'if' they can do it but we do not guarantee a twelve month extension. That would be foolish and dangerous.

If there is a product available that allows clients to raise some equity at reasonable rates well within affordability, I see no problem with it. Where I see a danger is that creditors will change 'remortgage' to 'release of equity' and this could cause problems down the line. I know for a fact that the debt purchasers and the creditors are looking at equity release versus extension and are minded to reject if the client has not at least tried to raise some finance.

My final point relates to fees. IP firms are now usually paid as a percentage of realisations so it is in their interest for the equity to be raised in year 5 rather than an extension as they get more money for less work. This could influence some IPs.

[Goosed]

Michael,
I didn`t mention anywhere that I was `sold` my IVA, I used the term in the context that if someone had agreed to their IVA accepting the equity release clause or if not possible, a twelve month extension, then why would it be wrong for that person to expect a `six year maximum IVA`.
Nor did I suggest that you as a firm has a loan company or receives commission.

I signed my proposal fully expecting to have to release equity into my IVA via a remortgage in the final year, and I obviously have no problem with that.
I am simply stating that it would be completely wrong and would contradict the purpose of an IVA to force a debtor into a very expensive, very lengthy loan after five years of an IVA, when they were not under any impression it would happen.

[Michael Peoples]

My point is that a loan may actually be cheaper than a remortgage. If you have a mortgage of £100,000 at 3% and need to raise £10,000 equity you will then have to remortgage to £110,000 at adverse rates. To ensure affordability it is likely that your mortgage term will be extended to retirement age and you will have lost your excellent tracker deal. However, a secured loan of £10,000 would work out overall cheaper and in a couple of years the entire mortgage and secured loan can be shipped to a high street lender at normal rates.

I think the fear of the secured loan is missing the point and it could well be better advice to get a secured loan rather than a remortgage.

[lem]

not necessarily Michael, as in a couple of years you may find your house has lost value yet you still have a £100k mortgage and a £10k secured loan aswell and find you can't remortgage as your LTV is now too high so you are stuck with debt again, albeit in a secured form.

[Michael Peoples]

True but as the loan to value for the secured loan cannot exceed 75% there would have to be another severe drop in property values. Secondly, the monthly payments on a high street mortgage of £100k and a secured loan of £10k would still be lower than a £110k mortgage at adverse rates. This you would have had to take out to complete the IVA anyway.

[PELDER]

It seems to me lately that people still in an IVA are faced with more hurdles to jump than there were when I entered mine 5 years ago, luckily for me I was able to get out of it with a F&F at the halfway point, and everything has been hunky dory ever since! Now, I find the suggestion that a person is effectively ordered to take out a loan to meet the equity release requirement defeats the whole concept of the IVA which from the outset is advertised in all the newspapers and TV commercials by the large (and small!)companies that propagate the IVA as being a great debt repayment vehicle of paying back only what you can afford over 5 years – now it is 6,7 or more years for some people who were not properly informed from the start, or had this bombshell just dropped on them at some point during the term of their IVA.
Which of these ‘reputable’ financial institutions would give anybody in an IVA a loan of say 10 grand anyway ? Not even a loan shark – for sure!
Bankruptcy perhaps isn’t such a bitter pill to swallow given these terms, and I have yet to see anybody who wants to go bankrupt on this forum re-directed by anybody to this forums’ sister site at www.bankruptcyhelp.org.uk where they may get a different handle on bankruptcy from some of the experts who post on there.
But as always I will stand corrected !
Just my opinion folks..........

[Pennyless]

My proposal states LTV of 85% for any future remortgage to fulfil IVA criteria.

[Goosed]

Same as you pennyless...or twelve additional monthly contributions if I am unable to remortgage.

[Pennyless]

I think getting back to the OP's point, for whatever reason they failed to comply with their "proposal" and thats why they are being pushed down the "loan" line.

In their position I'd rather take the loan as offered by their Company rather than fail my IVA, but hopefully I wont put myself in that position.

[Goosed]

In the event of a debtor not being able to remortgage,surely a better option than an after IVA term, interest bearing loan to meet equity release requirements would be an IVA contribution extension period (whether that be 1,2 or 3 years) negotiated by the overseeing IP???

A fair and economically viable solution to all parties???