I'm a little confused about the logic behind the negotiations going on between my mortgage lender and my Insolvency Practitioner.
I have a joint loan taken out with my partner of about £28,000 that we got with our mortgage.
My other debts are all credit cards in my sole name, the biggest balance being £15,000. My total debt is around £60,000 and we have around £20,000 equity in the property, but this is decreasing daily and we would have to pay charges as we are still tied into the mortgage.
The proposed IVA is in my sole name and so far our mortgage lender has refused to agree to the IVA even though we have agreed that my partner will make full repayments on the joint loan and this is budgeted for in our income/expenditure.
The lender instead has asked to stand outside of the IVA. My understanding is that by standing outside of the IVA very little will change as we will still have to pay them back, something we have agreed to do anyway plus there will be more money left in the IVA for our other creditors.
Our practitioner has told us that this is something that the other lenders will not agree to and therefore not worth even trying to put through as a proposal. However I'm confused at the logic of the other creditors refusing on this basis as the original IVA was pretty much on this basis anyway and this way the lender who seems to want to block the IVA would be removed from the voting.
Can anyone explain tell me why this is such a large obstacle?
Its probably best to wait for one of the professional experts. I would guess that the standing outside loan will get back 100 per cent and the other will have a write off and they are not happy about it.
Anyway, welcome to the forum. Hang in there an answer is sure to come.
Even while I am in the IVA my wife will be paying 100% of the monthly payment but the lender will not have this and want to stand outside.
The Insolvency Practitioner has told me that it's highly unlikely that the other creditors will allow them to stand outside even though, in effect the mortgage lenders unsecured loan has been budgeted to be paid out of my monthly income before my IVA contributions.
The way I see it is that the mortgage lender has the lions share of the vote and is likely o just obstruct the whole thing unless they get their way. If they stand outside it's just the big credit card that can block it on their own.
My guess is that your IP is doing his/her best to negociate with the creditor, its in their interests too to get this agreed. They wouldnt have put it forward if it was a hopeless case.
Would I be right in saying you have a Northern Rock Together mortgage?
The mortgage lender concerned will take the view that you would be legally discharged from further responsibility for your unsecured debt upon the completion of an IVA. That means they will only be able to hold your partner responsible for repayments of the unsecured loan. From their perspective they may consider that this weakens their ability to collect the remaining balance as their "human" security for repayment has weakened.
If it is Northern Rock you will find many others on this site who have been similarly restricted from entering into an IVA due to their acceptance criteria.
Other creditors are unlikely to want to see their dividend from an IVA reduced by full payment continuing to being made on an unsecured loan to the mortgage lender. I think that is why you have been advised that they are unlikely to accept this sitting outside of the IVA.
Alternatives that you might consider include bankruptcy or a debt management plan. If house prices continue to decline you might even find yourself in a position in which you could go bankrupt and retain your home.
Andrew Graveson
Bright Oak Ltd
UK Debt Management Company
Website: www.brightoak.co.uk
I cannot see a problem in an IVA being put forward in your name only, with the NR loan being excluded on the basis that your partner is going to maintain contractual payments. This would have to be done with the full knowledge of the other creditors - who actually benefit from this as the money you pay in is not being shared with the joint creditor.
The only risk is that if your partner defaults on her payments, then the loan then becomes a creditor of the IVA again - but this does not make the situation any worse that if they had agreed to rank in the first place.
This may not be a strictly technial answer, but is is a practical way forward that I would be prepared to try. Other IPs may well have different views.
Thanks everyone for the responses. Spoke to my Insolvency Practitioner today and found out that Northern Rock (well spotted Andrew) had relented and agreed to the IVA. It seems my Insolvency Practitioner did not want to try and exclude Northern Rock because 2 of my other creditors were represented by a company called Ticks(?) who have a policy never to allow companies to be left out of the IVA.
It all looks as though it is going to work out though as Northern Rock have most of the vote.
