Could a Relative buy my home?

[janot]

We have been advised to sell our home as we currently pay way over 40% of our income towards the mortgage and the Picture loan we have secured on it. Problem is that the loan company (Picture) lent 125% of the equity left in the property so we are now in negative equity, we have also heard that Picture will not settle under the full value outstanding.

We wondered if we could get another family member to buy the house and us pay them rent (and hopefully cover the morgage cost for them) would we still be allowed to do an IVA under these circumstances?

[Cybus]

What other debts do you have?

If selling the property to a family member, you are selling to a connected party. You must be extremely careful if you are planning on going down this route, to subesequently enter in to an IVA. You need to be certain that the IVA you propose is going to be one that you can commit to and bearing in mind, most last 5 years, that is quite a commitment you are going to have to make.

I don't like to sound negative, but you have to understand the consequences of entering in to an IVA and it subsequently, for whatever reason, failing. If you have sold the property to a family member then there is the possibility that, if you are made bankrupt, the trustee could look to overturn that sale.

That is why I suggest that you proceed with great care, if you want to go down that route. For all intents and purposes I would suggest that the sale is conducted at arms length with a proper valuation being carried out by independent Estate Agents. You really ought to sell the property to the family member at a realistic price and not one that you think is fair to them. If you demonstrate it was sold at arms length and achieved a realistic price broadly in line with the suggested asking price, then you would be safer.



Tell it like it is.

[janot]

We owe about 70k of unsecured debt,

We wondered if we could sell to a parent for the amount of secured debt, so it will mean they will pay just over the value of the property. this means we then pay them a rent to hopefully cover the cost of the remogage on their poperty to pay for ours. (does that make sense).

We then have just the 70k to sort out. and we do not want to walk away from what we have done, so an IVA would help us to clear it.

if we were to go BR I would lose my job and we would end up homeless, and that is not an option as we have 2 children.

We have also read that people in IVA cannot easily privately rent and we do not have 6 months rent as a deposite.

also as i said picture are not good at settling at a figure below the outstanding amount.

joturner

[MelanieGiles]

The transaction would only be subject to challenge if it was not at market value, so as Cybus has suggested do ensure that an independent valuations is conducted before considering this. If your relatives are going to take over the liability to the secured creditors, then this ought to be sufficient justification for a transfer, but this will need the consent of both lenders.

You will also need to be seen to be paying a market rental - so if the local rate for a property of your size is £800 but you are paying £1,500 to cover the secured loan costs, then this transaction is also challengable.

It is not a bad idea, so long as you comply with the above and find someone prepared to help you.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[janot]

Thanks

we thought about getting our parents to remortgage their home to buy ours and repay the mortgage and loan in full.

so we will now have to find out what the rentable value is and if it will cover the cost of the mortgage.

Also will this mean our parents will have to pay more tax as it will be classed as an income?

joturner

[Cybus]

Unfortunately as it is a source of income, it is most likely they will have to declare and pay tax on it.



Tell it like it is.

[Skippy]

How can it be a source of income if they have had to remortgage and the monies received are paying the new mortgage?

Yesterday is history, tomorrow is a mystery, today is the present - a gift to make the most of.

View my blog at http://skippy13.blogs.iva.co.uk/

[MelanieGiles]

The one will set off against the other for tax purposes - in the same way as buy to let properties.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[janot]

thanks,
i think i understand. it may be worth us looking into it furher, would save us spending more money to move etc. etc.

[Adam Davies]

Hi
Just remember on buy to let remortgages you can only offset the cost of the interest charged and not the repayment part of the mortgage.
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[janot]

Thanks Andy,

Another question, sorry if I am becoming a pain.

I called the helpline last week and the advise was good, he said to request mortgage holiday - done, C&G have given us 6 months off, told them that i was looking at selling they were very understanding, also rang LTSB and asked for holiday from loan - form has arrived signed that and returned it so fingers crossed. Picture would not give holiday break not very understanding at all.

I have also opened another bankaccount and transfered all D/D's and wages are being transfered.

he also said to write to all c/cards and tell them that i cannot pay, however will probably be able to pay so much if ltsb give me holiday from loan so do i offer to pay some or not? I thought it will help my credit rating till i am in rented house then i can apply for IVA.

Am i on the right track?

[Adam Davies]

Hi
You are.
If you make any payments to your unsecured creditors do so on a pro rata basis.So if you have £200 that you can pay on 40k of debt for example then pay £5 for each £1000 owed.You are not then prefering one creditor over another.
Hope this makes sense

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[janot]

Thank you,

It is hard to know what to do. and that you are doing the right thing, I so wish I had found this site sooner, but I am so glad I did.

We are in the middle of getting all our figures sorted, I am now starting to look forward to the future, even if we have to rent we will be so much better off.

[Mr Fortune]

Hi janot,

There are a few other things that would be useful to know.

Firstly, are there any dependents living at your address under the age of 16...or over but still in full time education? This can be of great leverage when dealing with Repossession Orders and re-purchase of the beneficial interest.

There is a way of going bankrupt, wiping off the Secured Picture Debt which will default into Unsecured when the property goes to the trustee, you can still reside at your address for up to 12 months (provided you can keep up with just the mortgage repayments). Within that time you can either surrender the property to the trustee or arrange payment for the beneficial interest of the property. You would have to pay the Official Receivers bond of £335 on application, but on many occasions that I've done it the beneficial interest on your property can be bought for just £1

Either way, from experience Picture WILL settle for around 40p in the pound if it's done in the right manner.

Another alternative is a bankruptcy order bounced straight into what's called a "Fast Track IVA", where the official receiver nullifies the bankruptcy order for an exchange deal usually around 20p in the pound across the board, much less than the repayment in an IVA, your automatically saving £7000 - £9000 in IP fee's, and the term is set for only 3 years instead of 5

[MelanieGiles]

But try finding an OR willing to do a FTVA - the majority of them will not do them, and can I ask what you mean by paying the OR's bond?

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp