Do you think IVA may be availiable to my parents

[p.a]

Hi there.
I am enquiring about an IVA for my parents - I wondered if you think an IVA would work for them.
They currently have around 80k unsecured debt which is rising rapidly as they are using further credit to fund the monthly payments each month.
Repayments are around £1500 more than they can afford.
The complication might be that my mum lives in spain (They are still a couple) in a mortgaged villa (around 50k Equity in 150k property) and they have a mortgage with myself in england where myself and my father live.
My mum is retired in Spain but still does odd jobs to contribute to the £700 mortgage, and my dad earns about £2300 after tax, and I think they could afford to pay around £500 as opposed to the 2k plus which they currently somehow find each month from further credit.
Do you think an IVA may be availiable to them?
Thank you so much for your help.

[MelanieGiles]

Hi pa and welcome to the forum

An IVA is an option for your parents, but they will need to fund contributions for a five year period and then effect an equity release at the end. What are their ages? And what is the value of the English property and equity therein? Also do they have any debt with HSBC or Northern Rock?


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

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[p.a]

Thanks for your quick response, They are 58 (father) and 55.
The English property is worth around 95k and mortgage is intrest only - 85k. As stated the house is 50:50 between me and my father.
No debt with northern rock or HSBC.
Is the spanish property liable for the equity release, or are only UK assets considered.

Thanks again, it will be such a relief to us all if a solution is possible.

[MelanieGiles]

Yes, the Spanish property can be used for equity release, so they could do a five year repayment based upon the £500 per month, and an equity release during the fifth year. At this rate they could almost afford to repay the debts in full, so do be sure that the £500 is realistic and affordable.

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

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[p.a]

Hi Melanie, just to check - If the payment was more like £250 p.m. do you think an IVA may be accepted?

And also, what if they can not get a remortgage at the end of the 5 years to release the equity - and would they have to release an amount agreed at the begining of the agreement, or can this change.

Also - would my personal credit rating be affected as I live at the same address?

Thanks again, its so good to know that there are experts out there who are willing to help without charging fees.

[MelanieGiles]

If they were only able to afford £250 per month, then they would need to inject at least £14,000 from an equity release at the end of the arrangement to effect even the minimum dividend likely to be accepted by creditors - and as they have £50k in their property they are likely to be required to pay a lot more.

Their disposable income should be based on their own individual circumstances, and you will need to get them to put together a detailed income and expenditure summary together. I have a form on my website which you might find useful.

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

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[p.a]

Is the equity release amount set at the beginning so can not increase if the value of the property increases?

Would the IVA not make it difficult to remortgage near the end of the term?

Thanks again

[Adam Davies]

Hi p.a
Most creditors insist on an equity release in the final year based on the value of the property in the final year[they know that property will increase during the course of the IVA giving them a larger lump sum]
A mortgage will be possible during an IVA as long as the IVA has been conducted well.The interest rate charged will be higher than the rate charged in the High St,but will still be competative.
Regards


Andy Davie
IVA.co.uk Spokesperson and site manager
(aka Neverending)

Please check out my blog: http://andydavie.blogs.iva.co.uk

View my profile here:
http://www.iva.co.uk/andy_davie_profile.asp

[MelanieGiles]

They may encounter problems in remortgaging a Spanish property, so this is best researched before they commit to an IVA rather than afterwards.

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

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[.AADD]

Hi again - Just one more thing!

If they had more equity in the property by year four - say 100k, would the creditors be limited to taking up to the amount of capital outstanding, (e.g. 80k of debt less 15k paid in installments - 55k outstanding) or could they take more than the 55K?

Thanks

[p.a]

Correction
Hi again - Just one more thing!

If they had more equity in the property by year four - say 100k, would the creditors be limited to taking up to the amount of capital outstanding, (e.g. 80k of debt less 15k paid in installments - 65k outstanding) or could they take more than the 65K?

Thanks

[MelanieGiles]

Your parents would not need to pay more than they owe now, plus the outstanding costs of the insolvency practitioner acting for them. In some circumstances they may be required to pay statutory interest at 8% per annum, but this is unlikely in this case.

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

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk