Does this mean I could lose my home?

[k.c]

I entered an IVA some 15 months ago. I am concerned that in the 4th year I have to have my home re-valued as per the contract. I will at that time owe around £80,000 pa and will not be earning enough money to extend this mortgage. I have children and I am disabled (although I work full time - as I cannot afford to be disabled). My house at present is worth approx £150,000.00. The consultant I spoke with when I completed my IVA form entered a value at £90,00.00 although I told her it was worth more! Does this mean I could lose my home? Thank you for your assistance in advance. Kim

[MelanieGiles]

Hi kc and welcome to the forum

The technical answer is that your IP should have the property valued during the 4th year, deduct the amount outstanding on your mortgage and thus work out the equity. If your property is solely owned, this is the figure which will determine the amount that you have to inject. You will then be required to find a way of raising the amount of equity you are required to under the terms of your proposal. Is it 85% as this is the usual figure?

The practical answer is, and this depends upon the attitude of your own IP - so I can only really speak for what I do in my practice - is to see what level of equity you can afford to raise, and then put an offer to creditors on that basis. Given your circumstances, and limited income, I feel that you will have a good chance of finding a compromise on this point.

Concerned that your creditors were misled within the proposal by some £60,000. Which IP firm are you using? In the long run this will definately not help you, as the property will have to be properly valued during the 4th year. Was a professional valuation not carried out over your property and referred to within the IVA proposal presented to creditors? How much do you actually owe?

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

[k.c]

Thank you for your resonse
In answer to your questions in the posting. My IVA is with Debtmatters. They filled in part of the original questionaire on the phone. This is when they advised entering the lower amount of property value. I did was not asked to get a professional valuation. The original debt was reduced by 75% and I pay £290.00 per month.

I am starting to panic now.

I hope you will be able to advise me further.

[MelanieGiles]

If you are paying a 25% dividend with payments of £290 per month, and taking account of IP fees which I am estimating are approximately £8,000, I assume that you have debts of approximately £40,000. Would this be correct?

If so, and assuming that the value of your property was £150,000 at the time you entered into your IVA, then your creditors have been misled as you were not actually insolvent at the time.

If you were now to borrow against your equity now, this would cost in the region of £215 per month to repay (interest only basis). This could clear up your IVA, and put more money in your pocket each month.

If the facts surrounding the advice you were given by Debtmatters are correct, I think that they have some explaining to do, and I am amazed that creditors accepted your IVA without the basis of any professional valuation. I do not feel that you really needed an IVA in the first place!

If you continue with the IVA until the fourth year, your property may be worth even more, and this will mean that you will have to raise more money - having already struggled to pay for four years on a tight budget. You must now discuss this with you IP as a matter of urgency.

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