Early release of the 4th year clause

[spenmotherhen]

Hi All

Just wondering if it is possible to release equity befor ethe 4th year?

We are heading for our 3rd year of IVA in May and would love to sell our house pay off our IVA and start fresh, even if it meant paying all of our equity and walking away with nothing.

What I am not looking forward to is remortgaging and putting ourselves further into debt to settle our IVA.

We are living very "frugally" using our contingency each month to cover the rise in petrol as I guess alot of people our. I'm just fed up with trying to find money to pay for school trips, school photograph's, childrens birthday parties etc. [|)]

Our house is rented out and it is a two bed property so we will never move in, would it be plausable to sell it and move on?

We would be £650+ better off without our house and IVA and at present we would have enough equity to pay the majority of our IVA off.

My husband gets a house with his job in case anyone wondered where we would live.

Is it worth approaching our IP to see if we could do this?

Thanks has anyone else managed to sell there house to settle their IVA before the 4th year clause took place?

Thanks for any info

Kind Regards

[pbeck]

You IP will be delighted if the house is sold, that way they get all the equity rather than just the equity left after a remortgage up to 85% value.

Probably you would still be obliged to continue making the monthly payments for the remainder of the IVA period, up to the point where everyone + the costs got paid, but you better check the proposal to see what happens if you sell the house, also talk to your IP, they'll know the score and can tell you if you have to continue making payments after the equity release.

Philip Beck - www.freeivaadvice.co.uk

Licensed Insolvency Practitioner and IVA specialist

[spenmotherhen]

So I would not be in a better position as I would have to pay the same amount for the next 2 1/2 years.

Wouldn't my payments be reduced during this time due to owing less?

Or if paying the same amount as now it should end earlier?

Thanks for your advice the 4th year clause is hard to understand.

[jpj]

How much equity do you have in the house? If your house is worth say £100k, you only have to mortgage up to 85k.. at the end of the 5th year you get to keep the 15k equity.
It may be worth you taking a longer view of a couple of more years!
Also i would suggest looking at offering a full and final settlement now via a house sale, and get a figure from your IP.
say you are happy to sell the house now for a full and final offer,otherwise you will keep the house till your IVA ends and will walk away with the 15% equity .

[pbeck]

You would still pay the same amount, just your IVA would end as soon as everyone and the Ip had been paid off.

The point of the 4th year clause (these days it's the 5th year clause), is that you should pay as much as you can for 4-5 years, then release the equity in your home by remortgaging, this maximises the return to the creditors. Of course, creditors know that once you've remortgaged you won't be able to pay the same level of IVa payments, that's why they want the remortgage at the end of the IVA.

IVAs aren't supposed to be easy, creditors only agree to them if it's the best that they can get.

Philip Beck - www.freeivaadvice.co.uk

Licensed Insolvency Practitioner and IVA specialist

[spenmotherhen]

Thanks for your info.

The house is worth between 125-130k mortgage is 100k, so around 25-30k equity, so does this mean in the 4th year at present values the IVA would take upto 85% of the 25-30k?

What happens if the house prices drop?

My proposal states 75% LTV

Thanks again

[jpj]

As far as im aware you have to remortgage up to 75% of the 130k. (which you are already at!) Im sure others will confirm this.

[Adam Davies]

Hi
Yes,jpj is correct,and if the value of your house is correct then an offer of the full equity now must be tempting to your creditors, as at present they will get no equity.
Go for it,speak with your IP but state that you want the offer to be a full and final offer with no ongoing payments
Regards

Andy Davie
IVA.co.uk Spokesperson and Website Manager

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

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

[spenmotherhen]

Thanks Andy and jpj

Do you think this will be a good offer? we have paid £440 a month since May 2006 but the first year was to cover fees only so our creditors have only just received some repayments during this last year.

Our total debt was £62k plus fees.

Thanks

[pbeck]

Yes, I think you can offer to sell the property as a full and final settlement. You say the property is worth £125-£130K with a mortgage of £100K and a 75% remortgage clause, well, as things stand the existing mortgage is over 75% so unless house prices increase you woulnd't have to remortgage anyway. If we assume that after costs of sale and paying off the mortgage you'll realise around £20,000, this is going to be better than another 39 payments at £440.

Talk to your IP and see if they will accept it.

Philip Beck - www.freeivaadvice.co.uk

Licensed Insolvency Practitioner and IVA specialist

[spenmotherhen]

Thanks pbeck, as we are at the 75%+ margin of our mortgage at the moment, what happens in the 4th year then? Will we have to extend our IVA or just carry on paying our monthly amount until the 60 month period is up?

If the housing market drops what happens then as if it rises?

Thanks for your info the penny is beginning to drop slightly with understanding LTV and the 4th year clause.

Thanks very much again your advice has been very helpful.

[MelanieGiles]

Just a point here - how was this property initially intended to be dealt with in your IVAs? You are HM Forces I think! Did you disclose that the house was an investment property in your original proposals? If so, then I would be suprised that it was subject to the 85% final year equity release provision.

Your IP will have to call a variation meeting of your creditors to ascertain their wishes, but if the house is not your principle residence the 85% LTV does not take effect and you are likely to need to offer all of the sale proceeds.

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

[spenmotherhen]

Hi Melanie, yes we have been totally honest from the onset with our living arrangements. Our IVA company said that as there was no equity in the property when we first bought it then we could obviously not release any money from it to put towards our IVA.

When the initial meeting sat, we had a couple of moderations from the creditors, one being that the house be taken into the 4th year clause.

The house was bought prior to our IVA for an investment however myself and children did live in when my husband was on a detachment for 6 months.

I am confused as to why why the house has been included in the 4th year clause reading your comments above.

What should of hapened?

What happens now? If the house does not sell what happens when we reach the 4th year?

Why do you think that our IVA company did not know afterall we were living at a totally different address when we began our IVA.

I only wish now that I had found this website earlier, then perhaps I would totally understand what I have signed up to.

I can only urge anybody contemplating an IVA to seriously contact Melanie as she has so much experience and knowledge.

Thank you for your advice and what do you reccomend I do?

Thanks for your time.

[MelanieGiles]

This seems to have worked to your advantage as investment properties are usually required to be sold as part of IVA proceedings, and in your case the creditors have agreed that you can retain 15%. If you are going to offer the full amount of equity released, then I feel your revised offer has a good chance of acceptance.

That leaves you living in quarters indefinately (I remember the horrors of those magnolia walls!), but if your hubbie is going to do the full 22 years, presumably you will have gratuity money to purchase a property when he retires. You now do need to discuss your suggestion with your own IP, and let us know how you get on.

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

[spenmotherhen]

Thanks Melanie

My husband is past the 22 year mark [:I] He took his commision and now has another 15 years [:D].

So we are set up for a while housing wise.

Magnolia, woodchip, avocado tiles and orange kitchen cupboards, yes we are still lucky to have all of those, lol!!

Thanks for your advice x