final settlement figure, what could we expect?

[MelanieGiles]

I would personally recommend that - but this will bring more fee pressure to bear, as solicitors do not work for nothing.

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

[cockerhoop]

thanks for that if we were unable to raise say a 50k mortgage in addition to our existing mortgage, the 12 extra months (ie £7000) would look very tempting, as long as after that it was finished COMPLETELY

[MelanieGiles]

Hi - the 12 month option is only available if you can pay off a similar amount to the equity over that period.

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

[upwards4ever]

We have exactly the same 4th year equity release clause in our iva. Exact same wording! And it wasn't fully explained to us either. To be honest 'on the day' when waiting for that call to say whether iva has been accepted or not is nervewrecking and it is such a relief to hear a positive result that you would nearly agree to anything! However, the IP is supposed to be working for both parties so I feel slightly stitched up as it was not explained, and if this clause is such a common one, why is it not mentioned beforehand? We placed our trust in the IP as they are supposed to working on our behalf as well. We were trying to face up to our situation and thought an iva would help us pay what we could afford and then have a fresh start after 5 years but the reality is we are expected to pay every month for 4 years on a very tight budget which does not allow for Interest rises and then after 48 payments go and borrow to the hilt again on an Interest Only mortgage which leaves us with exactly the same debt, just dressed up differently in the form of a mortgage!

I believe a lot of the debt problems nowadays are a result of irresponsible lending and surely an IVA having to be completed in this way is the same thing.

For example, we went into this owing 65,000. If I now understand the situation correctly, if our IVA goes the distance, then after 4 years we will have paid in over 20,000 and still be expected to raise the other 45,000 (if equity allows) plus 7,000 IP fees plus 4 years of statutary interest!(roughly another 5,000)

If this is the case we will have paid around 77,000 on a 65,000 debt and had the honour of being on the Insolvency Register to boot.

The end result is creditors get 100% in the pound PLUS interest, the IP gets over 7,000 and we are left with another 60,000 on our mortgage!

How can an IP honestly say they represented us fairly?

Please, please, someone tell me I've got this all wrong.

[MelanieGiles]

I can understand your annoyance - this provision does appear to be unfair at face value, but your creditors are just looking for the best return they can possibly get, and I don't think they should be critised for this if you can afford to pay.

I agree that this provision should have been adequately explained to you beforehand - this is something I always do in my own practice, as the issue of someone's home is highly sensitive and not to be gambled with on the day of a creditors meeting when emotions are running high.

Creditors usually limit any equity raising to 85% of the value of your property, and so are leaving you with 15% of the equity intact in your case 75% and 25%. They will also listen to arguments if you are unable to afford to raise the sum required, and in my experience are pretty fair.

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

[Adam Davies]

Hi
I agree with Melanie in that creditors have to get as much back as they reasonably can,however the problem seems to be the way in which the IVA was "sold" and this is where the problems arise because certain areas are not explained,in many cases,fully and correctly.
Again if an equity figure was agreed at the time the IVA was voted through then this "misunderstanding" would not happen.Everybody would know what is expected from them.
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

[upwards4ever]

Thanks for your replies Melanie and Andy.

I have no problem with the creditors wanting as good a return as possible but I do now feel that things are 'sold' in a vague way. eg it is commonly stated that the IP costs are included in the arrangement giving the impression of 'don't worry, you don't need to worry about accrueing any extra bills' and another one is that 'interest is frozen' when the reality is the full IP costs are paid by the debtor (even though we're told that the IP is working for the debtor and the creditor) and although 'interest' appears to disappear it can land back on at the end as a substantial sum. In my last post I stated in my example that 'Interest would be another £5000' but I forgot to point out this would be for each year and would therefore be more in the region of £20,000! This would actually mean, 'in my example', that we would be paying over 90,000 on a 65,000 total debt.

I accept this is a worst case example but I was under the impression that these sort of terms kicked in against 'windfalls' like the lottery or something. I didn't think this 4yr equity clause could actually mean being forced to sell house to realise all this money.

What was the point of letting an IP take over, adding the guts of £9,000 to our bill, and putting our home at risk against debts which were originally 'unsecured debts'.

The 'spirit of the agreement' is to get the creditor as much back as is reasonably possible. I now wonder what the 'spirit of the agreement' is towards the debtor as I was led to believe it is to help get a fresh start.


P.S. I'm not having a go at anyone here, I guess I'm just letting off steam as our IP is taking her time in coming back to us re offering a settlement and my brain is working overtime on what she might come up with! Maybe I'm reading too deeply into the small print.

[MelanieGiles]

Hi again

You are correct that these items should have been explained to you at the time that you took out your IVA. Did you have a face to face meeting with the firm who represents you at the time your IVA proposals were being prepared?



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

[upwards4ever]

I met someone (IP possibly? but not my supervisor) at initial consultation but from then on, all preparation was by phone. Have never spoken to Supervisor and on day of proposal meeting I received a call from one of her assistants to tell me that IVA had been accepted but that there were a couple of modifications. (4th year equity release was one of them) She quickly ran through them (read them out to me) and asked me if I was ok with them. However, from my end of the phone, I thought the meeting was over, that it was a done deal and to be honest was just relieved that it was accepted!

It is a very emotional time pacing the living room floor whilst waiting for that call, and then when it comes through the relief just floods out whilst at the same time a voice (not even the Supervisor, it was an assistant) on the other end of the phone reading out what sounds like rules & regulations and not allowing time for you to a)take the detail in or b) take any advice or c)even question the implications of anything.

If this 4th year equity release is so commonplace (and carries serious implications which fly in the face of the pitch given to get you to go with them) why is it not explained in full and flagged up that it is a highly possible modification?

I have heard commentators on TV & Radio on a few occasions stating that an IVA should not be entered into without first consulting a Solicitor. Unfortunately, it was too late for us but I would now say that is good advice.

Maybe I am pre-empting the worst after learning so much on this forum but I will have a better idea when my Supervisors assistant gets back to me (hopefully soon) as she said my Supervisor would be in the office 'one day' this week and she will discuss my offer with her to see if she is happy for it to be put forward.

[MelanieGiles]

There should be no need for meetings with solicitors, if you appoint a responsible IP. We are the ones properly qualified to give impartial advice about options. It really saddens me to read posts like this where clearly advice has not been given about the pitfalls of including equity in properties. In my practice this is always clearly explained to people, who do have the choice to say yes or no.

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

[upwards4ever]

Unfortunately, as most people first looking at an IVA can only take an IP at face value and do not have any experience of the possible pitfalls they are, therefore, usually already signed in before finding them out. At that stage it is too late.

Compared to a lot of the postings I've seen on the forum my IP doesn't seem too bad in general and to be honest the only real complaint I have is having this 'equity release' clause included without it being explained.

Also, it appears pretty commonplace that it is not being explained so to be honest I do now feel that independant professional advice should be taken.

I do commend you Melanie on the way you operate your practice and I think I have read on a previous posting that you do not like to have this 4th year clause included due to it's vagueness and possible implications. Unfortunately, others who are not so straightforward can tarnish a whole profession.

I think this thread has gone on long enough, as I'm sure you are busy enough without me ranting on but I will keep you posted on how my own attempts at an early settlement develop.

Thanks for all your advice.

[upwards4ever]

Sorry Melanie, one more question.

Regarding the IP's position working for both the creditor and the debtor.

If their responsibility to the creditor is to get as high a return as possible (and I am happy with that) then what is their responsibility to the debtor?

Because surely by collecting payments for 5 years and then enforcing the creditor to transfer their debt to an 'interest free' mortgage which by it's very term indicates indefinately, or indeed sell up to raise the funds, is not very responsible and most certainly not working in the debtors interests.

It seems at times that some IP's are unwittingly working as the creditors enforcers.

Or is it their responsibility to take a reasonable early settlement offer forward and argue our case?

I'm asking this question to try and understand better my position with my IP.

From what I now know re the equity clause I would expect our early settlement offer of 31p in the £, which is with our IP at the moment, to be a non-starter. Ijust wish they had told me that on the phone and not wasted 2 weeks...giving me too much thinking time to fear the worst!

I am hoping that I might be able to do an improved offer via remortgage which would amount to around 70p in the £ to the creditors finishing the arrangement 3 yrs early. (Waiting on confirmation of re-mortgage amount that we can go to)

So I am asking the question to see if I can 'expect' my IP to take this offer forward and argue my case or do they just put it forward and let it take it's course?

[MelanieGiles]

Hi again

A Supervisor's duty is towards those who appoint him/her to carry out the supervision of a debtor's proposal - and that is the creditors. The IP of course has a duty of care to the debtor to ensure that the arrangement is supervised correctly, that reports are filed on time and importantly that money is repatriated to creditors as quickly as possible.

When you talk about enforcing someone to re-mortgage or sell their property - it is not the IP who stipulates this but the creditors usually by way of modification, which of course the debtor has the choice to accept or reject. The IP's role in this particular area is to ensure that you comply with the terms of the arrangement which you agreed to.

I personally am not a fan of junior staff chairing creditors meetings or liaising with the debtor with regard to modifications. This is the job of the IP, or a very senior experienced member of staff, as our job is to ensure that you have fully understood the implications of the modifications put to you. If attendance at creditors meetings by the debtor reverted to being compulsory again, a lot of these issues would be alleviated, but sadly the profession seems to move further and further away from this view into more of a processing methodology. Nothing wrong with that so long as we all do our jobs properly!

Your IP will definately listen to your representations, and carefully consider the commercial sense of your revised proposals. They are duty bound to present your proposals, and ought to recommend them to creditors if they feel the offer you are making is a good one.

As you say, apart from this one issue, you have been happy with the service provided. It is because this issue relates to your home that it is so sensitive, and you are right to be concerned about the advice you were originally given. I am glad to see that the regulators now insist that advice given is documented in writing and signed by the debtor by way of confirmation.

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

[upwards4ever]

so is the Supervisor not actually an employee or part of the IP's staff/team?

[MelanieGiles]

The Supervisor is the IP!

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