Help - is IVA the best option

[missbee]

I have just found out I am 6 weeks pregnant and the father does not want to know.
I earn £33k in a contract position which is due to end in december. My current take home pay is £1972 after tax NI and student loan payment, my current out goings including my debt repayments and travel are £1552.

I owe £10k on 5 credit cards and have a loan for £9k and owe £5500 on a car loan. The car is worth about £6200 so I could sell it and clear that debt, however I will need a car when the baby arrives

I have a joint mortgage with my sister.

I know it will be unlikely that I will be able to get another contract that pays so well. Also I do not want to have to travel into London which is currently 2 hours each way. Therefore if I get a job it is likely to be about 25k a year however my travel cost will be reduced.

I can not see how on earth I am going to be able to pay for my debt when I am on maternity leave. Even if I took 3 months off I would be stuck.

I currently have not missed any payments but i can not see an end to getting out of this debt.

If I do a IVA will this effect my mortgage?
Will have an effect on my sister?
Will our house be black listed?
Will I be made to sell the house?
Will I be able to another mortgage one day?

Any help or advice would be gratefully appreciated

[kallis3]

Hi,

Congratulations on the pregnancy. Even if the father doesn't want to know, he does have to face up to the fact that he is responsible for maintainence towards the baby.

I think you need to speak to a professional about this. Visit www.iva.com for a list of companies and reviews. Give one or two a ring and you will receive free and impartial advice as to all the options open to you and the best way forward for your circumstances.

[Michael Peoples]

Hi Missbee and congratulations on your pregnancy from me too.
You should speak to at least one IP firm for some free advice as there are specifics that need answered and this would depend on the value of the property and any equity therein. However to answer your questions based on what you have said I would suggest you first of all open a new bank account with a bank to whom you owe no money. This will do no harm regardless of what you decide to do in the future.

As to the property,your mortgage is a secured debt and must be paid and an allowance would be made in any repayment plan for this. Your sister would need to be kept fully aware as it is a joint property and creditors normally look for an equity release during an IVA. It should not affect her credit rating and it is unusual for a property to have to be sold.

Your own credit file will be damaged for 6 years irrespective of what you decide to do unless you maintain all payments which will be unlikely but you will be able to get another mortgage.

There are a number of options available to you such as debt management, IVA or bankruptcy and any IP can advise better when they know your personal situation. The payments can be structured to reflect changes in circumstances so there is nothing to lose by seeking some free advice.

[MelanieGiles]

Is there any equity in the property? If not, or if this is at a very low level, your sister may be able to purchase your interest in the property from the eventual Trustee, so there may be little to worry about - in the debt scenario at least.

[missbee]

We put down £48k as a deposit, £24k each and have a mortgage for £134k. My sister only earns about £22k a year so I do not think she would be able to afford the mortgage her self. The house i would estimate is in about £10k negative equity and we have a £5k indemity clause if we end our mortage before our fix rate ends next dec.

Do you think a secured loan could be an option?

[MelanieGiles]

With the property in negative equity, you have absolutely no worry about it under bankruptcy proceedings, as your sister can make a nominal offer to acquire your share for the sum of £1 plus legal costs (approx £200).

You will stay as the legal owner and continue to be responsible for your shar eof the mortgage payments. If you are already in negative equity, you have no change of getting a secured loan.

[missbee]

Sorry I was not clear. The house is probably now worth about £169k and our mortgage is for £134k so it is worth less than we paid for it. Does that count as negative equity?

So Melanie could I transfer my share of the house to my sister and then declare myself bankrupt? Sorry if i am asking stupid questions! This is all new to me.

[kallis3]

If you have no other secured loans then you are not in negative equity as your house is worth more than the mortgage.

It doesn't matter that it is worth less than you paid for it.

If you sold it, you would have money left over.

[Michael Peoples]

You would not be able to transfer your assets to your sister as this could be set aside very easily. Your sister would have to buy you out at full value or the property would be seriously at risk.

You should certainly seek some free advice as an IVA or DMP may be the best option to protect the property.

[MelanieGiles]

I must have misunderstood your earlier post. I thought you had said that you had £10k negative equity. As you are now saying that your share of the equity is around £17k, then a transfer your sister for no value would represent a transfer at undervalue which could be overturned by a subsequent Trustee.

Could your sister afford to buy out your share, and then you pay rent to her to help her cover any increased mortgage which may be required to cover the additional sum required? If so, you could always consider an IVA simply based on a full and final settlement.