IVA and charging order - experience and advice

[JAW]

First time on here but have spent many months looking at postings.

This is a long one so please bear with me

My wife and I have been successfully paying into a Debt Management Plan for the last 18 months I decided in August to try for a full and final IVA. At the time one of my creditors had decided to go for a CCJ (£12k) which they achieved.

We decided to use the same company who sorted my debt management who felt were very good to propose joint IVA. I went through the process of applying for FF IVA offering 24p for me and 26p for my wife in the funded through a re-mortgage of the property and offering a net £25k. During the process the creditor applied for an interim charging order and I was advised not to worry as a letter would be sent to the judge asking not to make the order final explaining the our situation in preparing a FF IVA and asking the creditor to inform the other creditors of their intention.

I attended the hearing - the creditor did not want to withdraw the order and none of the other creditors objected - the judge though was very sympathetic to me said she had no choice but grant order as it was “first past the post”

I was subsequently informed by some else that these orders were just a rubber stamping exercise - and should not have bothered continuing with IVA - I feel a bit let down by the company who I think were seemly over optimistic of the order not being finalised. They are well established and respected provider in the market place.

Any way the IP company are now looking at a 5 year IVA with further 12 months payments in lieu of equity as I cannot now re-mortgage with charging order. They think we can offer an improved amount – though I cant see how this would be accepted as we would be offering £475 per month (£34k gross) less IP set up and management fees which I think would equate to little more or less than the FF IVA offer. And of course our creditors would have received a similar amount straight away and not over 6 years.

For information the creditors meeting for my FF IVA is still at the end this week – it would be ironic if it were agreed though I think it very unlikely, I cant go ahead with it – 3.

Questions to the forum –

1.) Has anyone else made a successful IVA arrangement (in lieu of equity) like this one
2.) And if yes what offer(s) in the £ has been made.
3.) Any other advice?




Joe

[catullus]

Hi JAW

I have come across this mistake by debt management companies before. They confuse the process of applying for an attachment of earnings with an application for a charging order.

For a debt management company there is a relatively simple procedure for postponing an attachment of earnings order, because at the end of the day, that is what a DMP acheives, so the creditor might as well wait until the outcome of the DMP exercise.

An application for a charging order is a completely different beast, it's all about priorities and as the judge said it's first past the post. Many people working in the debt resolution industry don't sem to know this.

As to your particular questions. If the equity in your home is wiped out by the charging order you've got no alternative other than to offer an income based IVA.

You'll have one less unsecured creditor to worry about, at least to the extent of the charging order, but you will have to arrange to continue to pay the loan secured by the charging order during an IVA.

As to the amount, well you need to make your best offer but generally a return of less than 25% would be voted down.

Other advice? You've been badly advised by your IP firm regarding the judgement creditor and I would insist on speaking to the IP personally and ask them to refund you the nominees fee.

[MelanieGiles]

For the record, and from my own personal experience, we always seek a first adjournment of a final charging order hearing, so long as the creditor is not owed more than 25%, and I have never had one turned down - albeit I accept that this is at the discretion of the judge.

Did your IP put forward details of the IVA offer? As judges are supposed to take note of other creditors when deciding whether to grant such orders.

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

[catullus]

I'm surprised at that Melanie. For quite a while I followed the same procedure but a couple of years ago, now I got hit with an order that I should have made application for an interim order and was told that the "judgement" was circulated to all district judges and recorders (but never reported)

Never tried since!!

[MelanieGiles]

Yep - I guess you only need to get burned once to stop doing this. Interim Order is the safer route most definately.

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

[JulianSampson]

If your IP or Solicitor is up for a fight you could argue the following cases, Howell v Montey (1991) or Scottish & Newcastle v Lancashire Mortgage Corp from July 2007 which I use to adjust priorities on the property and may well have some impact on a Court given one could argue that the DMP had, at least in equity, a prior interest.

Equally practical parisa could be to ask the judgement creditor to agree to postpone their interest behind a new Lender to enable you to refinance albeit if you are tight on equity then this may be a non-starter.

If you go for the first option do let me know how it works out!

Kind regards

Julian Sampson
Solicitor
Wright & Wright LLP
www.wrightandwright.com
See my article in Clean Slate magazine

[JAW]

Thank you very much your responses which are insightful - Yes I feel the person dealing with the IVA application seems to have been very naïve and I will have to be very careful what they next propose and may have to seek advice elsewhere for a second opinion. Fortunately I have and will not pay for the preparation of the IVA proposal. In answer to your questions -

My wife and I have a 190k mortgage with our property valued very recently by an estate agent at £250k giving £60K equity . The Charging Order is for 12k leaving £48k equity. I have asked our IP if I could some how still offer equity with the IVA though I have been told that with a charging order I could only re-mortgage £200K.

Melanie - to let you know I got an adjournment for the final order to allow our charging order creditor to consider our request for the IVA and to circulate to other creditors their intentions. The Judge at the final hearing had a copy of the IVA proposal as had our charging order creditor and still made the order final. My own IVA was 58K (my wife £49K) so charging creditor accounted for 21% of my total debt and as said all the other creditors were notified but did not object to the final order according to the charging creditors solicitor at the final hearing

Julian - I will certainly get the IPs views on DMP having interest on the equity. On your second point I think I will need to ask the mortgage broker who I have been working with, that if the Charging creditor was to postpone it’s interest to allow a new lender to refinance the property, what sort of mortgage could be raised.

Once again thank you all for your time

Joe

Joe

[MelanieGiles]

Why didn't your IP get the creditors meeting called after the adjournment and before the date of the final hearing? That is the whole point of asking for an adjournment, so no wonder the judge lost patience and granted the final.

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

[Andrew Graveson]

Hi Joe,

Might be worth getting a second view on a remortgage?

I'm not suggesting that you've had bad advice but even with the charging order my reading is that you have £50k'ish of equity remaining?

Andrew Graveson
Mortgage Broker & Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk

[mikebdomain]

Joe

I have to agree with Andrew on this; if there are no affordability issues, it seems, based on the information provided thus far, you have enough equity to clear the charge and to offer a F&F on the proposed IVA.

Or have I missed something.

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[JAW]

Melanie - From their email correspondence I had with them I think they thought we could convince the judge to continue with the interim order until the outcome of the IVA meeting was known. I pleaded with the judge for this but she said that was not possible - It may be more probably that my IP could not get the IVA proposal out giving suffcient time for the creditors meeting - I did start the process in mid August.


Andrew and Mike - Before the CCJ and charging order was made we had an illustration to re-mortgage to £235,000, releasing £45k of the 60K in equity. This was an 18 year Interest Only 2 year fixed term paying £1453 pm then £1689 pm thereafter - but this offer was reduced to 235k after the CCJ and 200K after the charging order.

For info my salary is 40K per year, 10k for my wife (self employed self declaration) If we could have realised 235K we could pay 12k to Charging creditor leaving 33K (less IP costs) for balance of creditors (£95k). I think the offer to creditors would still be low (probably 23K)

The only thing that occurs to me is to see if it is legally possible to go for a 4 year IVA proposal realising equity in the property after the 4th year less the cost of having to pay the Charging order creditor – I expect I would have to get agreement from the Charging order creditor first – and if not as an alternative (and I know this overly creative ) should I be forced to sell the property by the Charging order creditor before the 4 years then the balance of equity left is giving to the IVA creditors.

Joe

Joe

[MelanieGiles]

You might be pleasantly suprised as to what happens with the Charging Order creditor now. Are they asking you to pay over any monthly instalments? So your IVA could still continue without this creditor, and given their seurity this will minimise the need for you to raise money during the final year.

Blessing in disguise maybe?

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

[JAW]

Thanks again Melanie for comments.

The charging creditors have not made their intentions known so I have emailed the charging creditor to ask -

A) if they wish for me to continue with the payment agreed through the CCJ (@£82)

B) If i am still paying if it is the intention to reduce the balance owed and hence the amount for the charging order. No mention of interest on order amount as yet.

My IP's proposal is without the charging creditor but proposing a 5 year IVA with 1 year extra in lieu of equity.

It would be great if this was a blessing in disguise! - but I am still worried about offering a slightly improved offer on the F&F without the equity (hence my overly creative idea) - I really want to make sure it is best offer to my creditors and make it affordble.

I will wait and see and let you know.

Joe

PS My creditor meeting was due to day but my IP informed me yesterday that both mine and my wifes IVA proposals had been pulled (primarily as a result of the Charging order).






Joe