IVA declined

[jbutler]

Help needed, Me & my husband have got 80k of debt this over 2 loans one being a unsecured part of are mortgage with NR & we have 6 credit card. We have gone for an IVA with debt free direct but this has been declined as NR has 38% of votes. We are only able to pay 259.00 a month to are IVA as we have are own house & 2 small children. All other company have agreed are IVA I have spoke to NR & they said the reason the IVA was declined was coz we only token out the mortgage in March 07. Don’t know were to go from here as not wanting to go bankrupt as would loose my house. Is there any thing else I can do.

[MelanieGiles]

Hi jbutler and welcome to the forum

It is very likely that Northern Rock will now attempt to secure their debt against your property - which in hindsight might have been a better option in the first place rather than lending you a long term unsecured loan over the same timescale as your mortgage.

This would then perhaps leave you with no equity in the property, and make bankruptcy proceedings a more favourable option.

Your other creditors also have the ability to apply for charging orders as well.

[jbutler]

would i not loose my house if i go bankrupt, as if NR put my loan as secured it wold mean i only have 20.00 a month to pay into any sort of plan

[MelanieGiles]

Not if there is no equity in the property. It is a common belief that houses are taken and sold under bankruptcy proceedings, but in reality it is only the bit that you actually own ie the equity which is at risk.

If you only have £20 left after paying Northern Rock, then it would seem that bankruptcy proceedings would be a better option for you, but do make sure that you have a property valuation to confirm whether there is any equity in the property.

If your mortgage is currently on a repayment basis, you could consider switching to interest only to free up some extra money, but do be careful here as none of the capital will be repaid and this in itself could eventually put your home into jeopardy.

[Adam Davies]

Hi
How much is your house worth at present,how much is your mortgage and any secured loan and how much is the unsecured NR debt ?
Mel
If NR secure the debt and leave jbutler with £20 per month to service her other debts,obviously impossible,then bankruptcy can be the only way forward[unless a house sale is possible and renting leaves more disposible income].Surely the other creditors[in majority] are penalised because of NRs strong stance.What would happen if creditors went for charging orders as soon as notified by the IP of a pending IVA propsal? mayhem !!
Why do other creditors not take this route ?
Regards

[MelanieGiles]

Andy

Other creditors would be most definately penalised if Northern Rock were to secure ahead of them, but they all have the same opportunity.

Charging Orders are now being used more than ever by a number of the leading lenders as a method of debt recovery. In the unlikely event that they were all to apply at once, the judge would have to allow them to all rank equally, so you could end up effectivley with a "Secured Creditor IVA" which of course would continue with interest being added until the debts were paid off in full.

Our poster now has effectively three options:-

1 DMP which provides absolutely no protection from creditors pursuing legal action.

2 Bankruptcy prior to charging orders - when the equity in the property will have to be realised for the benefit of the main body of creditors. This provides a fairer option for all creditors, but leaves the debtor without their home.

3 Bankruptcy after charging order, where there is no equity available for a Trustee to grab or dipsosable income available to make ongoing IPA or IPO payments.

You might call this the lesser of three evils!

[jbutler]

my house is worth about 130k with a morgage of 108k. i dont have any secured debt but unsecured loan with NR is 30k

[Adam Davies]

Hi
When someone takes a secured loan there is claer warnings about the risk to the property if payments are not maintained.In reality this should also apply to unsecured borrowing if charging orders become more popular
Regards

[jbutler]

Well just for update IVA was declined & cant do a DMP as payplan said i cant have NR loan in it which means i only have 20.00 to pay into a DMP plan & the min is 100.00 is the only thing i can do now is go bankrupt,

[Reviva UK]

Hi jbutler
worst possible thing to do is to do nothing. This will just mean that you loose control and things can go badly wrong.

A couple of thoughts ;-

If all your creditors turn their unsecured debts into secured charges you would effectively have mortgages of £ 188k with a value of £130k. This is not a great position and if you went bankrupt AFTER the charging orders had landed it would be almost impossible for you to move or refinance / remortgage for 5-7 years.

If for any reason you couldn't keep up with the repayments then you would again have a huge liability of debt.

I suspect that you are better to sell the house and move into rented accomodation, use some of the equity if there is any left as a rental bond and then go through bankruptcy.

try to get some help from a bankruptcy expert - not someone that just fils in forms but someone who understands the process and can help you get your "ducks in a row" , thus making it a lot easier on all the family.

[jbutler]

sorry it is me again i am getting a bit lost as i have spoke to national debtline & they adviced that if any company was to put a charging order on my home it could only be up to 8k whcih is the amount of equity i have in my house, is this correct,

[MelanieGiles]

No!!! The charging order will be for the full value of the debt which is outstanding. That was very poor advice if that is what you were informed.

[Reviva UK]

Hi there

Information is not technically correct. Perhaps it didn't come over clearly in the call.

If company put a charging order on you house this would be for the full amount of the debt you owe.

If the property was sold or repossessed then they would only get 8K and the rest of the charge would again become Unsecured.

So in Northern Rock pursued you and won a charging order for the unsecured loan you would have a
house worth 130k
1st mortgage of 108k
2nd mortgage of 30k

They would hope that over time the value of the house would increase and therefore the likelihood of them getting their money back increases.

[jbutler]

hi i have been incontact with melanie office & hope to get help as dont this DFD did my IVA very well, as not wanting to go bankrupt & been adviced by payplan that cant do a DMP plan as they would not have the NR loan in it as they will secure it which mean then as above i only have 20.00 pound left & min for DMP is 100.00

[luluj]

Sorry - I think you have little choice but to go bankrupt....as Melanie says you may have the opportunity to retain your home if someone else will pay the "nominal" figure for the OR. Bankruptcy is not as bad as it first appears and the stigma of it has got better over the years.