my boyfriend is looking into getting an iva

[blondy]

hi my boyfriend is looking into getting an iva but doesn't wont to include his mortgage in it is that possible and which companys deal with this matter?
thanks

[laleanne1]

Hi

If your partner has a mortgage and there is equitiy in the property this will have to be included as it will be considered an assest. If he enters into an IVA he will be asked to release some of the equitiy in either the four or fifth year of the iva. What he really needs to do is speak to an expert and explain how much he owes, who to and how much he has invested in his property they will be able to give you a more detailed answer.

hope this helps

l morris

[MelanieGiles]

Hi blondy

The mortgage, as a secured creditor, will not be included as a creditor - as the lender has security against the property, but the ongoing mortgage payments will need to be included in his income and expenditure account.

Laleanne is correct in that if there is equity, account will need to be made of this within the proposal, as creditors will expect to see a proportion of this raised to enhance the offer being put forward.

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

[go_4_broke]

Melanie if you get a minute could you give an outline of how this works please? For instance is it based on the equity at the time of the IVA starting, or on an assumption of windfall equity due to increasing propert values? Or simply a fixed %age of the property value at the time of drawdown ?

-Best

'5 years sticking my head into the Lion's mouth of debt !'

[MelanieGiles]

Hi go for broke

This really depends upon how creditors modify the proposal. With regard to timing, some accept the valuation carried out at the beginning of the IVA as a basis for equity calculation, others ask for a revaluation to be carried out within the first six months, but more commonly requests are made for the property to be revalued within the fourth year of the arrangement and this figure to be used as the basis for equity raising.

With regard to percentage, I have seen anything from 75% to the full amount of equity requiring to be raised. There are a number of creditor workgroups ongoing at the moment with a view to standardising the requirement for equity raising, and I suspect that the outcome of this will be for a formal valuation to be carried out at the beginning of the IVA, with a maximum equity raising to be carried out within the final year. But we will see!

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

[go_4_broke]

That's brilliant Melanie, thank you very much.

I suppose your predicted likely outcome is 'fair', in that it reflects the available equity at the point of what would have potentially been bankruptcy.

The whole thing seems a bit of a sneaky one by the creditors though, as it could be viewed as effectively extending the IVA whilst the removed equity is repaid.

Does this always arise as a creditor modification, or are there circumstances where you would offer it in the original proposal ?

-Best



'5 years sticking my head into the Lion's mouth of debt !'

[MelanieGiles]

I always try to address equity within my proposals, as creditors will generally accept a reasonable offer. Have to say that the fourth year valuation route is very popular at the moment though.

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

[neverending]

Hi
If you have a valuation at he start of the IVa it is meaningless because who knows how the markets going to do ??
It has to be the final year of the IVa but it would be nice to see a standard clause of 75% of the available equity paid to creditors[obviously to produce no more than a 100% dividend].
regards

[go_4_broke]

Thanks again Melanie.

Further to Never's comment above perhaps any equity above that which would be available at the time of the equivalent bankruptcy should be regarded as windfall and treated as such, with only a percentage going to creditors. A cap would be nice but 75% perhaps a bit on the optimistic side ?

I guess in the current market it's not difficult see why creditors are favouring the Y.4 route though....

-Best

'5 years sticking my head into the Lion's mouth of debt !'

[MelanieGiles]

Don't agree with that Neverending!

Properties should be valued at beginning of IVA, so that the debtor has a clear view of what sum needs to be raised. This view is actually supported by a number of creditor representatives.

After all we are supposed to be following bankruptcy trends, where it is now generally accepted to take a valuation at the beginning of the assignment.

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

[neverending]

You,ve lost me there Melanie
Of course it would be in the debtors interest to have a valuation and agreed equity release at the begining of the IVA but I can,t see creditors agreeing to that because the equity,historically,will be far greater in the final year of the IVA.
Also if a valuation is done pre IVA and property falls then this will be unworkable and hence "meaningless".
You stated yourself that the fourth year valuation is preffered by most.

[MelanieGiles]

Although this may sound a little strange, there is still a huge amount of "fair-play" attitude amongst a lot of the lenders and their representatives. And some of them feel that it is fairer to crystallise the equity at day one rather than leave a black cloud hanging over the debtor for the duration of the IVA.

If property prices were to fall (unlikely but possible) then there should be a caveat for a revised valuation - but not upwards in my opinion.

We await the outcome of the various working parties with interest. I personally have always felt the 4th year valuation to be relatively unfair - but then I am not the one owed the money!

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

[neverending]

I totally agree with you,it would be great if the equity release figure could be agreed pre IVA but I think that this would be almost "to good to be true".Just look at how property prices have risen in the last four years.
"fair-play" sounds great but at the end of the day financial institutions are under an obligation to look after their shareholders and I doubt if "fair play" will ever over ride this.
Regards

[go_4_broke]

You can see some logic in it I guess, even from the creditor's position.

It's not in their interest for IVA's to fail, which they are more likely to if too burdensome.

In the event of substantial equity gains, the debtor could be faced with the 'double whammy' of losing their equity AND having crippling increases in mortgage payments to fund it.

-Best

'5 years sticking my head into the Lion's mouth of debt !'

[neverending]

You can see it from the creditors point of view, regarding final year equity releases,at the end of the IVA term the creditors will be asked to write off upto 75% of the debt.At the same time the debtor may have accrued this amount,and more,in equity.
I am all for the pre IVA agreement,dont get me wrong,but I just cant see it happening.
Lets hope I,m wrong.