share with you the predicament that I now have

[nico]

Hi All,
I thought I'd share with you the predicament that I now have for anyone out there who has experienced the same problems - although I do believe that ours is an odd one!!
In April last year our finances finally came to a head after years of using credit facilities. We put up our house for sale and started to enquire about an IVA.
The IVA company drafted a proposal on our agreement that the house would be sold (no equity to be able to offer the creditors) and we would rent accomodation freeing up enough to offer our creditors just 40p in the £ (main creditors HSBC). We estimated that this would take approximately 6 months to complete.
The Iva proposal stated a payment of £377 per month to be increased to £677 after 6 months.
When it came to the time of signing and returning our proposals I noticed that the mortgage and secured loan repayments were quoted considerably less than we had stated and we were told that this was to show that we could afford the dividend to pay HSBC.
Needless to say I put this on hold in the hope that we would sell our house and be able to be in a position to truthfully state that we could afford the £677 per month and offer more with this being over 60 months rather than 55.
The IVA company have since contacted me to say that the proposal has now been cancelled.
Then today the unthinkable has happened - we have an offer on our house. We have been offered £3,000 less that will cover our mortgage, secured loan and estate agents fees.
Firstly is it would be illegal for us to sell our home if the sale amount would not meet the commitments?
Secondly can mortgage shortfalls be included in the IVA proposal if the home is sold rather than repossessed?
And thirdly if we were to sell for less than the outstanding amount would this be frowned upon by our unsecured creditors for additional credit included in the IVA?

[jane.l]

We came up against this problem when we tried to sell our house.

We ended up one day, sat in the estate agent/solicitors office, they told us the secured loan company would not release their 2nd charge as there was not enough money to cover it! so we could not exchange contracts and we could not pay the solicitors/estate agents fees of over £2,000!!!!!

I realised then, the awful mess we were in. I had to quickly think up an excuse and hastily left!

I am not sure if you can sell your house in that situation, we couldn’t. We had to just leave it to be repossessed and are now bankrupt

[MelanieGiles]

Hi nico

You will need to get the permission of the secured loan company before selling, and some of these companies can be quite difficult, although if you are only predicting a £3k shortfall you might have some luck.

If you do manage to sell, then the shortfall can be included within the proposal as an unsecured creditor.

Your creditors would not frown on you, rather commend you for taking a decision to sell your home so that you can offer them some form of repayment.

And finally can I add that you did the right thing by not signing that proposal. IPs who put forward false figures to make IVA fit criteria do not deserve to have good clients such as yourselves.

[ianmillington]

Hi

Basically you will have a problem selling as the buyer (or rather their mortgage lender) will require free and unfettered title, which you cannot supply unless you satisy all charges.

If you can agree with the mortgage holder that they can take possession and sell as mortgagee in possession or ask the secured lender to do this then the above problem won't apply. Alternatively you will need to get clearance from the secured lender that they will be prepared to release their charge on payment of less than the full debt leaving them with a small unsecured balance, to be included in any IVA you propose, should that be your proposed course of action.


I don't believe the creditors will take a dim view of this.

Ian

[nico]

i have just had the redemption through for the mortgage and it would appear that I will have a shortfall of just £500 on the original secured loan of £12,000 which was taken out over a year ago so fingers crossed the outstanding amount will not be much more?!
Should I will speak with the secured loan company as see whether they will accept this as a full settlement or explain to them about the whole IVA proposal?

[MelanieGiles]

I would speak to the secured loan company as soon as possible and sound them out about a sale. There is no need to tell them about your intentions to propose an IVA at this stage.

[luluj]

When we moved our house sale money covered the mortgage and secure loans, however left us with nothing for solicitors fees. My mother paid these on the understanding this was a one off loan of money in order to resolve the house sale and that she did not expect this to be repaid until after our IVA was fully completed.....our IP company agreed to this.

[nico]

I was under the impression that the 1st mortgage and the estate agent fees were automatically taken from the house sale proceeds before the 2nd mortgage?

[jane.l]

our solicitor told us that the mortgage has to be paid first, then the 2nd charge and then whatever is left(if any!) would be for the solitor's fees

[nico]

If this is the case then we could pay both of our secured lenders and then pay off the outstanding amount to the estate agents possibly in a couple more installments following the sale?

[luluj]

Certainly my solicitors told me that after the secured loans had been paid off it left the deficit for there and the solictors money - therefore we had to get the help of the Bank of Mum!

[nico]

So does this mean that we could go ahead with the sale on the basis that we can afford to repay both loans if we can make alternative arrangements to pay estate agents/ legal costs?

[ianmillington]

So long as the solicitors and the estate agents are happy to do this, yes. They might be willing to do so if to do otherwise would scupper the sale.

However, if you then repay them and then go bankrupt or into an IVA then there is the potential for someone to argue preference. My personal preference would be for the secured lender to agree to remove the charge if the shortfall is only nominal (the amount might be less than the redemption penalty anyhow!) and to rank in any formal insolvency. If the wheel falls off the sale and either lender is forced to take possession proceedings their eventual losses will be far more.

Ian

[jane.l]

Yes, that is what happened to us!

If it was just a case of finding the £2000 for the solicitor’s fees then I might have asked family, unfortunately, our secured loan was for £35,000 and they would only receive £16,000 in the event of a sale, we wanted to put the shortfall into an IVA but they said no. We had no choice really but bankruptcy and now they will receive nothing. Originally all we wanted to do was sell our house and downsize and continue to pay all our debts, but we could not transfer the secured loan on to a cheaper property, that’s when the problems started and we looked at an IVA, then that did not work out either

[nico]

Many thanks for all your responses,
Just to follow on the sale of our house, our secured lender (second charge)have said that we shall have to cover the shortfall by applying with them for an unsecured loan or the sale cannot go through.

I have been in contact with Payplan about now going forward with an IVA proposal and we have moved into our rented accomodation as the sale was expected to go through on 20th March but has been held back due to the prospective buyer being in the armed forces. I am sure though that it would be fraudulant to apply and IF accepted agree to the terms of a new loan knowing that we would be unable to meet the payments in full!

I really do not know where to go. Our house is empty and the buyers are eager to get moved in. We accepted only £4,000 less than the asking price after being on the market for almost a year. The housing market around this area has been very slow with the possibility of house prices falling further and I am sure that if we were to allow the house to be repossessed not only would we incur additional charges we would not be able to afford the payments and the eventual sale of the house would not achieve the sum on offer.

Has anybody got any suggestions on what I can do to fight my cause further or should I just throw in the towel now?