The lump sum payment at the end of IVA

[Stupid]

Another question please.

As I understand it an approved IVA will probably include a compulsory equity release on your property at the end. Is this in addition to the 60 payments of the agreed amount.

How is it calculated? Who is going to lend money to someone with an incomplete IVA and a bad credit rating anyway?

Maybe I am just living up to my name?!?!?!?!

[MelanieGiles]

Hi there

You will be required to have your property revalued during the final year of the IVA, and seek a remortgage based upon 85% of the value of your property. If this would raise monies in excess of £5,000, you would need to pay these over to the Supervisor on top of the contributions you have made to date. Your new mortgage payments are limited to no more than 50% of your then disposable income, and if this drops to below £50 per month you would not have to pay over any more and the IVA could then conclude.

There are many lenders who will re-mortgage IVA clients - after all you have no debts, and a history of making regular payments to your IVA for at least four years.

[carlmcmullen]

Melanie,

What happens if you propose to introduce xxx equity in the final year and when you get there you are unable to release this equity due to perhaps income multiples or property value.

If you can evidence your attempts would creditors just allow you to make income contributions for the remainder of the arrangment or would you have to extend the IVA so you still meet the required dividend?

Carl

[MelanieGiles]

Hi Carl

The trick is not to actually quantify the equity in the first place. In my IVA proposal we usually refer to this figure as TBC, thereby not including any value in the dividend calculation.

There may well be some difficulty with income multiples, although there are lenders who do not require this criteria, and at the end of the day the equity raising is limited to a sum which would not cost more than 50% of the disposable income then being paid.

If you were really stuck, you would need to call a meeting of creditors to explain why the debtor was unable to raise the money, and I feel that it is unlikely that this would result in the IVA failing - and you might want to suggest extending the IVA for a further year as a gesture of goodwill.