Compensation

[fireblade3516]

Hi, would appreciate any advice on the following -

I'm hoping to be getting some compensation from a legal battle as I was allowed to buy a new build property which doesn't have full planning permission and doesn't comply to full building regulations.
The amount is purely to cover works etc needed to put right everything and does not include any personal damages.
The amount is greater than the total of remaining payments I have to make on my IVA, (but not greater than the amount I initially owed).
I presume I will have to declare it but I'm hoping to look at 2 options, either use the lump sum to make a full & final settlement or use it to get everything done that the house needs to comply with all the issues ready for the valuation 1 year before the end of my IVA, (currently 2 1/2 years in). I owe a lot more on the mortgage than what it is worth in it's current situation.
Thank-you in advance for any advice

[Michael Peoples]

Personally I would think the compensation should be spent on the repairs and therefore would not be a windfall. This would restore the property to what it should be worth and the equity can then be addressed in month 54 in the normal way.

[fireblade3516]

Hi Michael, thanks for the reply, that's what I thought to be honest but if I didn't spend it on the house do you think there may be any chance it could be accepted as f&f settlement or does a f&f settlement usually have to cover the whole of the initial debt?
Thanks in advance

[KAYKAY]

I think if you didn't get their permission to use it for repairs, they would treat it as a windfall and request it get paid into the IVA, and still want release of equity in year 4, this way it will increase the dividend to creditors. After all they are supposed to be working in the interests of both creditor and debtor. Be very careful.

[fireblade3516]

Hi Kaykay, I fully intend disclosing it, just want to get it right when I speak to my IP. If the lump sum is not sufficient to cover initial/outstanding debt can it be used as a f&f payment or would it just get paid into it. Not trying to mislead my IP but I don't intend moving in the next umpteen years so my property can be sorted over time, I am hugely in negative equity and there's no way my LTV would be below 85% in 2 and a half years time.

[Lisa Thomas]

I would like to think this would not be treated as a windfall as the award was made for a specific use. If I was your IP I would have to have a quick check with an insolvency lawyer to make sure my thinking is correct and you could therefore use towards a F&F. Out of interest how much will it be and how much do you owe - you might be able to offer some in F&F and keep some...

[fireblade3516]

Hi Lisa,

Don't have the paperwork to hand but roughly:-
Initial amount owing approx. £70k
Have made:-
13 payments of £685
7 payments of £334 (variation made as partner reduced hours on medical reasons)
11 payments of £515 (partner changed job and increased hours - after review)
Currently paying £515 per month
Amount of compensation approx. £22k (hopefully)
Mortgage balance approx £200k
Approx value of property without works carried out £130k and with works carried out £160k
Bit sketchy I know but appreciate any input,
Thanks in advance

[Lisa Thomas]

Hi. How long was original IVA for - i.e. how long have you got left at £515 and what was original proposal about any equity in your home?

[Adam Davies]

Hi

I think your IP will be keen to offer this amount as a full and final settlement and I think your creditors would agree to it

Chat with your IP and good luck

Regards

[fireblade3516]

Hi all

Original IVA was for 5 years, with regards to equity - my understanding is that my IP will get a valuation done, if my LTV is below 85% I will be required to remortgage up to 85% LTV and pay that amount in, if can't get a mortgage then have a 1 year extension, if LTV is still above 85% then no further action is to be taken.
Andy - I hope so too

[lifenoteasy]

Make sure that your agreement states that and does not allow for the possibility of a secure loan. 2 IVA companies are stating that a loan is an option despite it not being explicitly stated.

[fireblade3516]

lifenoteasy - I will do but have no recollection of a secured loan being mentioned

[Lisa Thomas]

Hi FB. By my calculations if the extension is required you have c5 years left to go at £515 = c£31k. However it sounds as if you have negative equity so this might not apply in which case the figure would be 4 years at c£515 = £25k. This is your starting figure for any settlement. If my thinking is right then £20/£22k offer on a debt of £25k is a very good offer to put your IVA to bed early.

[fireblade3516]

Hi Lisa I've made 31 payments so I thought that without the extension I have another 29 payments to make, am I missing something? if I'm right then 29 x £515 = £14,935 making my offer more attractive. Thanks in advance again for your comments

[lifenoteasy]

Also look at it from the perspective of what happens if you do not get the repairs done - will that impact on the value of the house?

If so that might make the offer more attractive.