Newbie

[Stell]

Hi all [:)]

My o/h has been in a Debt Management Programme with Payplan for 18 months with no probs until now - some of the creditors are getting a bit heavy-handed! PP suggested an IVA which seems a reasonable option as his debts are £32,000 and he has been paying £260 per month.

I have a couple of questions :
1. In a seperate post you mention about Practioners fees? I asked PP about this and they told me we dont have to pay any fees - is this correct?

2. We have a mortgage (in joint names) the debt is in my o/h sole name. What would happen if we enter into an IVA and then decide we want to sell the house?

3. We are going to have to re-jig the mortgage anyway as when it was taken out, my o/h wasnt informed he would need an endowment to cover the repayment. This means he will be around £16,000 short on maturity in 8 years - the Lender have agreed to "re-mortgage" us to cover that shortfall. Would this transaction be allowed once an IVA is in place or should we wait until after the mortgage thing is done and dusted?

Thank you for any help you can give me.
Stell [:D]

[ianmillington]

Hi Stell

1.The fees of the IP come out of the "pot" so effectively the creditors pay (unless your o/h pays in full or nearly so).

2. From what you say, you will need to cooperate in the remortgage (assuming you don't have any debts) but it should not be necessary to introduce any of your equity into the IVA. If you sell part way through, expect the Supervisor to have taken out a restriction, which will block it. If you do want to sell, then you will have 2 options: either offer to settle the IVA early or, if it's simply a house move, roll the equity into the new property. Whatever option you take, you will need to discuss it with the Supervisor first.
3. Once the IVA is in place you will struggle to do anything which distorts the equity position.

Can I just ask, Stell, if an IVA is the right solution now, why wasn't it 18 months ago- on the best case scenario the DMP was always going to take over 10 years?

Ian

[Rachael24]

Good information, Ian. I was in the same boat with a few of these questions. Thanks!

[Stell]

Thanks Ian.

Good Question! Probably because an IVA wasn't suggested as an option and we were at our wits end thinking we were going to be thrown into the streets so grasped the DMP ? The problem is that although almost all creditors accepted "arrangemenets" some now seem to have strated getting a bit heavy with us (him). One HS Bank debt is 11,000 (that is the largest single amount of debt)but they have said they would accept £7,000 as a full and final settlement - I maybe could manage to borrow that amount and clear them BUT will the other creditors then sue us or whatever ...tbh it is all going round and round in my head!!

Also, I see that the final equity payment in an IVA after the 5 years is "often paid by way of a small re-mortgage" BUT how can the bebtor get a re-mortgage if the IVA probibits them from obtaining further credit?
Sorry my post sounds so cinfused.
I really do appreciate any and all advice and help.
Thankyou
Stell

[ianmillington]

Hi again Stell

Probably not too wise to labour the IVA vs DMP point as the past can't be undone of course.

To get things straight on the mortgage point. There is nothing in law to stop you getting credit following approval of the VA, although if you do without the Supervisors permission then it's breach of the proposal and the worst case scenario will be termination of the IVA. So credit card and "consumer type" loans are out although for example if you need to finance a car to get to work that will be OK, but you'll need the Supervisors permission.

The remortgage in year 5 will recognise the fact that someone in an IVA will be less able to raise finance than someone who is not. Typically under the new protocol It will assume that it won't be possible to get over 85% LTV. Also, the increase in monthly mortgage subscription cannot exceed 50% of the monthly payment into the IVA. If the amount available by remortgage is only very small, the Supervisor will be able to extend the VA for up to a year instead.

Make sense?

Ian

[MelanieGiles]

But it is a fair point Ian, and was the first one which struck me when I read the post. It is clear that all options were not appropriately explained to Stell's partner, but one thought that strikes me now is that if you were to raise a sum of money from the property to offer to credtitors in full and final settlement now - would that perhaps be a better option.

Or as Payplan are actually funded by your creditors, would they be prepared to do this for you?? If you were with a proper commercial DMP company, I think that they might be suggesting this to you now rather than giving you the option of a five-year IVA with an equity release at the end.

Just a thought!

[ianmillington]

Yes, that's true. In fact, to address the broad issue, there ought to be a full review of the position before the next step is taken. It might be a one-off payment might be an option, subject to the numbers.

I think it is for Stell (or her other half) to ask whether they ought to be seeking a second opinion on the way forward, given that they appear to have only been advised about the IVA now the wheel has fallen off the DMP.

Ian

[Stell]

Thank you Ian and Melanie - you read my mind!!! Prob is one creditor already has a judgement against the property so after mortgage lender, creditor, my share, he would be left with equity of 12,500 - if we thought they would accept this, we would sell!

I am not prepared to sacrifice my portion as I have paid the mortgage payments myself for the past 10 years - hope that doesnt sound selfish!

We have already been told that they prob will not agree to settle on that - if an IVA is agreed, they would all get a share of 18,000 so obviously they aint gonna settle for 12,500.

Also Melanie "proper commercial DMP Company"???? - very worrying.
Stell

[MelanieGiles]

Understand your position regarding your equity share, but would it be possible to raise the £18k between you to offer a full and final settlement? Your partner could always pay you back out of his disposable income and it would be a much quicker solution.

I would definately recommend a second opinion to be sure.

[ianmillington]

Basically Stell, I think you need to start from square 1 with a proper review of the I&E from the ground up. I'm also very interested in a couple of property-related points you've made:

1. I assume by judgement you mean a charging order? If it's your o/h debt, then it's against his share of the equity, and not yours. It's not clear what assumption you made as regards that point when you gave us the figures, but if it lies against just your o/h share how does that affect things? By the way, did this happen whilst the DMP was running?

2. Very interestingly, you say you have paid the mortgage for 10 years. That may (I repeat may) mean that your share of the property is more than 50/50 to begin with. I say may because if your o/h has contributed financially in other ways, that might swing the pendulum in the opposite direction.

It is clear that, if your o/h does an IVA, irrespective of the fact that you won't be entering into it, you will be significantly affected by it and will need to be on board at all stages of the progress. I'm rapidly coming to the conclusion (and hope Melanie agrees) that you should start the ball rolling with you both having a meeting with your proposed IP to thrash out the issues, particularly surrounding the property, before you start. The info you have just supplied in my view makes any proposed IVA too complex to be simply set up over the phone.

Hope this helps

ian

[MelanieGiles]

I completely concur with Ian's advice - especially his points with regard to your personal position. Once you have the facts and options on the table then you can both make a choice as to the best way forward. And I would hesitate to use a provider who could have given your partner this same advice prior to him entering into a DMP.