Been reading the posts on this site and they are full of good advice so hoe you don't mind me tagging along!
My question is:-
I'm considering my debt options at the moment (and haven't got that long to do it before BR may be my only option) so I hope that someone might be able to advise me.
I have 70k of unsecured debts. I have briefly spoken to an IP who just took a few basics down as I was only enquiring but the jist is I have a mortgage of 75k (interest only) and the property is valued at 110-115k so therefore at its top rate I have 40k of equity in the property now although it is not releasable as I am at the top level of my borrowing. With my incomings and outgoings if I were to be considered for an IVA, whatever left would only be sustainable to offer a dividend to creditors of the very minimum of 25p to the £. Would that offer even be considered by creditors if over 60 months of payments the amount paid into an IVA be less than the equity that I have got in the property at the moment???
I'm not sure how it all works but would they prefer to say make me bankrupt now and get the equity which is more than they would achieve over the 60 months?
I'm pretty sure that I would have to release equity in the 4th year but considering that I am mortgaged to the hilt already and I pay interest only then it would be unlikely that I could ever release that much more so wouldn't the creditors just say no to an IVA proposal If an IP even thought it viable) as they can get more by making me bankrupt now?
Hi and welcome to the Forum. As you do have a sizeable equity chunk creditors will want 85% of that released into your proposed IVA in the final 6 months of a 5 year proposal. This will be limited to 85% LTV and the proviso that any increased mortgage payment cannot exceed 50% of your final monthly IVA payments.
That said if you cannot re-mortgage then you might have to keep your IVA going for a further 12 months.
The other alternative is to sell the property.
You need expert advice so visit www.iva.com and review firms of IP's and select one or two who will give you the appropriate advice and the advice is free. Good luck.
Regards, David Mond, Insolvency Practitioner for over 46 years. Personal Insolvency Practitioner of the year 2012, Personal Insolvency Practitioner of the year finalist 2013 & 2014 awarded by Insolvency & Rescue Magazine and 2015 finalist for Personal Insolvency Firm of the Year.
I think you have a very good chance of putting forward an IVA given the facts that you have presented, but the IP you spoke to ought to have advised you that the equity in your property would also be taken into consideration in an IVA.
You will be required to get your property revalued during the final year of the IVA, and secure borrowing based on a maximum 85% loan to value - so given the figures you have just provided us with, and assuming no property growth over the next four years or so (which may be unrealistic) you would be able to borrow £98k of which you would need to use £75k to pay off your existing mortgage leaving £23k for creditors.
If the property is jointly owned, then only your share of the money would be needed, and your new mortgage payments would be limited to 50% of your then monthly IVA payment.
This may be a little complicated to understand from a brief forum post, so I would suggest that you contact an IP who specialises in IVAs and can assess your situation properly.
If it may be possible to put an IVA proposal forward for me based on the equity that I have in the property then what when it came time to re-mortgage and release finds I am not able to do so? I am mortgaged to my full capacity at the moment and its interest only and I gained this mortgage offer a few years back when I was earning more than I do now. So based on this in 4 year time I can't see that I would find a mortgage lender that would lend me more than they do now?
If that is the case and I am unable to release any equity would I default the IVA as you say that the creditors would be expecting a large equity release? especially if I can get an IVA in place which only pays say 25-30p in the pound which is what mine would be if I could get it agreed as this would be my total amount of surplus after outgoings? or have to pay 12 more months and would that mean that I would be paying for 6 years?
I really don't want to sell as I'd have nowhere to live and still have to do an IVA for the remainder of the debt.
You merely have to demonstrate that you have made every effort to secure the additional funding. If you cannot raise any more money, your IP will revert back to your creditors on that basis to ascertain their wishes. This could result in you being asked to pay an extra year's contributions in lieu of the equity, but I personally feel that this is more favourable than a higher mortgage which will go way into the future for you.
You may be interested to learn that the average dividend payable across IVAs generally is only about 32p in the £ - so you are not far from that ballpark now.
Sorry, one, maybe two last questions! Gosh you must type quickly!
Would that then mean if I could not re-mortgage then that my IVA could last 6 years and not 5? Is this usual? or what I mean is this commonplace for people who cannot remortgage (as I should imagine that there are many)
and if I could (someway) get a remortgage does the whole equity release amount go into the IVA 'pot' and how would I then be able to afford the increased payments on my mortgage as well as my IVA?
I learned to type in the Army, and we were made to type very fast and accurately - sadly I don't always manage the last one!
I suspect that creditors will want to see an extra year's contributions, but as the IVA protocol which introduced this term was only introduced in February 2008, it will be 2012 before we see the real implications of this.
As I said earlier, the new lending is based on 85% of the value of your home, and out of this you would need to pay off the current mortgage and any secure charges registered against the property first. If your property is jointly owned by your partner, you will only have to pay over 50% of any equity raised - so in reality, you will probably only borrow as much as you have to.
Hope this helps - but a chat with an IP will probably be more beneficial as there are bound to be other questions you will want to ask as well.
If there is anyone else out there on the forum who has had their IVA term extended due to non availability to release equity in 4th year can you let me know what happened in your situations?
Or if you were able to release equity then how did/does it work what with having to pay extra mortgage payments as well as your usual IVA payments in the final year?
I'll speak with some IVA companies tomorrow as well.
Thanks. This forum is great to learn things from and others experiences, so that I know what I could be getting myself into. I don't want to go into something which I didn't make attempts to find out as much as I can about first.(shame I didn't think that way when I was using credit and living a life that was WAY beyond my means)
Theres plenty on here who have had their IVA's run into a 6th year due to lack of availability of equity due to mortgages not being there to take.
I think different Ip's handle it all slightly differently so make sure you are happy as to what you are signing up to before putting pen to paper.
I am sure that any new mortgage payment isnt allowed to be over a certain percentage of your IVA payment.One of the Ip's will clear this up.
Discharged today the 8th feb 2012. View is much brighter now.
Continuing to rebuild our credit worthiness.
