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Hi,

I was wondering whether you can advise us on how to proceed further. My partner and I are currently in a Debt Management Program with Payplan. We have a combined debt of around £66k paying £180 a month. As you can see we will probably not see the end of the debt in our lifetime.
I was wondering whether an IVA might be the answer, we have a mortgage for £209,000 and the house value is around £250,000. Please can you let me know if an IVA would be possible for both of us and if so how do i go about it ?

Best Regards

Hi joe and welcome to the forum

An IVA would certainly at least give you an end point to look forward to, but you would have to face raising equity on your property during the final year which, given today's credit crunch conditions, could be tricky. You would be required to raise a new mortgage based upon 85% loan to value which, given the current value of your property would only raise a couple of thousand pounds.

Have you thought about downsizing to a smaller property - smaller mortgage and using some of the money to reduce your debts or even offer an IVA at that stage. Can you tell me what part of the country you live in and how much your current mortgage payments are.

Hi
Is £180 per month the most that you can pay ? It is probably not enough for an IVA,however you could look at moving your mortgage onto an interest only one and release more money towards an IVA ?You could sell up and use the proceeds to offer a full and final IVA instead.
What is for sure is that you need to look at a real solution,your DMP is not one

Hi Melanie,

Thanks for responding to my question...

Its good to know that there are people out there i can talk to about this. I don't think downsizing would be an option as we have three kids totaling five of us, we currently reside in a three bed semi.
We live in Haslemere Surrey and currently pay £1247 a month on the mortgage

Thanks Melanie

MelanieGiles wrote:

Hi joe and welcome to the forum

An IVA would certainly at least give you an end point to look forward to, but you would have to face raising equity on your property during the final year which, given today's credit crunch conditions, could be tricky. You would be required to raise a new mortgage based upon 85% loan to value which, given the current value of your property would only raise a couple of thousand pounds.

Have you thought about downsizing to a smaller property - smaller mortgage and using some of the money to reduce your debts or even offer an IVA at that stage. Can you tell me what part of the country you live in and how much your current mortgage payments are.

As Andy says, you may need to switch to an interest only deal to free up more disposable income, followed by a possible equity release later on. This may make an IVA feasible without the need to sell up, but you would be well advised to speak to 2 or 3 different professionals to get some ideas on that.

You can look at reviews of IP firms at www.iva.com

Good luck and best wishes.

Hi Siz5 and Andy

Thanks for replying and giving us advise
We have a joint interest only mortgage already and we can only remortgage in 18 months time as we are locked in for this period
Cheers

size5 wrote:

As Andy says, you may need to switch to an interest only deal to free up more disposable income, followed by a possible equity release later on. This may make an IVA feasible without the need to sell up, but you would be well advised to speak to 2 or 3 different professionals to get some ideas on that.

You can look at reviews of IP firms at www.iva.com

Good luck and best wishes.

Hi Joe

You would need to have your income and expenditure reviewed in detail, but if you really can pay only £180 per month there are a couple problems that will need to be overcome. Firstly, an IVA based upon that level of contribution will be highly vulnerable to interest rate rises. I note you are currently "locked in" to your current deal - by that do you mean it's a fixed rate in addition to being unable to move?

Secondly, on my very rough figures the dividend (ignoring any remortgage) is only 12p in the £, which some of your creditors might find unattractive. Is there anything you expect will happen in the next 5 years (HP etc commitments ending, children leaving school etc) that might enable you to increase the contributions?

ian

I have researched renting in your local area and it is similar to that which you are currently paying. So you are effectively caught in the "equity trap" where you have an asset which you cannot afford to realise.

You will now have to balance whether a neverending DMP is the right way forward, or whether it is better to bit the bullet now, sell up and go into rented and attempt to get back on the property ladder at some stage in the future. Bricks and mortar are not everything, and family life and freedom from debt might just take a higher priority if you sit and think about it.

If you were to consider selling, an IVA could be proposed on the basis of the sale proceeds being offered to creditors, allowing you a relocation budget to cover removal costs and rental deposit. It is worth thinking about.

Hi Ian,

Firstly thanks for your support on this, i am already on a fixed rate mortgage and its an interest only one. There is a charge of £10k if i decide to remortgage before 24 months. At the moment and near future there will be no major changes in our income and expenditure except that i am an IT contractor so my monthly salary changes depending on what my hourly rate as i work for different clients from month to month. After going over my expenditure again we could possibly afford £350 a month but that will mean some overtime for both of us.

Joe

ianmillington wrote:

Hi Joe

You would need to have your income and expenditure reviewed in detail, but if you really can pay only £180 per month there are a couple problems that will need to be overcome. Firstly, an IVA based upon that level of contribution will be highly vulnerable to interest rate rises. I note you are currently "locked in" to your current deal - by that do you mean it's a fixed rate in addition to being unable to move?

Secondly, on my very rough figures the dividend (ignoring any remortgage) is only 12p in the £, which some of your creditors might find unattractive. Is there anything you expect will happen in the next 5 years (HP etc commitments ending, children leaving school etc) that might enable you to increase the contributions?

ian

Hi Melanie,

I see what you mean as the average rental monthly fee is roughly what we are paying on our mortgage at the moment. As i said to Ian, there may be a way of doing some overtime each month to increase earnings so that we can afford an IVA, if this is possible would the amount be fixed every month or could it be flexible ?

Joe

MelanieGiles wrote:

I have researched renting in your local area and it is similar to that which you are currently paying. So you are effectively caught in the "equity trap" where you have an asset which you cannot afford to realise.

You will now have to balance whether a neverending DMP is the right way forward, or whether it is better to bit the bullet now, sell up and go into rented and attempt to get back on the property ladder at some stage in the future. Bricks and mortar are not everything, and family life and freedom from debt might just take a higher priority if you sit and think about it.

If you were to consider selling, an IVA could be proposed on the basis of the sale proceeds being offered to creditors, allowing you a relocation budget to cover removal costs and rental deposit. It is worth thinking about.

The payments really need to be fixed Joe, and if you cannot commit to a regular payment then an IVA is unlikely to be a sensible option for you.

Thinking about you Joe I hope you get sorted.

Hi Marie... Thanks for the kind words are you in a similar situation ?

Moneystinks wrote:

Thinking about you Joe I hope you get sorted.

Hi Melanie, i am looking at our budget etc etc to see if we can be able to make a fixed payment every month, once again thanks for all your help

MelanieGiles wrote:

The payments really need to be fixed Joe, and if you cannot commit to a regular payment then an IVA is unlikely to be a sensible option for you.

Hi Joe

I am currently applying for an IVA with Melanie. This is the worst thing I have ever had to do....but....this forum and the people that post are so lovely and none judgemental that bad days are made not quite as bad and good days made really good!

The expert advice is a real help and it puts my mind at rest.

We viewed the site for a while and then started to post. We then sort Melanies help. Melanie's team are great - they are kind and helpful. If I have a problem after work hours then I can post on here and more often than not Melanie posts everyday anyway and usully picks up my message. If not then there is always somebody on hand with the information I need.

Good luck I hope you are starting to feel abit better. Keep posting and even if you feel you are asking a silly questionask anyway as usually there is somebody else wondering the same.

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