NEW IVA - Can Someone Clarify??

[Trottstar]

Hi - husband and I are in process of setting up a DMP when at the last minute weve been suggested to take out an IVA. Looked into it and seems like a good plan but can someone please explain the re-mortgage thing in Y5. What if there is no/little equity in the house. What exactly are they going to ask me to do?

[Michael Peoples]

Your property will have to be revalued and you will be obliged to remortgage to a maximum of 85% loan to value. If there is equity and you cannot raise the funds your IVA will be extended by a maximum of 12 months. If there is no equity or less than approx £5,000 the IVA will cease after 60 payments. Hope this helps.

[Trottstar]

Yes it does - the liklehood of there being more than 85% LTV available is quite small anyway. So what happens if say there is £30k equity, and you remortgage...What if A) You are refused as credit rating is crap or B) You remortgage foe £30 minus fees, what happens to the money? Thanks for replying quickly - its like a lifeline having you guys out there! x

[Michael Peoples]

If you cannot remortgage you will be expected to make 12 more payments even if this does not bring in the £30k available. You will need to show that you have tried and failed but especially at this time that would not be difficult. Alternatively, you could enter funds from a third party as full and final and again this would not need to be £30k but be a good offer.

If you can raise the money by a refinance the money will go into the IVA pot and distributed to creditors. Your new mortgage payment cannot increase by more than 50% of your IVA payment so you will not be expected to take on something not affordable. Once the remortgage has completed your IVA payments will reduce or cease depending on your new surplus and regardless will end after 60 months.

[MelanieGiles]

Curious that an IVA was not suggested to you in the first place. Has there been a change in your circumstances along the way which now makes an IVA possible, whereas it was not before? Which firm are you with?

[Trottstar]

Pay Plan - weve been passed over to them from the National Debt Helpline who have been brilliant. This lady from Pay Plan called me today to discuss final figures before its passed to a DMP administrator and she suggested that an IVA might be better for us considering we will have to be paying about £510 over 7.5 years. She said that an IP could get this amount reduced as they are allowed to claim for more living expences and it would bring the term down to 5 years - so all in all a better deal?? Is this correct? And also - since payplan are doinf the DMP for free would an IVA be free to set up too?

[Michael Peoples]

No IP company works for free but we do get paid from whatever contributions you make. These fees are agreed with the creditors at the outset and most companies work no win no fee. If your IVA is not approved the IP stands the cost so it is not in anyone's interest to propose something that will not be accepted or run 5 years.

[MelanieGiles]

I'd love to see an IP get increased living expenses that would usually be allowed in a DMP!! Is this another example of a company funded by creditors squeezing their clients unecessarily?

IVAs are generally run over a five year term, so she is not really doing you any favours as probably an IVA was always a better option.