Weighing up Options

[saundej]

Hi all,

I have around £60k unsecured debt, a mortgage of £150k on a house worth around £220k. I've pretty much built up the debt by borrowing to pay off monthly payments etc.. I've spent the last year moving the debt around onto 0% credit card deals and just paying off the 3% handling fees to keep myself afloat whilst not allowing the debt to grow (much).

Looking at the options, a DMP, assuming the interest gets frozen is likely to take me between 15 - 20 years to pay off, we will do everything we can to avoid having to sell our home, which is why the option of an IVA looks more appealing.

I have a few of questions..

1)I currently have an overdraft on our joint accounts which, if I were to enter an IVA I'd want to avoid the bank chasing my wife for the debt (as we'd be both joint and seperately liable for it). The easy option would appear to be to remove my wife's name from the accounts. Is it that simple or can the bank refuse this request?

2)A year ago, I opened an ISA in my name to allow my mother to 'borrow' my ISA allowance. As the ISA is in my name, I assume this money would be taken by my creditors. Is there any way I can avoid this? again, the simple option would seem to be to pay the money back to my mother prior to applying for the IVA but really don't want to appear to be transfering my assets out of my name to avoid paying my debts. If the ISA company isn't owed any money, would the rest of the creditors be made aware of it's existence?

3) Lastly, my tracker mortgage has one year to run before it moves back onto my lenders svr which will result in around a £200 increase in the payments. Would I be better off waiting until the mortgage deal ends before applying for an IVA so that there are no nasty decreases in my disposable income, or can this event be built into the IVA contract.

Sorry about all the questions on my first post, I've just been mulling these things around in my mind for the last month and am looking for some answers before I make any decisions..

[MelanieGiles]

Hi there and welcome to the forum

My first observation is that you have £50k of equity in your property against £40k of debt. Assuming that the property is jointly owned with your wife, she does own half of that - but if she has benefitted at all from your debts you may find that creditors will argue that some of her assets ought to go to pay your debts.

Turning to your specific points

1 Your wife if jointly and severally liable for the joint debts, so you should not seek to transfer them to your sole name even if the bank would let you which they probably will not.

2 Was the money put into the ISA from your mother? If so she may be able to claim it back, but could fall foul of HMRC's ruling that only one ISA per person to the maximum allowance per year is permitted. If you can trace the money back to your mother, and you can settle any HMRC liability on interest which should have tax paid over it, then I would return the money.

3 Your IVA payments can be staggered to accomodate anticipated increases in mortgages and other expenditure if they are known at the time your proposals are prepared.

Don't worry about the questions - they are good ones, and other posters will also benefit from the replies.

[saundej]

Thanks for replying Melanie,

Having checked with a few lenders, it seems that out of the £70k equity, only around £10k is currently releasable via a remortgage.

As we have this equity in the property, does this mean that my creditors are more likely to expect me to sell the property to release the equity than agree to any IVA proposal?

Also with regards to the ISA, I'm assuming, the only way we'd have any chance of claiming this back would be for me to make my mother aware of the situation I'm in so that she can claim it back which really gives me food for thought as she can really do without the worry.

Thanks

[MelanieGiles]

Given that the equity would cover the debts, I think you could be asked to sell if you were to present an IVA proposal. Why not get a forced sale valuation of the property to see if it really is worth £220k - you may be unpleasantly suprised how house prices have fallen over the last 12 months.

I think you would have to come clean with Mum, rather than risk her money being grabbed by your creditors. Without wishing to sound too harsh - this was rather flaunting with statutory legislation in the first place.

[saundej]

The valuation was done a week ago by a local estate agent - is a 'forced sale' valuation a different thing?

I was kind of hoping that it had dropped a bit more in value (sounds strange saying that).

[MelanieGiles]

Forced sale means if values the property at its absolute worst with a restricted timescale for sale of usually three months.

[nomoredosh]

Hi
My advice is get a couple more Estate Agents out to value. The market place is shot to pieces and I know that there are different opinions on values. They can be £50,000 or more apart!! Ask them for a sale price not a market price. Try and look around at what has sold recently that is similar to yours but be aware that the price that they are on the market at is not necessarily what they have sold for!

[soreloser]

Just to demonstrate Melanie is probably right on this - I asked an Estate Agent to give me a price to expect if I wished to sell up quickly and take a job overseas....

The valuation came in at £155K (January) for IVA application info, when only 12 months earlier in December 2007 it had been valued at £220K for a secured loan of £64K (groan - madness on my part).

Unbelievable - second time I have been caught in -ve equity but this time it probably saved me.

Ironic

[saundej]

Hi,

I've had a few more forced sale valuations done which have come out at around £200k. I'm guessing that this still isn't a sufficient enough drop and creditors would still be likely to ask us to sell our house?