It was not made clear that we would be forced to sell our house. What can we do ?

How can I avoid selling my home release equity in to my IVA?
When I set up my IVA the main creditor HMRC inserted a modification which reads "The debtors’ property is to be valued 12 months before the end of the arrangement and funds to the value of the debtors share of the equity shall be paid in to the arrangement, in addition to other funds". I had no idea that this would mean selling our home if we couldn't release the capital in any other way. We cannot re mortgage, our income is too low. Therefore, our IVA provider having discussed the matter with HMRC have asked us to sell our home and put the equity realised in to the IVA!! We feel duped and let down by our IVA provider who did not make it clear to us that we would be forced to sell our house. What can we do??

Whilst I can sense your disappointment here Andrew, can you really blame your IP for not understanding this term? It would have had to be expressly agreed by you in writing at the time your IVA was accepted, and to refuse to do so would have resulted in HMRC rejecting the proposals.

What is your property currently valued at, and how much do you owe on the current mortgage?

There is an outside possibility of a secured loan, depending, of course, on how the figures stack up.

It's not a question of blame really, although clearly I'm devastated at not being aware of this until now.
Even reading the words of the modification now it does not make it clear that we have to sell our home. Especially when there is another modification which clearly states that if we can not re mortgage we will be asked to extend our monthly payments by up to 12 months.
Our current mortgage is £105,000 and the only valuation we have had says our home is £225,000. Which I think is on the high side, even so it leaves plenty of equity. Is there nothing we can do to avoid selling our home?

But how did you think you would be able to raise the equity? And if you had your time all over again, and declined to enter into the IVA, what would you have done to repay your debts at that time?

My understanding at the time was that we would pay the agreed amount for five years, re-mortgage in the last year if we could. If we couldn't then we may have to pay for a further 12 months. There was no mention of selling our home at the time. In fact one of the main reasons we were advised to enter an IVA was to protect our home. I can't tell you how completely devastated we are, we've struggled mercilessly for four and a half years and now our only option is to have to sell our home. It beggars belief, surely there is an alternative course of action?

Perhaps there should be a standard explicit plain english warning issued in writing when terms such as these are proposed

eg "If you can't raise a loan or a mortgage for he difference between your homes value and the mortgage balance, you home will be sold"

Martin

But that would have meant that you would have been expecting to get a 100% loan to value mortgage whilst in an IVA - or at least up to the value of the remaining debts and costs. I am sorry to sound a tad harsh Andrew, but I really don't understand how you could not have understood the implication of accepting that modification - however your IP ought to have made absolutely sure that you did.

Martin - I think that most reputable IPs make absolutely sure their clients understand those very penal terms.

Well, that's fine to say that the IP ought to have made certain that we understood the implication of accepting the modification. The simple fact is that they didn't - not until now! Read the words of the modification and tell me which part says anything about selling our home?
The question I have yet to have answered is what to do about it now?
If this forum has experts what do the experts say we should do? Or is it a question of closing ranks within a particular industry? I find it impossible to believe that I have no alternative other than to sell my home, is this the case?

It doesn't need to say anything about selling your home Andrew. It states that you will raise the full sum of the equity in your property based on a final year valuation. The choice of how you execute this has always been left with you.

There is no way you should view my comments as closing ranks with anyone. I am the only insolvency practitioner who regularly posts on this forum, and I give advice to the best of my ability - but I cannot advise you specifically as to what to do. You could consider consulting an insolvency specialist lawyer, however I rather fear that you will get the same advice in that you willingly entered into the contract and are now expected to abide by its terms.

Do you know what funds would need to be raised to cover the remaining debts in full and the IPs own costs? Have you attempted to secure any form of lending against your property?

It is not your IPs fault that this modification exists. One of your creditors suggested it, and you agreed to accept. You may gave been a tad naïve to assume that you could raise the money via a re-mortgage whilst in an IVA, and your IP should have questioned you as to how you would comply with this requirement. It is a very well known one from HMRC at the end of the day.

I again ask the hypothetical question - what would you have done had your IVA been originally rejected, leaving you with the choice of bankruptcy proceedings where the house would have been at risk at a much earlier stage, or perhaps a lengthy DMP which HMRC would probably not have agreed to either?

What were the reasons which led to your financial difficulty, and why did you end up with a HMRC debt?

The HMRC debt arose from property sale associated with our business,the collapse of our business led to us to entering the IVA. Our business went in to CVA which prompted the IVA because one of the limitations of the CVA was to restrict our personal income. At the time of the IVA we had no chance of releasing equity in the property because our income would not qualify for an increase in mortgage, this is still the case. In answer to the question - what we would have done at the time if our IVA was rejected? That's a very good point, because no such option was offered, it was presented to us that creditors would benefit more by accepting the IVA rather than considering bankruptcy, which is why we opted for IVA, that was the advice we were given.
At the time we thought our IVA provider was helping us, now I'm not so sure!
Do we have options at this time?

Yes.

You can sell your property and comply with the term

You can try and get the IVA varied to remove this clause.

You can find out how much money is required to pay your debts and costs in full, and try and borrow it

You can refuse to do any of the above, let the IVA fail and negotiate with creditors directly

I think you should now take this matter up with your IP directly. We cannot specifically advise here without full knowledge of the background of your case.

As this modification was inserted specifically by HMRC, can I negotiate with them outside the IVA?
If I fail the IVA what is the likely reaction of the creditors?
Is it possible to vary the IVA to remove this clause? If so how would I go about this? Clearly my IVA provider does not think so as they have not suggested it or tried to do it?
On the basis of where we are I have little confidence in my IP, should I take advice elsewhere? If so where?

Hi

HMRC can often insist on maximum equity release [this can involve a house sale] and if you end your IVA early you are in danger of them petitioning for your bankruptcy

Chat everything through with your IP

Regards

There may be the possibility of a secured loan and HMRC may accept this if it is the maximum you could borrow. Have a word with Shaun and see if you can raise anything at all and ask your IP to put this forward. You have little to lose as HMRC can only reject and ask for the house sale anyway.