final settlement figure, what could we expect?

[cockerhoop]

Hi
we have been in an iva for 2.5 years, we are beginning to get twitchy about the end, all we ever see is IVAs run for 5 years then the debt is gone, but our contract has things in about having our house valued after 4 years, and releasing 75% of the interest? by then our house will be worth more than double it was when the IVA started, and to get a mortgage to get 75% of that difference would be outside our reach. we are thinking of asking for a final settlement figure, as we have about £16k in total in monthly payments to go, what would we be expecting as a figure?

[MelanieGiles]

Hi geoff

If you are caught by the 75% revaluation clause, then it is unlikely that you will be able to propose an early settlement at a lower amount. How much is your house worth now, and how much is the outstanding mortgage? And how much are you currently paying on your IVA payments.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[cockerhoop]

Melanie, what is the 75% clause it was not explained to us? having look at verious websites recently we are of the opinion that after 60 months its over
when we started our ghouse was worth 100k and we owed about 90k, by end 4 years it will be about 200k obviosly a 75000 mortgage would us about £800p/m at todays rate, while our monthly iva is £530, so we would be back in the mire

[Adam Davies]

Hi cockerhoop
Quote "Melanie, what is the 75% clause it was not explained to us?"
This is concerning and to be honest many people seem to not understand fully the equity situation.
Did you have a face to face meeting with your IP ?
You will only be able to remortgage for the amount that you can afford and the max that you will have to pay wll be your original debt plus IP fees and possibly interest at 8 percent per year less your payments made.
Your case,again,shows the need for equity release amounts to be agreed prior to the IVA commencing.
To be frank it makes me angry that such an important part of your IVA seems to have not been explained to you by your IP.
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[MelanieGiles]

And as a practising IP, I can only but agree with Andy.

I simply do not understand how your IP cannot have discussed this with you at the time. Did they get you to sign a copy of the Chairman's Report confirming your agreement to these terms?

The 75% clause means that during the final year of the arrangement you have to raise 75% of your property's value, firstly discharging your current mortgage and then handing the remainder to the Supervisor for the benefit of your creditors - obviously sufficient to see them paid in full plus costs and statutory interest.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[cockerhoop]

sounds to me we have got a rotten iva
we were 91k in debt, and are paying £530 a month for 5 years approx £32k 26p in the pound is mentioned in the docs.
so this 75% thing
lets say at the start we owed 125k on house, ant the end of 4 years we will owe perhaps 115k split between mortgage and secured lown. if the house in valud at 180k. we would need to take out a mortgage for 135k, pay 115 to our original lenders and give the 20k left to our creditors? this would mean a mortgage of approx £1350 per month, saving us only £120 on our outgoings now. not what we hoped.
like i said we have 16k worth of payments to go, should we push to finish before the 4th year even if it costs more than we owe? ie a 20k extra against our house now would only be £200 extra
yes we have never met our IP they are not too helpful if we phone them, and very demanding when they phone us for information

[ray_a]

Hi Cockerhoop

Sounds like you are in a similar situation to us.

Basically we sold and decided to restart our lives again!

I think you might need to consider that because remortgaging might be daunting. The other alternative would be to go for a second mortgage but just make it interest only.

Good Luck

Ray

[cockerhoop]

we have asked our IP for a figure for final settlement, i am not holding my breath she seems to ignore most of our requests, will start pestering if she does not email back.
if we do have to wait until the 4th year, and renmorgage at 75% is any survey and set up fees taken from our payments, as we are at the bread line in an iva and cannot be expected to have £100s/£1000s reqired to set up a mortgage? and does this mortgage not require setting up until the 60 month?

[MelanieGiles]

Hi again

I am sure that your IP will arrange for a property valuation at the expense of the IVA, and any associated broker/solicitors costs will be deducted from the mortgage. You will need to check your Chairman's Report to see when the mortgage needs to take effect from. This is usually during the fourth year of the arrangement, and most clauses specify that contributions to the IVA can then stop in view of the higher mortgage payments being made.

If you can post the exact wording of your clause, we can perhaps advise you more specifically.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[cockerhoop]

exact wording
In addition to the monthly payments your residential property is to be professionally valued shortly after the fourth year anniversary of the arrangement, 75% of the your equitable interest is to be realised and paid to the supervisor before completion of the arrangement. If necessary the arrangement can be extended to allow an equivalent sum to be paid by way of ongoing contributions for a period of up to twelve months.
Melanie just checking do we have to take a 75% mortgage on our house's value, or raise 75% of the difference between owed and value
thanks
geoff

[cockerhoop]

melanie can you explain this bit
Supervisor for the benefit of your creditors - obviously sufficient to see them paid in full plus costs and statutory interest.
paid in full is that all the debts we had at the beginning? so nothing has been wiped away during the iva?

[MelanieGiles]

Hi cockerhoop

If you have entered the fourth year of your IVA already, you need to get the property valued (a local estate agent will likely do this free of charge for you) to determine its current value. You then need to get a redemption statement from your mortgage company to confirm the amount you currently owe. By deducting this sum from the property value, you can determine your equity and you then apply a 75% percentage to that sum to work out what you have to pay over to the Supervisor. Note - they do give you the opportunity to pay this sum by extending your IVA by up to one year, and making monthly payments to the equivalent of the equity sum.

In answer to your last query, if this does raise enough money to pay off your creditors in full that is something to be pleased about. The purpose of an IVA is not to write off debt, it is to allow you to make contributions to your creditors which you can afford over a set time period - which in your case includes an equity release which you agreed to at the time of the creditors meeting.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[cockerhoop]

So we don't have to end the mortgage just get a figure, similary with the secured loan, our thoughts were to hopefully increase the secured loan to cover the amount?, and with rising house prices would like to attempt to do this now 2.5 years in and make a fulland final offer.
about the second part, i don't think the amount would cover the total debt, what happens then?
will we see light at the end of the tunnel?
i'm sure those adverts on the tv use the phrase "write off debt"

[Adam Davies]

Hi
If the amount does not cover the total debt[original debt plus IP fees and possibly interest at 8 percent per year] then your remainig debt is then written off by your creditors.
It,s worth remembering that you may not be able to get a mortgage offer for the full 75 percent of your equity due to affordability and in these cases your creditors may accept a lower amount or indeed a further twelve months IVA payments.
regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[Adam Davies]

Hi
Just another thought on the equity release clauses within IVAs.I wonder if prior to an IVA commencing a debtor should have to consult a solicitor and sign a document to show that they have fully understood the implications regarding this clause.
It,s just alarming how many people are not fully aware of just how this part of the IVA will affect them.
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp