Has anyone got advice

[Sadsack]

Hi

I have a few questions regarding equity release and would very much like your take on the situation.

In a previous posting, I mentioned that my equity release changed 4 times in the last 10 months. My IP has now informed me (April) that they want £22,500 lump sum payment before the end of September. (Year 1 equity release). My IVA was accepted by HFC on the condition that an amount of £13,000 be released in year 1. This I agreed to but not the £22,500. My property has been on the market since December and no bites - original valuation £350k, mortgage outstanding with secured loan £271k. I have reduced the price of the property to £310k for a quick sale which means there is very little equity to purchase a smaller, cheaper property and release the equity the IP is requesting.

I have no idea which way to turn on this. Do you have any suggestions please?

Sue

[MelanieGiles]

So why is your IP telling you that they want more if £13,000 was agreed? Please find out so that I can advise further on this point.

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

[Sadsack]

Hi Mel

They are now saying that to achieve the required minimum of 41p, this is now the amount they require. Perhaps if you made some calculations, I too will have a better understanding of the situation. Here goes:

Total Debt £106k

4 months of £435
8 months of £485
48 months of £600
Equity Release year 1 - £22,500
Equity Release year 4 - ???????

Before I get all bleary eyed and emotional - THANK YOU FOR YOUR SUPPORT ON THIS FORUM. I HAVE NO IDEA WHAT WE WOULD DO WITHOUT YOU.

Sue

[jamesfalla]

Sue

As Mel says, you have to go back to your IP and get to the bottom of it. If you have an agreed and signed IVA which states you need to release £13,000 then this should be it.

I am interested to know how you got away with this though. From what you say, you seem to have £40,000 equity in the property even at the reduced sale price. If the plan was aways to sell the house, why did you not have to give over 100% of equity?

James Falla

Expert in IVA, Bankruptcy and informal Debt Management solutions for over 10 years.

For more information visit www.jamesfalla.com and visit my blog at: http://jamesfalla.blogs.iva.co.uk

[Sadsack]

Hi James

I am only too happy to hand over 100% of the equity. My problem is that I have animals which form a very important part of my life - not going to go down the emotional route here - and very few landlords would allow pets in rented accommodation. At the outset, I always maintained to my IP that there was no way that I was going to rent - I am unfortunately getting too old!!!! - and that I wanted to purchase again as its my security that I am taking care of.

There are no signed documents relating to any release of equity - they are merely file notes taken by the IVA company. I will point out that I agreed to the modification, which is in the file notes only, that I would release £13,000 in year one.

Sue

[MelanieGiles]

Hi Sadsack - as a devoted owner of a very precious Yorkshire Terrier I completely sympathise.

You need to carefully study two important documents for me:-

1 Your IVA proposal
2 Your Chairman's report

These documents will reveal exactly what you did agree to do with the property - no file notes, ro conversations that you cannot remember. Just hard facts.

Do I assume that you agreed to a year 1 equity release, together with a further release in year 4?

Sorry, I'm desperate to help you but I need more info

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

[Sadsack]

Hi Mel

I agreed to an equity release in year 1 and not in year 4. There was no discussion regarding any further equity release until April 12, 2007 - (IVA was accepted 28 September 2006).

In my Documents to be submitted to court Under Rule 5.14, the following is noted:

2. Executive Summary

2.2 I propose to make four monthly contributions of £435, increasing to £475 for 8 monthly contributions then increasing to £600 for the remaining 48 months, totalling £34,340. The estimated dividend to creditors is 25p in the £.

5. Personal Assets

5.1 Residential Property
5.1.4 I propose to sell my property in the first year of the arrangement. Out of the net proceeds of sale, I propose to introduce a sum of £5,000 into the arrangement. The balance is to be retained to fund the deposit of a smaller property.

Regarding the Chairmans Report ---- Report to Court - Section 259 of the insolvency Act 1986 -

"In view of the proxies lodged, the proposal was accepted with modifications."

The modifications are as follows:

1. Creditors will receive a minimum dividend of 41 pence in the pound, failure to pay the minimum dividend will constitute a default.

I have whipped my calculator out!! To achieve 41p, based on my total debt, I have to pay a minimum of £43,460 which does not include IP fees. Without releasing equity and just paying the monthly payments, I will have a shortfall of £9,120, once again without IP fees. If I include the IP fees, my total shortfall is approx. £17,600.

Not sure if this will help Mel, but any advice you can give me will be brilliant.

Thank you once again

Sue

[MelanieGiles]

OK - what has happened here is that creditors have modified your proposal based upon the receipt of all of your property equity - hence the 41p. I am suprised that your IP did not discuss the implications of this with you on the day of the creditors meeting - as it is a large jump from your 25p offer to the 41p you agreed. How did you think you were actually going to fund the difference?

You will have approximately £35,000 left from the sale of your property, assuming that this sells at the reduced asking price, and that the costs of sale are in the region of £5,000. How much do you need to retain to fund your new house purchase?

To achieve a dividend of 41p in the £, you say you need approximately £52,000, of which you have already paid about £5,000 in contributions with approximately £30,000 to go. The difference therefore from your house sale is the £22,000 quoted to you by the IP, which will be needed to fund the 41p in the £.

Another alternative would be to pay some over now, retain a larger share to put down as a deposit on the new property, and then face a further equity release towards the end of the arrangement to top up the balance.

The bottom line here, Sue, is that your creditors do not really care how you get the 41p, just that you get it!

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

[Sadsack]

Thanks Mel
I am happy to give them some of the equity now, just not all of it as I really do need to purchase another home. I know the creditors want their 41p and I am happy to give it to them but they are just going to have to wait a little while longer.

I am desperately looking for a little gem of a house which needs loads of work doing to it - hopefully to sell it in 2/3 years and then make a full and final settlement offer out of the proceeds. Obviously keeping some back for another little gem!!!!!

Sue

Ho Hum! Think I'll bang my drum!