www.iva.co.uk

Have been in my iva since may this year, It is a one year iva , as i have 2 properties to sell and any proceeds will go (hopefully)to a full and final settlement. 1 of the properties has been rented out but my tennant has now moved out, we have been in contact with our building society who have been very good, and they have accepted reduced payments for the last 3 months, but they now say that they have no alternative but to start legal proceedings, I assume to reposses, the property is going to be up for sale as of next week, and we may just(if it sells)clear enough to repay our mortgage. My question is, if our building society reposses and sell it at less than mortgage value,would they then chase us for any shortfall even though we have no disposable income? My oh is on a DMP and they are aware that i am in an iva. Any advice would be appreciated thanks

Hopefully an expert will be around soon...
I can tell you about my experience of mortgage shortfall in the meantime though!
We were repossessed in July and our IVA was approved in August. The mortgage company were listed as a creditor and an estimate of the shortfall was included. .
It isn't just the mortgage shortfall..your lender will charge you the legal fees, deed release fees and any other charges relevant to defaulting on your agreement. I think we had to add £2.5K to the arrears in legal fees.
I'm pretty sure you are also liable for the mortgage payments until the house is sold and completion has taken place. So this can really add up over time.
I am so relieved this is now all frozen and included in the IVA.

If you are already in an IVA, I am not sure what would happen.

If you are in a 12 month IVA, and your property does not sell, or does not make enough money to offer a F&F, what will happen to your IVA?

I think this needs one of the technical experts to answer.

This will be treated as a post-IVA debt which cannot be included into your IVA without the agreement of all creditors and of course the mortgage shortfall. In the circumstances you describe, about the way your IVA has been presented, it would have been sensible to bind in the mortgage companies from day one, even if their potential claims were just included at a nominal sum. I now hingsight is not always welcomed, but they way property prices are dropping at the moment, especially in the B2L area, IPs are living on foresight in order to try and make their clients proposals as watertight as possible.

Thanks for your replies,Melanie what would happen if my creditors didnt agree to include a mortgage shortfall into my iva? Could the mortgage company try to make me bankrupt? I have maybe £10000 equity in my own house, though i suspect that will be wiped out if house prices continue fall.

Then you would have a debt outside the arrangement, which the creditor could pursue under normal collection routes including bankruptcy. As this would also affect the creditors bound by the IVA, this could provide the sweetener to allow this shortfall to be included.

Still waiting to hear whether our second buy-to-let has sold yet and what the shortfall will be. We voluntarily handed back the keys to the mortgage lender and will hand the debt over to be managed free with PayPlan Ltd. It will be the smaller shortfall of the three mortgage shortfalls. (Our home and two of our three buy-to-lets, one in Bognor Regis now with a shortfall of £57,123 when sold and one up in in the process of being sold in Grimsby). Our home had a shortfall of £54,834 when we tried to sell it to help the situaltion and downsize but found we were in negative equity. We had to voluntarily hand back the keys as the mortgage rate was too high for us trying to cover our two other buy-to-lets having problems. Last month we started paying the Debt Recovery Agency £15 per month for three years for our original home and our Debt Management Company said after three years they expect them to wipe the remaining debt clear as they know we have three mortgage shorfalls in total and if we say we have no savings, they will most likely wipe it clean. (£15 x three years = £540).£540 out of the £54,834.

The Buy-to-let for Bognor we will start paying the shortfall debt of £57,123 starting the 1st August at £18 per month for three years and then that should be wiped too. (£18 x three years = £648). £648 out of the £57,123.

The third one will only be small possibly £10k-15k, so they will only get a smaller ratio possibly at a guess £6 per month for three years (£6 x three year - £216).

We were told by PayPlan Ltd'(our Free Government Debt Management Company), that once the Mortgtage Lenders sell off the shortfall debt to a Debt Recovery Agency for a fraction of the price a few hundred pounds or one thousand or so, the Debt Recovery Agency become Third Party and as we do not have any legal contract with them only the original Mortgage Lender they cannot expect anywhere close to the original amount. The Debt Recovery Agency cannot legally ask for the original shortfall debt to be paid out. That is why they ask for a Reduced Final Settlement Offer not giving an actual figure for you to pay hoping that many do not know this and people offer what they can over what the recovery Agency actually paid the mortgage lender to take it over. They therefore accept a couple of thousand to settle the debt. They accept the small amount yet still make 100-300% profit so both creditor and debtor are happy. Those with a Debt Management Company they know they will break even or get some payment over the three year payment plan when at the end it again gets wiped away. They make more profit than losses from people paying a higher reduced settlement than people paying a smaller figure under a Debt Management Company. One of the Recovery Agencies even told us this once they knew our situation and knew that we were with PayPlan Ltd. It is nice to be reassured that we will not have to pay close to the original Monopoly figure, so that in three to four years once all the mortgage shorfalls go through the three year payplans, that we will be clear of all debt and free to start fresh. Our credit score is better off under Debt Management than just having our properties taken away un-voluntarily and repossessed and paying a contribution to the original Mortgage Lender who try to get more out of you. Having a PayPlan with a Debt Management Company who deal with all the letters and hassement and stop all fees and interest, actually puts us in a better position as we have a payment plan notice on our credit score showing our commitment to paying a contribution towards the debt........albeit about 0.5-1%/2% of it. If you took out an IVA you would expect to have to repay about 20-25%. Also you are more tied up legally this way compared to simply paying a lower amount and finally paying a fraction as a reduced final settlement to the debt recovery agency the mortgage lender sold the debt on to.

Now fortunately, we can stay long term in our present house house we rent until the mortgage shortfalls are wiped away and see what the future holds then. We hope by then we will not have lost out from our bad luck with our bad tenants not paying their rent and buy-to-let maintenance problems. That is reassuring. We took this route rather than pay more with an IVA. the main thing to remember is when in this situation and no choice but to let your property go, it is in your best interest to VOLUNTARILY Hand the property back to the Mortgage Lender. They will intially threaten that all fees and interest and selling fees etc will be added but at the end of the day most of the debt will be wiped away anyway and these extra fees and interest and charges wont actually be paid. Always seek help from a Debt Management Company as they look after all the harrassment and stop all further fees and interest being added. Once the Lender knows this they just deal direct with them. I can recommend 'PAYPLAN LTD' = 08009177823 who are FREE so you do not have to pay for their service and all money paid to them however small, all goes to reducing your debt and not part. Hope this helps and reassures people in similar debt as us. ;o)

Purpleash22

SPENCER23 wrote:

Have been in my iva since may this year, It is a one year iva , as i have 2 properties to sell and any proceeds will go (hopefully)to a full and final settlement. 1 of the properties has been rented out but my tennant has now moved out, we have been in contact with our building society who have been very good, and they have accepted reduced payments for the last 3 months, but they now say that they have no alternative but to start legal proceedings, I assume to reposses, the property is going to be up for sale as of next week, and we may just(if it sells)clear enough to repay our mortgage. My question is, if our building society reposses and sell it at less than mortgage value,would they then chase us for any shortfall even though we have no disposable income? My oh is on a DMP and they are aware that i am in an iva. Any advice would be appreciated thanks

I agree Payplan are great I am with them too but I just want to say they are not free, they don't charge up front fees but do charge within the IVA payments. I just wanted to clear that up as I know there are other great companies out there too and I although I recommend Payplan they charge fees within your IVA just as other firms too.

I am glad that you are finally sorted though, it's such a relief isn't it?!

Payplan get their "cut" from IVA payments in much the same way (and similar amounts) as other IVA firms. However, in DMP situations all the money paid by the debtor DOES get handed to the creditors. However, the creditors "donate" a proportion back.

There is no such thing as a FREE lunch !!!!

Can I ask an expert, is this 3 yr rule and then write off correct ?
I was in a DMP with payplan for a period of 4 yrs and not one of my creditors would have written off the amount.

Hi Canaries. I am not an expert ... but basically ... no !

In the situation described above the original lender has decided to sell on the bad debt, to "cut their losses". They will sell on bad debts for a fraction of the amount owing. The agency who purchses the debt will then try to recover their "investment". They can go for the original amount, as they have purchased that loan, and will want to get back more than they paid ( that is, after all, the business they are in).

If the original lender was party to a DMP, the purchaser of the loan can either abide by that agreement or simply ignore it and chase the borrower in whatever way they deem fit for the amount outstanding.

However, should the original lender so wish they do not have to sell on the loan and all will continue as before --- unless they decide they are fed up with the DMP and go for the full amount.

Neither party is bound to the DMP and there is no "right" of right off. Creditors do not even have to agree to reduce payments or freeze interest.

Quite agree Foggy.

We were with a fee paying company for a DMP and did manage to get interest and charges written off but this is by no means the norm.

Have to also say that Payplan are not a Government company - they are as commercial as the rest.

I've not heard of a DMP being conducted in this way, I don't know of anyone who will have a write off - a DMP is about paying your debts back in full.

Thanks for your replies, one for the BS bin then.

What curious advice indeed!

Sounds like a load of codswallop! If someone buys a £50k debt they are surely entitled to recoup £50k irrespective of what they paid for it. It's really no concern of the debtor what the DCA pays...you still owe the money...doesn't matter who to!