www.iva.co.uk

Hi,

I have recently entered an IVA. I also have a previous business debt (made IP aware of this prior to IVA) which is guaranteed by my ex business partner and myself (joint and several).

The bank are now chasing this debt. I am in a negitvie equity situation and have no spare income to pay this debt.

My ex business partner is still running the business and is unwill to take on the debt (even though I put money into the business). My question is under the insolvency act would an IVA be enough for the bank to ignore me and go for my ex business partner?

Thanks Sam

Hi Sam,

Not sure about this - your debt should have been included in the IVA and your partner would have been chased for the whole amount.

I am hoping one of the experts will be along to assist with this later as I'm not 100% sure.

Hi Sam. If the business debt was guaranteed it would have been listed in your proposal as a contingent liability in case the company defaulted and you became liable. The bank is therefore bound in to your IVA but can pursue the other signatory under the laws of joint and several liability.

So effectively your ex business partner is liable for the lot but if he/she pays it off they could then become a creditor in your IVA. Your ex business partner should seek insolvency advice and you should notify your IP that the contingent liability has now crystallized.

Hi, Thanks for the quick replies. The bank has put a charge on both properties. Would this cause problems?

Thanks

The fact that the bank holds a charge over both properties makes the situation totally different. They will not be bound by your IVA unless they give up their security which is unlikely.

You will both have to arrange a repayment schedule with the bank or they could seek the repossession of either or both properties. Gievn that your property has no equity this would be pointless but if your ex business partner has equity their home is certainly at risk.

You say the bank put a charge on the properties. Did you agree to this when the funds were borrowed or was this done subsequently when the company defaulted on the loan?

It was agreed when the funds were borrowed at the time I only had £5k equity and the amount borrowed was £25k.

It was agreed when the funds were borrowed at the time I only had £5k equity and the amount borrowed was £25k.

Sorry, just checking my last post worked!

Hi Sam. Sorry about the delay in replying.
You will have to make an arrangement with the bank to repay the loan as will your ex partner. This may require a reduction in your monthly IVA payments but it is possible that your IP can do this if the payments do not drop by more than 15%.

You will need to contact your IP and explain the situation and it should not be too difficult to sort out as they knew from the start that this may happen.

Thanks for the reply Michael.

The bank are after £250 pm for the next 10 years. 15% reduction of my IVA would be £66.35. Do you think the bank would accept this from me due to my situation and chase my ex business partner for the rest or pass on the debt?

Thanks Sam

It is certainly worth putting the offer forward as otherwise you would be left paying back the whole debt yourself. You could offer to increase your payment once the IVA is over as a sweetener but also it may be worth considering selling the property and introducing the shortfall to the bank into your IVA.

If the bank know that you are in negative equity and are serious about selling they may be a bit more pragmatic when it comes to your offer. The fact that they have another party to chase should help and be sure to stress this point when speaking to the bank to ensure they are not just pursuing you for the debt.

Thanks for the response again. Selling the house isn't an option really. I would sooner go down the bankruptcy route and buy the house back from the receiver.

Thanks again

You would have to find someone else to buy the BI from the OR as you can't buy it.

If you are in negative equity then BR is an option.

Have a chat with your IP and see what advice they can give you.

That would be an option but it would not deal with the charge on the property. It would only deal with the IVA creditors but you could probably use the money you were paying into the IVA to pay the bank. Hope something works for you.

Hi Michael, so going bankrupt wouldn't release the charge on the property?

The charge is effectively like a mortgage and would not be included in any insolvency whether bankruptcy or IVA. The only way to include it would be if the property was sold and there was a shortfall as this debt would be now unsecured.