Are we better staying in IVA

[Shirt45]

We have been in an IVA since November 2006, our debts were £77, 000, after all the compounded interest was added. We have £58,900 outstanding on our mortgage, our house is roughly valued at £90-95,000. In our 4th year we are to re-mortgage in order to release £ £28,000. We also have £11,250 secured on our property ( that was secured without our knowledge ). Anyway I recently had a call from a company, and they reckon we would be better off declaring ourselves Bankrupt. We currently pay £250 per month towards the IVA, they say we wouldn't lose our house as their isn't enough equity in it. Would this be the best way forward for us?

[debtinfo]

Hi shirt, i shy away from telling someone what they should do but i will explain how the house will be treated in the bankruptcy to help your own decision.

 

I am going to presume from your post that you would both be going bankrupt and that the property is jointly owned. At the moment after the secured charge you have £20-25,000 of equity in the property or about £11,000 each, the trustee in the bankruptcy has 3 years to deal with the property. At the moment we are in a rising property market so as time goes on the equity will rise. The trustee has an obligation to get as much money as possible for creditors. The first thing they will do is ask you if you know anyone who can afford to buy the equity from the trustee for you. If not your rights to live in the property are higher than the creditors rights for the first year, after that they will offer you the equity again at the going rate (whether that is more or less). If you can not afford it the trustee has a decision. If the equity is low (less than £10,00 ish (note not guaranteed)) the trustee may decide that eviction proceedings are too expensive and so instead place a charge on the property for the reamining equity (ie they get their money when the property is sold, whenever that may be by you), if there is enough equity they will repossess and sell the property.

[Shirt45]

Hi shirt, i shy away from telling someone what they should do but i will explain how the house will be treated in the bankruptcy to help your own decision.

 

I am going to presume from your post that you would both be going bankrupt and that the property is jointly owned. At the moment after the secured charge you have £20-25,000 of equity in the property or about £11,000 each, the trustee in the bankruptcy has 3 years to deal with the property. At the moment we are in a rising property market so as time goes on the equity will rise. The trustee has an obligation to get as much money as possible for creditors. The first thing they will do is ask you if you know anyone who can afford to buy the equity from the trustee for you. If not your rights to live in the property are higher than the creditors rights for the first year, after that they will offer you the equity again at the going rate (whether that is more or less). If you can not afford it the trustee has a decision. If the equity is low (less than £10,00 ish (note not guaranteed)) the trustee may decide that eviction proceedings are too expensive and so instead place a charge on the property for the reamining equity (ie they get their money when the property is sold, whenever that may be by you), if there is enough equity they will repossess and sell the property.

Thank you, by the sounds of it it's a case of better the devil you know! I'll stick with that I think!!

[Shirt45]

Another quick question, if after the fourth year there is not enough equity in the property, and we have to extend our IVA for another twelve months. Does this mean we will be debt free, even though there wasn't enough equity to pay off the IVA?

[debtinfo]

Hi, IVA's are not my specialty but once you complete your payments you will be debt free. The equity is like a bonus to the creditors which may be collected if it is there but cannot if it is not. Someone else may correct me however

[Jan4a]

I know someone in an IVA. An amount from her house is included in the IVA. She is hoping to sell to her local authority so she can stay in it as tenant.

[loobyloo85]

Hi, in the IVA you would need to propose to release 85% Loan to value of any equity in your property. If in 4years time you do not have any equity to release, or you are unable to remortgage, you would need to pay an extra 12 payments on the end of your IVA in lieu of any equity. Your debts willll be written off after completion of your iva, and your credit ratingwill be wiped clean after 6 years in total x

[Shirt45]

Thank you to you all, for all the helpful information. Looks like I'll be staying with the IVA, far better the devil you know sometimes!