{"id":11580,"date":"2011-03-29T13:03:35","date_gmt":"2011-03-29T12:03:35","guid":{"rendered":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/?p=11580"},"modified":"2019-08-16T13:16:18","modified_gmt":"2019-08-16T12:16:18","slug":"mortgage-and-iva","status":"publish","type":"post","link":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/mortgage-and-iva\/","title":{"rendered":"Mortgage and IVA"},"content":{"rendered":"\n

An Individual Voluntary Arrangement <\/a>(IVA) is a formal agreement between an insolvent debtor and his or her unsecured creditors to repay a portion of the unsecured debts over a limited period of time. The duration is usually five years, but it can be for a shorter or occasionally a somewhat longer period. <\/p>\n\n\n\n\n\n\n\n

At least 75% of the unsecured creditors have to agree to accept the debtor\u2019s IVA proposal and unsecured creditors may also seek to modify the terms and conditions of the proposal. Unsecured creditors often do put forward modifications, usually so as to increase the amount that the debtor has to contribute or to reduce the fees which it is proposed to charge for the administration of the IVA. The effect of such modifications is to increase the total \u2018pot\u2019 which will be available to distribute to unsecured creditors so that more of their debts will be repaid. Provided the debtor agrees to these modifications, the IVA is accepted, approved and ratified.<\/p>\n\n\n\n

Secured creditors, on the other hand, expect to receive the full \ncontractual repayments on their secured loans over the life of the IVA \nand thereafter. The debtor with a mortgage (or car HP or other secured \nloan) is expected to make the monthly payments in full.<\/p>\n\n\n\n

Meanwhile the unsecured creditors receive only a dividend on their unsecured loans to the debtor. The size of the dividend can vary. It really depends on what the debtor can afford to pay and what the unsecured creditors are prepared to accept. At least 75% of the unsecured creditors (measured in \u00a3) must agree to accept the IVA proposals the IVA can be approved. In practice the dividend in the vast majority of IVAs will fall within the range of 20p in the \u00a3 to 40p in the \u00a3, although of course it can be much lower or indeed much higher than that. On occasion unsecured creditors can receive 100p in the \u00a3 and even statutory interest on top of that.<\/p>\n\n\n\n

\"Mortgage<\/figure>\n\n\n\n

If the debtor has a mortgaged property, it must be disclosed in the IVA proposal with full details of its true current market value and all mortgage details. Creditors consider the current market value of the property and the amount that the debtor owes to the mortgage provider. The debtor is expected to obtain a current mortgage redemption statement, showing the total cost of clearing the mortgage, including any early redemption penalty which might apply. With these two pieces of information, creditors can quickly assess if there is any realisable equity in the property. If there is realisable equity therein, unsecured creditors may, by modification to the proposals, require the debtor to re-mortgage (or sell) the property during the life of the IVA and introduce much of any released equity into the IVA for their benefit.<\/p>\n\n\n\n

A well constructed IVA<\/a> proposal will already include a provision for re-mortgaging (or occasionally selling) the property and offering equity to creditors. However, it may well be that re-mortgaging is not an option for the debtor simply because no mortgage provider will agree to re-mortgage the property due to the debtor\u2019s poor credit history or re-mortgage is only possible at prohibitive premium mortgage rates for the same reason.<\/p>\n\n\n\n

Even if there is no equity in the property, unsecured creditors will \nconsider the size of the monthly mortgage repayments. If they are \nexcessive, creditors may propose a modification that the debtor sell the\n property and move to rental accommodation, thus enabling monthly \ncontributions to the IVA to be increased. As a yardstick, mortgage \npayments that exceed 40% of net family income would usually be deemed to\n be excessive. Obviously if the cost of reasonable rental accommodation \nis substantially lower than the monthly mortgage payment, then it is not\n surprising that unsecured creditors would propose such a modification.<\/p>\n\n\n\n

In recent years, property values have dipped sharply, and many people\n find that their property is in negative equity. This simply means that \nthe cost of redemption of their mortgage is greater (sometimes \nsubstantially greater) than the current market value of the property. If\n forced to sell, the shortfall due to the mortgage provider now becomes a\n further unsecured liability and so would rank for dividend with the \nother unsecured creditors, thus depressing the dividend in an IVA.<\/p>\n\n\n\n

The partner or spouse of the debtor may have an equitable interest in\n the property amounting to 50% of the equity in most cases. The debtor\u2019s\n family may also have rights of residence in the property which could \nmake a forced sale difficult for creditors, at the very least. So, to \nconclude, while an IVA can affect the debtor\u2019s mortgage in an IVA, in \nmost cases, the debtor will not \u2018lose\u2019 their house.<\/p>\n\n\n\n

If you are considering entering into an IVA and are concerned that it\n might affect your mortgage, you should initially consult with an \nInsolvency Practitioner, otherwise known as an IP, for advice. A \nreputable IP will look at all of your financial circumstances.  You \nshould incur no costs in obtaining this advice. Your IP will go on to \nadvise you on all of the options open to you \u2013 IVA, Debt Management Plan\n (DMP), bankruptcy or another option.<\/p>\n","protected":false},"excerpt":{"rendered":"

The debtor with a mortgage (or car HP or other secured loan) is expected to make the monthly payments in full whilst in an IVA.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"none","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[7],"tags":[],"class_list":["post-11580","post","type-post","status-publish","format-standard","hentry","category-iva-articles"],"_links":{"self":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/11580","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/comments?post=11580"}],"version-history":[{"count":3,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/11580\/revisions"}],"predecessor-version":[{"id":11605,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/11580\/revisions\/11605"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=11580"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=11580"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=11580"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}