{"id":11629,"date":"2012-08-30T13:23:17","date_gmt":"2012-08-30T12:23:17","guid":{"rendered":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/?p=11629"},"modified":"2019-08-16T13:25:11","modified_gmt":"2019-08-16T12:25:11","slug":"can-i-do-an-iva-with-a-mortgage","status":"publish","type":"post","link":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/can-i-do-an-iva-with-a-mortgage\/","title":{"rendered":"Can I do an IVA with a mortgage?"},"content":{"rendered":"\n

It can be a worry for anybody who is thinking of entering an IVA as \nto how the process will affect their mortgage with the biggest fear \nbeing of losing their house. If they are married or simply co-habiting \nthen they want to make sure that anything that happens as a result of \ntheir going into the IVA does not impact negatively on their spouse or \npartner or indeed on themselves and their children. Let\u2019s look at the \neffects of an IVA on the mortgage of a single person first.<\/p>\n\n\n\n\n\n\n\n

The IVA proposal must contain the debtor\u2019s statement of affairs. That fully discloses all the debtor\u2019s assets and liabilities. It must also provide a statement regarding the debtor\u2019s income and living expenses. That statement usually illustrates a typical one month period. Expenses that occur once a year are split out over the twelve months on a notional basis. Take car insurance, for example. If the car insurance premium is paid once annually, then the monthly I&E statement will show a figure equal to one twelfth of the annual premium.<\/p>\n\n\n\n

\"Can<\/figure>\n\n\n\n

A property such as a house is an asset and if you have a mortgage on it you also have a liability. The property may have equity in it if its current realisable value exceeds the amount required to pay off the balance owing on the mortgage, including any early redemption penalty that might apply. The monthly mortgage payment is often the largest single monthly item of expenditure. Clearly then, you must disclose a lot of information to your creditors about your assets, including your house, in your IVA proposal.<\/p>\n\n\n\n

The single person offering an IVA to creditors should not be unduly \nconcerned about the effect of the IVA on their mortgage. Creditors will \nusually allow the insolvent person to continue paying the mortgage right\n through the term of the IVA, provided that the monthly mortgage payment\n is not an excessive percentage of the debtor\u2019s net income. If the \nmonthly mortgage payment is of the order of 40% or more of the person\u2019s \nnet income, then creditors might consider that to be excessive. They \nmight suggest that the debtor dispose of the property and live instead \nin rented accommodation. Gains for creditors could come through the \nrelease of equity from the sale of the property if a substantial part of\n those funds were to be contributed to the IVA as well as the savings \nmade from renting accommodation rather than paying a mortgage.<\/p>\n\n\n\n

Usually however, creditors will not require the debtor to sell a \nmortgaged residential property. Instead they often look for the debtor \nto realize any equity in the property and to contribute a substantial \npercentage of any equity funds realized in the final year of the IVA \nterm, usually the fourth or fifth year. At that time, the debtor would \nbe expected to remortgage or sell the property to liquidate any equity \ntherein. In reality the recession has made these means of releasing \nequity very difficult. Even if there is some equity in the property, the\n debtor may not be able to obtain a remortgage because of a poor credit \nhistory due to having to enter an IVA in the first place. If a \nremortgage could be obtained, the monthly mortgage payments would be \nlikely to be at penal interest rates and so be unaffordable for the \ndebtor. If selling the property is the only means of realizing any \nequity therein, creditors are usually reluctant to pursue this course \nunless the amount of equity is likely to be substantial. In a the \ncurrent buyer\u2019s market, that is unlikely to be the case.<\/p>\n\n\n\n

What then about a married or co-habiting couple? Being married or \nco-habiting usually means that most ordinary aspects of life are shared \nby partners. Utilities such as water and electricity are consumed in \nvarying amounts by co-habiting partners and transport costs may vary \nhugely between the partners. Thus for each item of expenditure, the \npartners might incur widely varying living expenses, regardless of the \nlevel of each partner\u2019s income. Looking at income however, it is \nrelatively easy to calculate the relative percentages of the household \nincome that each partner earns. The evidence of income is supported by \npay-slips, P60\u2019s, tax credits awards and so on. The usual treatment of \nordinary living expenses is for each partner to pay such expenses in the\n same ratio as their income. For example, if partner A earns two thirds \nof the total household income, then that partner is considered by \ncreditors to be responsible for paying two thirds of the joint living \nexpenses.<\/p>\n\n\n\n

The ownership of assets depends on many matters. Each asset such as a\n car or a house may be wholly or partly owned by either partner. Some \nassets may be owned on a 50\/50 basis or on an entirely different basis. \nFor example, if partner A owned a dwelling house outright and partner B \nmoved in to cohabit, then it would be manifestly incorrect to assert \nthat they each owned 50% of that property from day one.<\/p>\n\n\n\n

Each partner is personally liable for his or her debts and both \npartners are liable for jointly incurred debts. One partner may have a \nlot of debts and the other have very few and there may be some or no \njoint debts. Accordingly, one partner may be insolvent and the other \nnot. Should the insolvent partner decide to enter into an IVA, it will \nalmost certainly have some effect on the solvent partner. The first \neffect is that the household income and expenditure has to be disclosed \nto the creditors of the insolvent partner. Creditors will require a \nstatement of income and expenditure for the household showing how living\n expenses are incurred and paid for.<\/p>\n\n\n\n

In regard to assets such as a house, creditors will expect to see who\n owns what and in what ratio. This is particularly important if there is\n equity in a jointly owned property. Creditors would expect the \ninsolvent partner to address his or her share of the equity for their \nbenefit. Even if the insolvent partner is required to re-mortgage or \nsell the property they could not do so without the consent and agreement\n of the solvent partner.<\/p>\n\n\n\n

A key consideration in all of these matters is whether the partners \nhave agreed to pool their resources when they began to cohabit or indeed\n at some point thereafter. Even without a formal agreement, it may be \nimplied from the evidence of their lifestyle and expenditure that they \nhave so done. It may be that the solvent partner voluntarily agrees to \nassist the insolvent partner who is proposing the IVA by contributing \nsome or all of their own surplus income to the IVA.<\/p>\n\n\n\n

Finally, the insolvent partner\u2019s IVA may impact on the other \npartner\u2019s credit worthiness. The IVA will have addressed any joint \ndebts, with creditors receiving a dividend from the IVA. However, the \nsolvent partner has to maintain the full contractual repayments on any \njoint debts during the life of the IVA although any dividend paid from \nthe IVA would shorten the length of the term of such debts. During the \nlife of the IVA the solvent partner might also have to deal with the \nreluctance of creditors to lend funds, knowing of the insolvent \npartner\u2019s IVA.<\/p>\n\n\n\n

Nevertheless, many people have successfully completed their IVA \nwithout negatively affecting their solvent partner. A well constructed \nIVA will deal with all matters relating to income and expenditure as \nwell as assets and liabilities and enable both partners the opportunity \nto fully and finally heal their financial woes.<\/p>\n","protected":false},"excerpt":{"rendered":"

It can be a worry for anybody who is thinking of entering an IVA as to how the process will affect their mortgage with the biggest fear being of losing their house.<\/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-11629","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\/11629","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=11629"}],"version-history":[{"count":2,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/11629\/revisions"}],"predecessor-version":[{"id":11640,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/11629\/revisions\/11640"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=11629"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=11629"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=11629"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}