{"id":1965,"date":"2014-01-02T12:01:07","date_gmt":"2014-01-02T12:01:07","guid":{"rendered":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/?p=1965"},"modified":"2019-02-28T12:09:40","modified_gmt":"2019-02-28T12:09:40","slug":"iva-with-no-equity","status":"publish","type":"post","link":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/iva-with-no-equity\/","title":{"rendered":"IVA with no equity"},"content":{"rendered":"\n

Many debtors who entered into Individual Voluntary Arrangements<\/strong> (IVAs) three or four years ago are now worried that their IVA may fail because of the sharp fall in property<\/strong> values. <\/p>\n\n\n\n\n\n\n\n

In many cases the IVA<\/strong> proposal, while being mainly based on monthly contributions from income, also offered to re-mortgage the debtor\u2019s property in the fourth or fifth year of the arrangement and to contribute a lump sum to the IVA from the equity released by the re-mortgage. The monthly contributions and the anticipated equity lump sum taken together would provide creditors with the dividend offered in the proposal.<\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

In some cases where no equity was offered in the original IVA \nproposal, creditors added modifications requiring the debtor to \nre-mortgage the property in the fourth or fifth year and to contribute a\n portion of the released equity to the IVA so as to enhance the \ndividend. In some cases creditors required a stated minimum dividend to \nbe so achieved.<\/p>\n\n\n\n

With the fall in property prices a number of different scenarios may arise:<\/p>\n\n\n\n

  1. Negative equity or no equity in the property.<\/li>
  2. Minimal equity in the property.<\/li>
  3. Modest equity in the property but debtor unable to re-mortgage due \nto credit crunch, poor credit rating, a limit on the loan to value (LTV)\n which mortgage providers are willing to offer or a combination of these\n factors.<\/li>
  4. Substantial equity in the property but high street lenders unwilling\n to offer a re-mortgage due to debtor\u2019s credit history or other reasons.\n Only \u2018non high street\u2019 or \u2018sub-prime\u2019 lenders willing to lend but \nre-mortgage would be subject to exorbitant interest rates \u2013 sometimes \ndescribed as adverse lending.<\/li><\/ol>\n\n\n\n

    If no equity lump sum can be realized, the dividend in the IVA is likely to fall short of that offered in the proposal or of the minimum required by creditor modifications. To address this issue, the debtor can offer a variation proposal to creditors. Such a variation can simply request the removal of the \u2018equity\u2019 modification, enabling the debtor to successfully complete the IVA without making any equity contribution. In such a case, creditors would receive a dividend similar to that originally proposed but less than that required by the creditor modification.<\/p>\n\n\n\n

    Alternatively, the debtor may offer a variation proposal offering to \nextend the term of the proposal for up to one additional year and to \nmake additional monthly income based contributions in lieu of any equity\n in the property. While extending the arrangement by up to one year may \nnot be welcome for the debtor, it can be greatly preferable to \nre-mortgaging at adverse rates, something which is likely to have long \nterm negative consequences. Creditors of course retain the right to \nmodify any variation proposals put forward by the debtor but extending \nthe term to address equity is usually acceptable.<\/p>\n\n\n\n

    The insolvency practitioner (IP) supervising the IVA will advise the \ndebtor on the options open regarding addressing equity. Such an IVA need\n not fail and creditors are generally sympathetic to debtors who are \ngenuinely attempting to address their financial affairs.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Many debtors who entered into Individual Voluntary Arrangements (IVAs) three or four years ago are now worried that their IVA may fail because of the sharp fall in property values. <\/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-1965","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\/1965","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=1965"}],"version-history":[{"count":3,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/1965\/revisions"}],"predecessor-version":[{"id":3181,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/1965\/revisions\/3181"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=1965"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=1965"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=1965"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}