A reader asked:
I moved in with my parents into their council house several years ago and we are looking into the right to buy scheme. We received the paperwork and it stated that you are not entitled to the right to buy if you owe money to creditors.
Five years ago I lost my job and had a relationship breakup and unfortunately got into debt. Two accounts were defaulted and I went into a payment arrangement with them. I have maintained the payment agreements and gradually increased them but still owe quite a bit (£5,000) on the credit card.
I am back in work now. I have been offered full and final settlements – will this mean my debts are paid in full and I can then go ahead with the council house purchase? Or will I need to pay the outstanding debts in full for this to be classed as ‘owing no money to creditors’?
I know that getting a mortgage is still going to be an issue however :(
The Right to Buy provisions about debt
I have highlighted the relevant part of the Right To Buy rules (if you are looking at your council’s information sheet, the layout may vary but it should say much the same):
This may sound as though it applies to you – after all you have made an arrangement with your creditors and you do still owe them money. However the good news is that it doesn’t!
The type of arrangement this paragraph is referring to is is an Individual Voluntary Arrangement (IVA) which is a formal legal contract with your creditors. It is a type of insolvency, like bankruptcy.
It doesn’t apply if you have an informal arrangement with your creditors. This happens if you have made an agreement with each creditors yourself or if you are going through a debt management firm and are in a Debt Management Plan (DMP).
So the reader’s arrangements with her creditors won’t stop her being able to use the Right To Buy with your parents.
If you are wondering why it matters if you are in an IVA but not a DMP, it’s because buying a house means that you are acquiring an asset, and that would cause all sorts of legal problems if you were in a form of insolvency such as an IVA, so the whole option is being ruled out. These sorts of legal issues just don’t arise with a DMP.
Getting a mortgage
But even though these debts won’t prevent you from exercising your Right to Buy, they are very likely to mean it’s very hard to get a mortgage offer. This is for two reasons:
- the defaults on your debts mean that your credit record won’t be good, and
- you still owe money, which will worry a lender.
Both of these factors will make it harder for you to get a mortgage – you may find Can I get a mortgage when I am in a DMP? useful reading.
Using a full and final settlement to clear the debts is probably a very good way forward for you – it solves the second problem completely and by changing the balance owed to zero, your credit record will also start to improve.
As the defaults will have been a long while ago (at least they should be – if they are not at least four years ago have a look at whether the default date is correct and if it isn’t, get it changed) this may well be enough for you to get a mortgage later this year. With any problems on your credit file at all, it’s always worthwhile going through a broker, not direct to a lender.
Be sure a mortgage is right for you
It may feel like a no-brainer to buy the house at such a huge discount, but three things to think about:
- if you have more work problems it is much easier to get help with rent through Housing Benefit / Universal Credit than it is to get help with mortgage payments;
- investigate in detail any service charge you may have to pay the council – people can find themselves landed with surprisingly large bills after a few years that they can’t afford;
- think what will happen if you decide you want to move out, perhaps you have a new partner or your job moves. At the moment your parents have a secure home for life.
35-40 year mortgages – be careful!
The best ways to check your credit score
When can you get a default deleted?
Mark says
Another great article from Debt Camel. RTB with adverse credit is still not being addressed by the mortgage lenders though promises that a solution is on the horizon has been coming for a while. The demand is there.
Angie says
My husband are both self employed and have three years before Our Interest Only mortgage comes to an end. We are both 56. I was employed by the NHS until 2008 until I lost my job through ill health. I have a good NHS pension and top up my money with piano teaching. We are also two years into a DMP with Stepchange. We will have equity in the house but some will go to paying off the debt.
We worry constantly- we also have a seventeen year old planning to go to uni next year. I wouldn’t worry so much about renting but we’ll be nearly sixty and never expected to have to rent.,, and with a bad credit record. Help!!!
Sara (Debt Camel) says
How large is your mortgage? How much is your house worth?
How large are your debts in the DMP? How long until the DMP ends? Are any of the debts in your DMP really old, eg credit card accounts opened a long while ago?
Have you checked if you can reclaim any PPI?
What are your husband’s pension arrangements like?
Do you have a spare room you could rent out? Is your health up to working more hours?
Faz says
I have an IVA setup through step change, I have been on this plan for a year and have 4 more years to do. I was unable to continue to work full time due to ill health. However my partner is working full time and we both have lived in the same house for over 10 years and both our names are on the tenancy agreement and want to do the right to buy. Would we still be able to do the right to buy even though I am on the IVA and not my partner. I have contacted a broker who said he will be able to help but I am worried if I will be offered the right to buy due to my credit history. Please help with any information on how to proceed.
Sara (Debt Camel) says
So far as I know the information in the above article is still correct – you can’t use Right To Buy if you are in an IVA. I suggest you do not pay any fees to a broker who says he may be able to get you a mortgage, it isn’t the mortgage here that is the problem, it is the RTB rules.
Can I ask how much you are paying each month to the IVA? And why if you don’t have a house with equity you did not opt for bankruptcy instead?
Annalise says
I am currently on a DMP and it will last for a little over 10 years at 400p/m! As this will mean I can likely never buy a property (in mid 30s), I’m considering moving to an IVA so I’ll just have to forgo my financed car (buy one less than £1000) but then be able to have cleared debt payments in 5-6 years.
This way, the I could perhaps move to renting a council flat/maisonette/small house and the house use the ‘Right to Buy’ and cheaply at tbe end of it with no need for deposit. Does this sound like the most sensible option?
Thanks in anticipation of your time/advise.
Sara (Debt Camel) says
how long has your DMP been going? 50k of debts in it?
how much are you paying for car finance at the moment?
are you renting privately at the moment?
your income, is it steady and secure?
Jeffrey Yaw says
I am currently in an IVA and planning to make an application to buy my council property with the right to buy discount scheme. I read the earlier reply which stated that while in an IvA i may not be entitled, can i ask what if i make a final offer to clear the IvA with the help of my partner. Once the IVA is settled would that be deemed ok for me to proceed to make my application as it will be settled, thank you and i look forward to your reply.
Sara (Debt Camel) says
If your IVA has been completed it will probably be OK with the Council. But with an IVA on your credit record you will normally find it impossible to get a mortgage, and that applied even when the IVA is completed.
Jeffrey yaw says
Thank you for your reply, i am aware and currently in talks with a company who could help. Will they see an early settlement same as being completed? Because with early settlement it still stays on your record till the full period, will that be an issue with the council or the fact it is settled early will be enough to meet the council’s criteria? Thanks
Sara (Debt Camel) says
You would need to ask the council this.
kerry says
Hi, I’m nearly comin to the end of my iva, and I was wondering would a family member be able to buy my council home for me in 1 full payment as my nan has offered to buy my house for me and my children in my name.
Sara (Debt Camel) says
That probably isn’t possible and even if it was, it would be a VERY BAD IDEA until your IVA has ended. Because your nan (sounds a lovely lady!) would be giving you a large gift of the money and your IVA company would insist you used that to repay all your debts in full.
You need to wait until your IVA has finished and you have your completion certificate. Then your nan can give you the money and you can buy the house.
Shelley Barnes says
I am looking at the options to help my right to buy for paying off my debts with a potential small win fall. Due to mental ill health our family fell into financial difficulties and had a repossession on our home with outstanding balance, dated 2017 I also have 3 CCJs last one dated 2019 (due to me missing the letter). I am at this stage not worried about the mortgage but just want to know for the right to buy would I qualify if I partly settled my CCJs and the old mortgage and I have no other creditors I owe to or would I only be able to buy if I had fully settled these 4 debts?
Sara (Debt Camel) says
It’s pretty unlikely you can settle recent CCJs cheaply.
Right to buy mortgages are a very specialist area, you need to talk to a broker that covers this niche to see if you can get a mortgage with 3 recent CCJs even if they are settled in full.
Punkypom says
I moved into my partners council flat and I was added to the tenancy 12 months ago. He has been in his flat since 1998 and therefore would have a significant discount. However during the pandemic he entered into an IVA. I have the money to fund the purchase. Could I buy it in my name only or would this mean we would lose his discount? Or if we are joint tenants does it have to be in joint names? If so I assume it is not worth applying for the RTB. Thanks
Sara (Debt Camel) says
why did he opt for an IVA not bankruptcy? did he have any assets to protect?
Leanne says
Will 1 CCJ from 4 years ago mean I am not eligible for the right to buy scheme
Sara (Debt Camel) says
No, but it may mean that it is hard to get a mortgage. Has the CCJ been repaid? Do you have defaulted debts as well?
Leanne says
Hi, thanks for the reply. I will not require a mortgage as it will be paid full in cash
Elaine says
Are you able to have the RTB if you have a 4 year old unsettled default? There is no arrangement to pay in place and nor has there been and as far as I can see, the RTB legislation only states you can’t have the RTB if you have any “composition or arrangement in place, the terms of which remain unfulfilled.”
Does having old personal loans that weren’t repaid actually prevent you from being able to have the RTB even though there are no asset-based legal issues with this?
Sara (Debt Camel) says
It won’t prevent you from buying under the RTB scheme. But it may mean that lenders will not give you a mortgage at a reasonable rate. Has the debt been sold to a debt collector?
Elaine says
Yes it has been sold to a debt collector but I already have a full mortgage offer in place as the debt is over 4 years old so they were happy to lend. It’s the Council interpreting the clause as any debt whatsoever, even if there are no asset-owning legalities to consider. An old personal loan debt is irrelevant to assets that you own and I’ve already confirmed I am in no IVA or any arrangement whatsoever with the creditor; no bankruptcy, no nothing.
John Robson says
Hi my partner has a DRO and I (partner) just been. Added to rent book and want to buy council house with her. I have sold my previous property and have the funds to buy cash. Will/would it be a problem? I no this may sound harsh but theses debt were from her previous relationship and being incredibly stupid running up debt so I refuse to be held responsible for negligence with debt before I met her. I love her but her debt is her debt and her DRO will be finished in 10 months. So after that would we be able to purchase council house ?
Sara (Debt Camel) says
You are under no obligation to clear her old debts. If you were living with her, then the debt adviser will have considered this when setting up her DRO. When the DRO is finished, you can talk to the council about buying the house – as you have the cash her poor credit raring will not be relevant for a mortgage.
Louise says
Can I get RTB with council with a recent ccj on my name? No mortgage will be required as my late fathers estate will pay for the house
Sara (Debt Camel) says
The article above highlights a provision in the RTB rules – so far as I am aware this does not cover monthly payments to a CCJ.
Are you actually making payments to the CCJ?
Louise says
Sara I only just found out about it as it was made to my file some 12 months after I moved house so atm no but I don’t have any information about it
Sara (Debt Camel) says
see https://debtcamel.co.uk/unknown-ccj-credit-record/
Leanne says
Hi Louise,
If it helps, I was in the same position as you. My house went through fine. Good luck!
Louise says
Thankyou ❤️
Haila says
I have a Ccj that’s been paid of.a few years ago and is due to come of my credit file would I be able to have the right to buy my council house
Haila says
Sorry I forgot to add it’s not off till end of next yer
Sara (Debt Camel) says
Having a CCJ on your record should not be a problem for exercising your right to buy. See the comments just above this one.
But it may be a problem for getting a mortgage. You need to talk to a mortgage broker about this.
Claire says
I have a DRO, its currently in the 12 months period from august all debts will be wiped will this stop me from buying my council home?
Sara (Debt Camel) says
In theory you can buy after your DRO has finished in August. But if you need a mortgage that may be difficult.
Liam says
Hi, i have a BRU that ends 18th July 2023 (1 week today). I applied for the RTB 3-4 weeks ago and i have now received a decline letter from council solicitors to say due to bankruptcy i am an unsecured tenant. Will i automatically be a secured tenant once my BRU has ended and can i re submit my RTB application next week immediately?
Sara (Debt Camel) says
due to bankruptcy i am an unsecured tenant
That is an unusual phrase to use. I suggest you go to your local Citizens Advice and ask for their help with this.
T.D says
My council have asked for circumstances surrounding a large overpayment of benefits from DWP. I have a payment plan in place and never missed a payment. I have savings and could make a substantial payment towards it. I don’t have an IVA or DMP so this won’t effect my eligibility for Right to Buy, but could the circumstances surrounding it? (I don’t have a very good understanding and was misinformed by my late husband and there is a language barrier too (I am deaf)).
Sara (Debt Camel) says
I think you should talk to your local Citizens Advice about this request and how to reply to the council. Also whether you should be trying to clear this overpayment faster.
Alexandra says
Hi there, What if you are in a joint IVA which is now half way through the term. Would it be possible to apply for the ‘Right to Aquire’ scheme? We’re housing association not council tenants.
Sara (Debt Camel) says
I don’t think so. Ask your housing association. Also you would find it extremely hard to get a mortgage.
M John says
Hi, i would like to buy my ex council property which is now housing association. However almost 6 years ago I had DRO, at the moment it is still on my credit file. My question is, after 6 years when it comes off my file would this affect my right to buy in any way? Ive lived at the house 15 years after exchanging with previous tenant of 20 years
Sara (Debt Camel) says
I think you could use the Right to buy now as your DRO has completed. But it will be easier to get a mortgage when it is off your credit record
Magdalena says
Hi.
Please I need help and advice in my situation.
I have had an IVA on my own name since June 2017 till June 2022. It’s settled and I’ve got a certificate of completion. It’s been 6 years on my credit file but now I am 2 years after my IVA . My IVA isn’t showing on my credit file anymore.
Do I have a chance to apply for a RIGHT TO BUY scheme for my council house that I am renting from council since 2010?
Plus I have to mention that the council tenancy is on my and my husband’s name and we would like to buy as a joint application . He didn’t have an IVA but had some missing payments on his credit file in 2019-2020. But since then we are no longer missing any payments.
He has credit card balance of : £118.89
Creation loan with balance of : 429.60
Currys my plan with balance : £816.49
Plus eon energy plan with balance £1213 ( but we are now only owe £665.72 as are half way through with clearing the balance and it shows on credit file still but we never missed any payments. They are just debts that we have and they are shown on credit history but we are paying them off on time .
Can we get RIGHT TO BUY chance to buy ? Or do we have to pay all the debts off first ?
Are we not allowed to have any kind of debt to get Right to buy or these need to be paid on time ?
Do we still got a chance to get joint mortgage with in this situation?
We are planning to pay all the debts off in couple of next months time to be debt free .
Sara (Debt Camel) says
A completed IVA no longer on your credit record shouldn’t be a problem for right to buy.
You don’t have to clear all your current debts before getting a mortgage, but they will affect whether the lender considers the mortgage is affordable. Having energy debts, which are a priority debt, is often seen as an indication you are in difficulty.
Magdalena says
Thank you very much for your reply.
Regards to the energy debt this is something that we didn’t have impact on because what happened was :
Eon was merging with Eon next and therefore we were not able to top up our meter because of some chances in the system ( we are on pay as you go scheme ) they didn’t let us to top up because of the error and we’ve tried to ring the many times to make a payment on the phone but weren’t able to . They’ve never cut our supply off, never sent us any letters asking for payments. They simply said that because of the situation with changes in the system we just need to wait for the final bill and are unable to top up at the moment until it’s all sorted.
After a year we had a big bill to pay , to clear the balance off and we couldn’t afford it to pay it in full and they’ve added £7 to each week top up to pay it off and now we’ve got £665 still to pay. This is is our credit file shown as NR. What is this mean then ? Are we in bad situation because of this ? I’ve rang them and explained that we are in the credit file reported with this and it doesn’t look good but they’ve said not to worry as it isn’t our fault and they will write this off soon as we will pay the balance in full .
So shall I worry or not do you think?
Sara (Debt Camel) says
I think you need to talk a mortgage lender about this – Right To Buy mortgages are pretty specialised and there is little point in me guessing.
Magdalena says
Also I would like to know if I have to tell about my previous IVA to the right to buy application?
The question on the application is:
Do you have an IVA agreement? It doesn’t say did you have in the past or something so I don’t know what to do ? Shall I answer : no? Because I don’t have an IVA at the moment. My IVA started in 2017 and settled in 2022. I’ve got a completion certificate and this was two years ago . I am worried if I will mention to the council that I had IVA in the past they might decline me straight away. What shall I do ?
Sara (Debt Camel) says
Do you have an IVA agreement?
No you do not.
If they had wanted to know if you had ever had an IVA, they should have asked that question.
Magdalena says
Thank you very much for your help. I really appreciate it.
I’ve been following your website since I had my IVA and this is really amazing that you helped so many people with your knowledge. Thank you so much !
Yvonne says
Hi I am going through a DRO and my daughter lives with me. My name is on the tenancy. How long do I wait until I can apply for the right to buy after my DRO.. can my daughter but the property or will I lose my discount.
Sara (Debt Camel) says
You can apply after your DRO year ends. But if you require a mortgage that is likely to be very difficult with the DRO on your credit record for another 5 years.
Your daughter cannot buy the property if the tenancy is in your name, it would have to be joint with you.
Nnanna says
Hi Sara , I have been denied RIGHT TO BUY by my council due to CCJ, the denial letter stated that Hosuing Act of 1985 states the following: The Rightto
belongs has made a composition or arrangement with his creditors the
terms ofwhich remain to’be fulfilled, I have no knowledge of this CCJ. Please I have read your comments on here, can you advise me on what to do, the stated that I have no right of Appeal, I think this is wrong
Sara (Debt Camel) says
You can make a complaint to your council and you should (I think) be able to take to to the Local Government Ombudsman (https://www.lgo.org.uk/) if the complaint is rejected. the LGO will say if the complaint has to go to the Housing Ombudsman instead.
Your local Citizens Advice may be able to help with this.
Noma says
Please may I have the relevant legislation interpretation relating to the type of ‘composition or payment arrangement’ referred to on the right to buy qualifying criteria. I need to evidence that this refers to formal contracts like IVA as stated in your previous post please.
Thank you
Sara (Debt Camel) says
The legislation is here: https://www.legislation.gov.uk/ukpga/1985/68/part/V 121(2)
I have given the standard interpretation of this. A composition is an arrangement negotiated with several creditors to pay them less. If you think your council is mis-interpreting this, I suggest you get help from your local Citizens Advice.
Noma says
If I had an arrangement to clear rent arrears of less than £300 with the council can this be used to reject an application for RTB please? Just that one informal arrangement and no other?
Sara (Debt Camel) says
I don’t think I have ever seen anyone try to exercise their right to buy when they owe the council money.
Will you be needing a mortgage? Because getting rent arrears suggests a mortgage may be problematic?
Mike says
This was part of my complaint to my council right to buy team and i also copied council complaints team for there record.. Am waiting for there update, will be updating here if it was rejected or accepted. I also inform them that I am willing to go to housing ombudsman
I have No Composition or Arrangement with Creditors:
Under Section 121AA of the Housing Act 1985 which explicitly states that a person cannot exercise the Right to Buy if they have entered into a formal composition or arrangement with creditors, and the terms of that arrangement remain unfulfilled and is not the case in this circumstance. A CCJ does not, in itself, constitute such a composition or arrangement. “A composition agreement is a voluntary arrangement, typically under the Insolvency Act 1986, whereby a debtor negotiates with creditors to settle debts for less than the total amount owed, usually under a binding agreement such as an Individual Voluntary Arrangement (IVA) and again this is not applicable in the case.”
The fact that I was unaware of CCJs at the time of my application further underscores that no arrangement or negotiation had been made. I contend that it does not imply that I entered into or failed to fulfill a composition agreement .Upon learning of these CCJs, I promptly resolved it in full.