A reader asked:
We are desperate to end our IVA. So difficult. The IVA firm that seemed helpful at the start now after two years doesn’t care about our extra costs. We have decided to sell and downsize.
My wife is hoping for a discount but I said they were more likely to charge us more to get out early! We need as much equity as possible for the next house.
This is a tricky situation. There is a bad way to approach it… and a better one… but even the better one has some big disadvantages.
But first the important disclaimer – IVAs can have very different terms. If you want to sell, you are going to have to talk to your IVA firm about your specific situation. I’m just going to talk about some common IVA terms, which will hopefully leave you better prepared for that conversation.
The bad way…
I expect you are hoping you will just have to pay the rest of your IVA payments – probably three years more plus an extra year because you have a house with equity.
But until your IVA ends, you still owe all your debts and, in the IVA, you have agreed to pay as much as possible towards those debts. So if you tell your IVA firm you want to sell your house and end the IVA, they are likely to tell you that the amount needed to settle your IVA will be:
your full debts at the start,
plus the IVA fees,
plus something called statutory interest (if this is in your IVA terms)
less the two years payments you have already made.
There will sometimes be a clause in your IVA which means you have to be left with at least 15% of the value of your house. But even with this, you may have to pay a lot more than your remaining IVA payments would be. So this is not a good approach.
The better way…
Instead, work out what the remaining IVA payments will add up to, including an extra year as you have a house with equity (see How equity release works in an IVA for more about this).
Then contact your IVA firm and say you would like to make a full and final settlement offer of £x, the total you have just worked out. Explain that you intend to finance this by selling your house, but if your creditors do not agree to this proposal, you will not sell the house and your IVA will continue.
The IVA firm will have to propose this to your creditors as a “variation” to your IVA, and they will decide whether to accept it. You need this all sorted out before you sell the house.
But…
The problem with what you are proposing, even if you get a full and final offer agreed for your remaining IVA payments, is that it will be almost impossible to get another mortgage straight away.
Although your IVA will end and your debts will be settled, the IVA marker will stay on your credit records for six years from the start of the IVA. This will happen even if you pay off your debts in full! This marker will stop you getting a new mortgage. So your plan isn’t going to work unless you are downsizing so far you can buy without a mortgage.
Alternatives
The reader who asked the question had no pressing need to move, just a desire to end their IVA. They could sell, ending their IVAs and rent for the next few years. As they are struggling with their IVA, they need to discuss this with the IVA company – there may be ways to help with their increased expenses that could help. If this would involve prolonging the IVA more than they can face, they may have to go for the sell and rent option.
Other people may have urgent reasons to move:
- to somewhere bigger if your family is growing up;
- closer to better schools or to elderly parents that need support;
- relocation may be needed because of your work.
For them, a possible option would be to rent a new house but keep the current one and let it out. They need to consider how this will affect their IVA with both income and expenditure changing.
If you are reading this before starting an IVA, think how likely you are to have to move during the next 6 year… IVAs are not flexible debt solutions. If your life may have big changes – house moves, new baby, family changes, new job – the long IVA commitment may not be suitable for you.
Plan v reality – budgeting problems
What happens if you can’t afford your IVA?
Debt Camel’s Guide to IVAs
Michael Peoples says
May 5, 2017 at 9:09 amThere is another alternative to selling and that is to obtain a secured loan for the required amount. The cost is usually capped at 50% of the monthly IVA payment which would make affordability easier and end the IVA without the loss of the home. Once the IVA has completed the client could sell if they want or wait until their credit file clears up and then remortgage or move. Remortgages are difficult during an IVA and can be expensive so a secured loan may be the only realistic way of raising equity without a sale.
There are downsides to this option and it certainly does not suit everyone but it is something to consider.
Alison says
June 19, 2017 at 4:57 pmI have been in an iva for 4 years and not missed a payment, I am selling my house and asked for a settlement figure. I originally owed £14500 ish they now want 18,284 to settle and I have already paid over 7k, can I make an offer or do I have to accept that a 14k debt is going to cost me over 25k? Thank you in advance
Sara (Debt Camel) says
June 19, 2017 at 5:37 pmThe simple answer is probably not to sell your house until your IVA has finished, as the article above explains.
Stephanie says
August 5, 2017 at 8:25 amHi I’m in my 4th year now and paying £120 a month to my Iva . We’re thinking of selling our house. We owe £40k on my IVA 54k on our mortgage I was going to make an offer of 20k to my creditors . We got our house value for 125k . We really need to sell as I no longer can live in my area.
Thanks for the information above really helpful. We’re gonna go with the second option of telling them we’ll pay the last 2 years and add a extra years payment.
Jane rowland says
August 30, 2017 at 8:26 pmThis website is the most helpful I’ve found thank you! Our Iva was for £175,000, we have been in the Iva for 4 years, last year my husband and I separated he is now renting a property for himself whilst still paying our mortgage and the Iva payments of £800 p month this is causing hardship and stress to us both and we want to sell the house, currently there is about £250k equity we’d like to offer £30k settlement as an end to the Iva how likely is this to be accepted or offer £30k and sell but have reduced Iva payments for remaining 2 years but be allowed to sell house and keep what’s left of the equity? We have a son of 18. Both me and my husband are stressed by the situation, I’ve been diagnosed with depression take anti depressants and have felt at times suicidal with it all. Please help!
Sara (Debt Camel) says
August 30, 2017 at 9:10 pmwhat do you want to do if you do sell the house? Neither of you will be able to get a new mortgage.
Jane rowland says
August 30, 2017 at 9:13 pmMy ex is saying that I can keep the equity to buy somewhere for me and my son and he will continue to rent
We have so far paid in £48k inc a ppi payment £28k of that has gone to creditors the remainder to Iva company in fees
Sara (Debt Camel) says
August 30, 2017 at 10:33 pmWell if that will be enough equity to buy somewhere without a mortgage, you should probably try to go what I called “the better way” in the article above.
Work out how much the rest of your IVA payments for the 5th year and another 6th year in lieu of equity will be. Then propose to your IVA firm that you would like to sell the house in order to pay that total amount as a full settlement of your IVA. This will need to be voted on and approved by your creditors BEFORE you sell the house.
If your creditors reject it, then your IVA needs to get through to the end somehow. Could you and your son rent somewhere smaller / cheaper and let out your house? You may have to find some imaginitive way forward.
Bobby says
February 16, 2018 at 7:45 pmI own a property with a friend , but got into difficulty after losing my job and currently in training to change my carear. I agreed to an IVA 3 months ago but my IVA company could not put a restriction on the property because my friend will not sign the document to have a restriction place on the property. We have decided to sell the property as my friend no longer want the property but i am not able to buy him out as i have no income. My IVA was for £24000 and currently paying £105 monthly.
What are my options ? as i made a call to the IVA company to ask for a figure if i have to pay it off only to be told i have to pay off the full amount and with other cost.
Sara (Debt Camel) says
February 17, 2018 at 8:39 amRead the article above in detail. If you just sell the house, all the equity you have will have to be used to repay the debts in your IVA.instead you need to tell the IVA firm that you want to prose an early settlement and won’t sell the house unless this accepted by your creditors.
carol says
February 9, 2019 at 4:59 pmI have sold my flat and buying a house, I also are three years into an I’ve fir £17.000, I pay 104.00 a month . There is only enough with the sale to pay solicitors and estate agents. The bills will be cheaper so I have offered to up the monthly amount. They are saying I need to pay 3.500 to lift the Iva of my flat. Then I will have to clear the rest from the house sale, which means I cannot but the house. All work is done and we are all ready to sign up and move. I’m now 60 years old and accumulated this through divorce after 35 years of marriage. I’m trying to make my bills cheaper this being the reason for the move plus I won’t have a car soon so need a bus route for work. My solicitor has said she is certain they cannot do this. I’m at my wits end. I am all packed up and waiting for a moving date, I cannot let two other people down. Please help. I have asked if theyca. Move the Iva to the other property but they refuse.
Sara (Debt Camel) says
February 9, 2019 at 5:39 pmI am very sorry to hear this is proving so difficult. Did you not talk to your IVA firm about what you wanted to do before putting your flat on the market?
Why will you not have a car soon, do you have health problems?
Simon says
March 12, 2019 at 11:18 pmMy IVA completion certificate is dated 29/11/2017 & I would now like to sell my house to downsize. In light of the Green v Wright case can my Iva provider claim any equity I may have if I sell my property?
Sara (Debt Camel) says
March 13, 2019 at 8:24 amGreen v Wright sounds so scary, your IVA firm taking money years after an IVA has finished. But it only applies to a very specific situation, where you had an asset (the right to claim a PPI refund) at the beginning of your IVA that wasn’t dealt with as part of your IVA.
This does not apply to your house! Your IVA firm was aware of your house and would have considered whether you had to release equity or pay a 6th year of payments. They can’t come back now after your IVA is finished and ask for any of your equity.
One thing to check is that your IVA firm has removed any restriction on your house with the Land Registry, see https://debtcamel.co.uk/end-of-iva/. If they haven’t, it is an admin error and you should get them to correct it. This rarely happens, but it’s better to find out now rather than have your solicitor find out when you are halfway through a sale!
Simon says
March 13, 2019 at 9:46 amThank you so much Sara for putting my mind at rest. I can always rely on Debt Camel for sound advice.