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A good starting point for IVA questions
I've been helping a mate with his IVA and he's received some information from the company dealing with it.
According to the figures they've sent him, he originally owed about £16,500. He's repaid around £13,500 and there's £3,000 still owing. He's got an outstanding PPI claim which he's acknowledged will be paid into the IVA (approximately £2,500 due from that), and unless I'm missing something, this means he will eventually have paid almost all of what he originally owed.

The IVA company has sent him a computer printout of an IVA proposal with his name and details on, but which is neither signed nor dated, along with a photocopy of a chairman's report with a date in late January 2014.
The computer printed and unsigned IVA proposal says, "I propose the property (his house) is excluded from the arrangement and that the term has already been extended by 12 months.)
But later in the same document, the house is listed under the heading of "Assets Specifically Pledged." This is at odds with the earlier proposal to exclude, so I'm not sure where to go with this. We've sent the IVA company a letter requesting a completion certificate, but there's been no reply as yet.

Also, on the basis that logically this IVA would have been arranged in the latter part of 2013 if the first payment was made in January 2014, would I be correct in suggesting that he'd be entitled to argue that the 2008 protocol should apply, rather than the 2014 one ?
Hi Steve

Welcome to the forum.

The first thing you need to understand about an IVA is that on rare occasions if funds allow then the individual could end up paying more back than was originally owed. This is because in most standard IVAs if income increases or additional funds can be paid into the agreement from windfalls or equity release the following can be collected:

- 100% of the original debt
- The costs and fees and the IVA company
- interest on the original debt charged at 8% pa from the start of the IVA.

As such as in your friends case even though with the PPI the total original debt is almost paid in full, the arrangement still continues as agreed because the additional costs and interest remains outstanding.

In terms of the equity release clause in his IVA this situation is more difficult to advise on. This is because not all IVA companies have the same terms and conditions. Some IVAs pledge a set amount of equity must be released, some pledge 100% of the available equity in the 54th month, others follow the protocol rules. The specific terms signed up for would be the ones that would have to be adhered to.

Now, if no signed agreement can be produced then could your argue that he agreed to different terms? Perhaps, but that would probably have to be argued in a court.

Really the best option is to come to a mutually agreeable way forward with the IP. If you can't or won't do this they are likely to argue the agreement has been breached and terminate the whole thing. This would leave your friend with outstanding debt. The alternative would be to take legal action against them but this is likely to be a very costly excercise with no guarantee of success.
A belated thanks for your input on that.
It's been a busy few weeks with everything that's been happening.

Since my original post, the IP has responded to our communication and sent an unsigned and undated proposal document, which again contains the same contradictions as I previously mentioned, with the regard to the part which says, I propose the property (his house) is excluded from the arrangemen..." and later, the house is listed under the heading of "Assets Specifically Pledged."

Since my last post, my friend has found a few documents from when he first applied to embark on an IVA, and which came from the company who he originally signed up with. This changed part way through, and I seem to remember him saying it was because the first company was having problems or was very busy. I know he had a lot of trouble getting hold of them on the phone and wasted money being on hold for half an hour at a time. Not sure what problems the company was having, but continuing, one letter from that original company is dated December 2013, which says the papers have been finalised. It enclosed documents he had to sign & return. The copy paperwork he's now found proves he signed it in the latter part of 2013.

Amongst the documents is a Conditions document, which says, “The conditions are part of the arrangement. If any ambiguity or conflict arises between the conditions and the proposal, and any modifications to it, then the proposal (whether modified or not) will prevail.)”

In the proposal itself, it says the standard conditions are part of the proposal. The conditions are dated 2012. (not 2008 or 2014 !?)

I’ve read through all 23 pages of the standard conditions and there is no mention of an obligation on the debtor to remortgage his property under the arrangement, however it does mention it in the actual proposal.

2.1 of the proposal says:-
“I propose that the arrangement last for 60 months or until 100p in the £ is paid to creditors, whichever is the shortest.”

3.1, paragraph 3 of the proposal, under the heading of “Assets included in the Arrangement, says:-
“….. I propose the property is excluded from the Arrangement and that the term has already been extended by 12 months.”

But later on, in Appendix E, section 1 there is a pledge that the debtor will attempt to release equity from the property. It is subject to conditions, one of which is as follows.

"The incremental cost of the equity solution, including cost of any new repayment vehicle will not exceed 50% of the monthly contribution at the review date."

I’m assuming this means that the monthly cost of a remortgage cannot exceed 50% of the monthly payments into his IVA as at the review date. If anyone can comfirm this, it will be much appreciated, as this is not a subject I've looked into before.

The 2013 dated paperwork does contain an obligation to seek to remortgage the property, even though in his proposal he made it clear he wanted to specifically exclude it. I’m not sure how this has arisen, in that whoever drafted the proposal should have noticed and pointed out this contradiction before asking him to sign it. The problem I envisage is that it’s usually the case that people are treated as if they have read and understood a document before signing it, regardless of whether they actually have read it or not. I wonder if one way he might be able to dispute this is if he was to point out that he is dyslexic and relied on someone else telling him what he was signing. I wonder if one argument we could put forward in his favour is this. Appendix A of his proposal is at odds with the exclusion referred to in 3.1, because his house is listed under a heading of Assets Specifically Pledged, however it is clear from 3.1 and the words, “I propose the property is excluded from the Arrangement….” that his intention was to exclude the property from the proposal, irrespective of the fact that it incorrectly listed later as having been pledged.
I appreciate that the confusion regarding the wording, and the question of what is and is not included in the proposal is more of a legal question than a financial one, however given the wealth of knowledge and experience that exists on here, I would be glad of any light any of you can shed on this, and any suggestions I can pass on.

Thanks again

Steve J
Hi Steve

In terms of the generic equity release clause in standard IVAs your understanding is correct. The clause will state that the incremental monthly cost of any mortgage for equity release can't exceed more than 50% of the IVA payments at that time. Further information is available about this here: How is equity affected by an IVA

This is one of the safety measures included to protect the person in the IVA so that the amount of equity they are required to release is limited.

In terms of your friend's specific case, from what you have said it does seem that the proposal contradicts itself in different parts as to what should happen to the property in this instance. It seems to have become more confused by the fact that the IVA company changed half way through. As such the person who initially drafted the proposal is no longer available and so can't be referred to for clarification......

I am not sure whether James can add anything but it seems to me that given the circumstances, the current IVA company can interprit the meaning of the document one way and you and your friend in another. Unfortunately in these situations if there is a stale mate the only way forward will be to get a lawyer involved...... As such, if it is impossible to come to a mutual agreement with the current insolvency practitioner I think you are going to need to get an insolvency solicitor to look at this......
Hi Steve

As I understand it you are querying whether or not your friend's property should be part of their IVA agreement at all. My gut reaction would be to say that this would have been the intent of the proposal. It is hugely unlikely that any homeowner starting an IVA in the last 10 years would have got away with their property simply being exempt.

That said the documents you have reviewed are clearly unclear on the matter and there are clauses that seems to contradict each other. As such I do not think the original intent of the proposal will ever be clear. Given this unfortunately I do not have much good news for you and as I see it there are only 2 ways forward.

The first is to reach a compromise with the IVA company that both parties are happy with. Of course this is easier said than done especially if the IVA company dig their heals in and simply say that the equity release clause has to be adheared to.

Of course this scenario is not necessarily disasterous. If (through gritted teath) you agree the clause stands the equity only has to be considered if there is more than £5000 based on 85% of the market value of the property. Even then as you know it may be impossible to release anything and so the payments will simply extend for a further 12 months.

If you do not agree with this then the only other option is you will have to get legal advice. An insolvency lawyer may be able to give further clarity. They may agree with you and be able to robustly argue your friend's case to an extent that the IVA company back down. However I am sure that they will be unable to give any guarantee and may say that if the IVA company doesn't budge the only way forward would be a legal fight which your friend may not have the appitite or funds for..... Facing this scenario backing down and accepting the clause would ultimately work out a cheaper option.