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Property transactions in the period after an IVA


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Where an IVA has taken place, and subsequently mortgage shortfalls arise from repossessions, is it true to say that the party in IVA is or is NOT protected from the mortgagor (s) pursuing him for shortfalls?

 

Properties owned by a person successfully proposing and starting an IVA - negative equity issues.

 

It may be the case that it is wrong to assume that properties which are sold during a ( 5 year ) IVA and with negative equity necessarily cause financial distress to the IVA proposer.

 

Under a bankruptcy it seems well established that properties bought by a bankrupt ( prior to bankruptcy ) fall as a potential asset for the trustee in bankruptcy and that the trustee may disavow any interest in those where he sees he is unable to garner any value for the estate. As for the bankrupt, he starts afresh after discharge, so effectively, he is not financially affected by any mortgage loan shortfall. The mortgagors are in no position to pursue him thereafter.

 

Is someone able to confirm that an IVA is able to facilitate a similar advantage to someone who proposes an IVA?

 

Supposing that all properties are correctly listed in the IVA proposal, and that the IVA includes a clause permitting unforeseen losses to be brought into the IVA. Supposing those listed properties are assessed at a value at the time of the IVA commencement, equity at about par with the mortgage. Then the IVA kicks off and some time later, after a period during which the IVA party has been making the mortgage payments anyway (albeit possibly with some arrears) – and then mortgage payments stop, the properties are later possessed and sold with a shortfall, which crystallises the debt(s), and the mortgage company considers pursuing for said shortfalls, but it seems that it might be the case that they are forced to accept a claim in the IVA.

 

- Is this about right?

 

Is the situation any different / are there any dangers, where after the IVA was up and running, suppose a new tenancy at one of the properties commenced, then, a short time later ( say 2 months ), the landlord stops payments, the tenants might be permitted to continue living at the property for a little longer, paying rent – maybe even for the duration of their ( 6 months ) tenancy agreement, the bank repossessed, and the ( almost certain ) shortfall materialised after the repo sale, which might be quite some time later.

 

In those circumstances might the IVA proposer be vulnerable to pursuit by the mortgage company for a debt which arguably didn't crystallise until much later?

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  • 7 months later...

I don't know if this fits your circumstances or not; I am in an approved IVA, and my property is up for sale. It has an offer on it, and currently, there is some equity that will be available to the creditors.

However, I asked the question, about what happens if I end up in the position where there is no equity or negative equity, and in my case, it will be subsumed into the IVA, but I can imagine the creditors won't be happy, and if I try to reach a deal two years in, it may not get accepted.

 

I know that doesn't answer your question directly, but does it help?

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I am not sure what you mean by a deal 2 years in / may not get accepted.

 

If a sufficient number of creditors have already voted in favour of your IVA, and your super has organised the wording appropriately so as to accept other unanticipated debts which may occur, then that should be possible sunbject to sufficient overall funding to maintain the overall integrity of the IVA.

 

My post was more to do with the attitude of acceptance ( or otherwise ) or the mortgagor ( bank ) who did not have an opportunity to vote before the outset of the IVA, but how could they if the debt had not been crystallised at that time?

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It seems to be the case that the mortgagor must be notified at the time of sale where there is a shortfall, as the mortgagor may want to take some extra care that the property is sold for maximum realisable proceeds.

 

I think it is right to say that, in order for the sale to proceed, the mortgagor has to consent to a sale in such circumstances. Normally the conveyancing solicitor would write to the mortgagor for clearance.

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