I’m in an IVA With Debt Free Direct in the UK But Have Concerns. – Richard

“Dear Jon,

I am in an IVA. I have an equity release clause as follows:

‘After month 54 of the arrangment the Supervisor will obtain a professional valuation of the property. The debtor will then obtain two remortgage quotes from reputable brokers/lenders to satisfy the Supervisor that the equity realisation is the maximum achievable. The property shall be re-mortgaged to a maximum 85% loan to value less existing secured borrowings. A remortgage of less than 85% loan to value is allowable where the lower realisation will introduce funds equating to 100% of the debtors equitable share or where the arrangement will receive payment in full. Where the debtor is unable to obtain a remortgage the IVA should instead be extended by up to 12 months. The amount by which the additional secured borrowings increase shall not exceed 50% of the monthly arrangement contribution at the time the mortgage offer is obtained. Where it is demonstrated that after month 54 the equitable share is less that £5000 (gross) the property is to be excluded from the arrangement without extending the term. The cost of a re-mortgage to release equity shall be deducted from the mortgage proceeds and the monthly payments deducted from the contribution. If the increased cost of the remortgage means the dividend to creditors fall below £50 per month after fees, monthly payments are stopped and the IVA is concluded’.

I recently received this response from my IVA company (DFD) when I asked for clarification as to what this actually meant:

You would require your ex-partners permission to release equity from the jointly owned property 50% of the equity would be used as your entitlement.

If your property has less than £5,000 equity based on 100% LTV then it would be excluded from your Arrangement, this would be the overall equity position not your percentage.

Should you be unable to remortgage and have more than £5,000 equity a 12 month extension of your Arrangement will be required.

My question relates to the 85% LTV issue. DFD are insisting that the available equity is based on 100% LTV. Is this correct?

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My question relates to the 85% LTV issue. DFD are insisting that the available equity is based on 100% LTV. Is this correct?



How much equity is in your property?

I am unsure what your concerns are as if the property has the equity required to be released, then it will need to be released, if it does not, then you can have the term extended to make additional payments.

My take on this will only make things more cloudy as I believe they mean you may need to remortgage to 100% LTV if you can and have the equity available to do so to meet the minimum required.

If you have less than 5K equity, all this is moot.

Let me know.



Jon Emge is an experienced UK debt advisor who has helped thousands and thousands of people in the UK to deal with problem debt. Jon specialises in finding good solutions for problem debt using a variety of UK specific techniques.

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