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An IVA Offering only the equity in the matrimonial
home
Background
Fred is 69 years of age and lives with
his wife who is 71 years of age in a property valued at £50,000,
which is jointly owned with his wife and has no mortgage.
He has debts of £27,000 in his sole name.
Due to his age he no longer works and
is now struggling to pay his debts.
Apart from half of the equity in his
home amounting to £25,000, he has no other assets.
Question
Will he be able to put forward an IVA
and would his creditors accept it?
Answer
In order for his creditors to accept
an IVA, the proposal would have to demonstrate that they would
receive a greater benefit than should a Bankruptcy occur.
All that Fred would have to offer in
an IVA or Bankruptcy would be his share of the equity in the
house.
In an IVA, after Fees and disbursements
which would be approximately £3,650, the creditors would get
79p in the £.
In a bankruptcy, Fred would have a year
to raise the equity in his property otherwise his Trustee
in Bankruptcy, would be able to obtain a possession order
and force Fred from his property. The Trustee would then realise
the equity in the property and would be entitled to Half.
In bankruptcy this could well be more
than 18 months down the line. Also to take into account would
be the Fees in Bankruptcy, which are based on what is known
as the Official Receiver's Scale Rate. In this case, these
would be approximately £8,845, giving a dividend to creditors
of only 60p in the £.
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