50/50 clause

[MelanieGiles]

The very spirit of entering into an IVA with your creditors is that you will continue to offer as much as you can reasonably afford across the duration. If your circumstances have improved, then if I were your IP I would expect you to increase your payments, but as Ian says if the proposal is silent on this you could dig in an be bullish. I find it very odd that there is no provision at all for uplifted payments if your circumstances allow.

To Hovish - clause 2.2 means that the funds or assets you offer to creditors will be utilised to pay off the costs of the IVA and creditors in the appopriate order (although it is slightly oddly worded!)

Claus 4.1 and 4.2 gives the supervisor power to petition for your bankruptcy in the event that you do not make all of the payments you have pledged to make (again oddly worded and difficult to construe in isolation of the succeeding paragraphs).

[ianmillington]

Hi again


2.2 All income contributions and asset realisations under the terms of the voluntary arrangement will be applied in enhancing the distributions of funds to the creditors in the due order of priority as set out in the Insolvency Act 1986.

Everything you pay into the IVA will be applied for the benefit of creditors in the proper priority ie

VA expenses and fees
Preferential creditors (I doubt you have any)
4.1 Ordinary creditors

Duration of arrangement

4.1 if tne debotor has failed to pay over any contribuitons (wether from income or from the realisation of assets) that the supervisor deems to be payable
4.2 the possible presentation of a bankruptcy petition by the supervisor is considered further under the heading @failure of the agreement@ below.

4.1 This purports to cover the situation where the Supervisor has simply "deemed" an amount to be payable - I question what this has to do with duration of the arrangement, it's a default clause really. Without something else within the proposal entitling the Supervisor to omnipotence whereby he can simply "deem" something, it's pretty pointless in isolation.

4.2 Simply refers to the option available to the Supervisor to petition which you will note is covered elsewhere.

It is, I am afraid a highly dangerous practice for me to provide advice based upon snippets of the proposal and even more dangerous for you to rely upon them. If you want me to take a quick look at it I can provide you with an e-mail address for you to scan in and send to me. Let me know if you would like to do this.

Ian

[Hovish]

Thanks a lot Ian but I do not have the facility to be able to do this. I do feel a bit up in the air about it all because I do not feel that it is totally clear as to what to expect. Should I just carry on making my payments and see what happens. Any extra money we may receive we will not spend hold onto it in case, do you think this is wise.

[ianmillington]

I really do feel you need someone to take a look at the paperwork and clarify it for you. You could phone GT and tell them you are struggling to understand your obligations and ask them to take you through it. I can't see them having any problem with that.

Hope that helps.

Ian

[Hovish]

Thanks a lot Ian

I will contact GT and see if they can clarify this for me once and for all the I know where I stand.

[ianmillington]

Great! Let us know how you get on.

I'm sorry, but I had overlooked Hull Tigers post. If your recollection is correct, then it's negotiation. The key word here is "reasonable". 100% of your pay rise is not "reasonable" but 50% probably is. But it's also important to check the chairman's report, which might define it rather more clearly.

Ian

[Hull_Tiger]

Hi Ian,
The only thing I could find in my proposal was the following:

21. I will keep the supervisor informed of any circumstances throughout the term of the arrangement (conditions 22 to 25 of the appended IVA Standard Terms and Conditions refers). If the supervisor calls for an increase in payments, as a result of the information provided, I undertake to accept the supervisor's reasonable decision and pay any reasonable increase in payment which may be determined. However, this undertaking will not prejudice my right to proceed under section 263 of the Act should I be dissatisfied with supervisor's decision.

This is in the proposal not the Std Terms and Conditions attached to the back. Chairmans report doesn't reference anything in relation to increases etc.
Melanie has told me in another thread that she believes 100% of the increase (minus additional expenditure of course) is a reasonable request so I guess that leaves it open to the opinion of the IP in question.

[ianmillington]

To me, an IVA is all about compromise. Whilst it is theoretically possible, unless it is set out in the terms I can't see how in practice it can ever be reasonable for a Supervisor to require 100% of any increase in your net disposable income. That is hanging you out to dry which, in my view, is not reasonable. I would speak with your IP to get on record some form of definition that you can work on, because if he/she does require all of it, you should ask yourself whether there is any valid reason to push for any pay increases/overtime etc. My guess is the answer you'll get is a 50/50 split.

Ian

[OPTIMIST12]

It is interesting that there is so much variation in different cases as regards how much of a pay rise is to be paid over.

I have the following wording in my proposal -

"In addition to my proposed monthly contributions, I shall pay 50% of any overtime, commission, bonus or any other additional payments received over and above that already provided for in my income calculation as detailed in paragraph....."

I have always understood and accepted that the 50% relates to - in my case - overtime / bonuses only. The basic pay figure - as and when it inceases - is to be paid over up to 100% SUBJECT TO any agreed increase in expenditure. An increase in basic pay is not - in effect - an ADDITIONAL payment - it is your BASIC payment. Overtime / bonuses / commission/ are ADDITIONAL - as in not guaranteed - and therefore correctly fall under the 50 / 50 clause.

Just my opinion - but at the start of the IVA your monthly expenditure is worked out and this is increased as and when this is justified. Surely the difference between your updated and agreed monthly expenditure and your new BASIC pay SHOULD all be paid over as this is the basis on which an IVA is set up - i.e. that you will repay the maximum reasonably possible to Creditors?

Otherwise - say someone gets promoted and gets an annual pay rise of £3000 per year - is it really fair to expect to keep £1500 of this even if your expenditure has gone up by - say - only £400?

Bonus / overtime etc are by definition ADDITIONAL payments and correctly fall under the 50% arrangement so are a different ketle of fish.

It just seems that - if a person is lucky enough to automatically keep 50% of 4 or 5 increases in basic pay over the course of an IVA then that could amount to a tidy sum that creditors could legitimately argue should have gone in part or whole to them.

[Hull_Tiger]

All this has come about for me as I have changed jobs with a higher wage. I took it upon myself to call the firm running my IVA and that is what they came up with. My review is not actually due until May. I have also asked them to clarify the situation with Overtime/Bonus and they also say these are due in full to the IVA. Windfalls are included in my proposal and again are payable in full.

Now it is conceivable that I could just remain as I am for the rest of the term of my IVA and the creditors would not get any additional dividend. In my new job we are offered a pay increase each year which we have to sign to accept. What is stopping me from refusing all of these pay rises as I know it will all be passed over to crediors?

Don't get me wrong I wont refuse them as (a) I will see the benefit of the pay-rise when the IVA finishes in 2012 and (b) if I can increase my dividend now, it gives me scope to reduce it back down again if my circumstances change in the future.

I accept that I got myself into this mess and am now taking measures to get myself out of it but it would be nice to have an incentive to make an increase in income that both me and my creditors can see some benefit from.

[aguise]

This gets very confusing and can be read in so many different ways,mine reads. We will pay 50% of any net income we receive, whether this arises from overtime, bonus payments or rises in basic income. I take this means I just pay 50% of everything over the amount stated in the arrangement. It also allows for inflation as well.

Ang

[aguise]

I also might add that with the nhs I only get 2.5% and I think that is below inflation and wont cover the cost of the bus fare rises.

Ang

[OPTIMIST12]

Hi Hull Tiger -

Like you I informed my IVA Company as soon as I had a Pay Increase rather than wait for an Annual Review. I was informed quickly thereafter of my new monthly payment. Its good to get things sorted out straight away.

Hope you reach an agreement soon.

Good Luck!!!

[OPTIMIST12]

Ang - that raises another intersting point about the 50 / 50 clause where it relates to "basic" pay. Say that yourself and another person had entered into IVAs on the same day with the same figures. If you only get your 2.5% increase for each of the 5 years and the other (lucky!!!) person gets - say - 5% per year in a different job - they would potentially have considerably more spare money over the duration even though you had started off in the same "boat".

Dont know what the "right" answer is but it is very interesting to hear about different peoples experiences.

[aguise]

Thats it, it varies so much and can be read in different ways, unfair to some and very advantageous to others, we get or rather hubby gets loads of overtime so we have the advantage of that but some do not get overtime regardless of hours but may have good wage increases which means in some cases they dont get the opportunity of overtime and lose all of their wage increase. Maybe something like 50% all pay increases up to £1000 and over and above the thousand all of it. So you would keep the first £500 and then the creditors would get the extra over and above a thousand. Do I sound stupid ?

Ang