56 yrs, 25,000 pound debt - IVA or NOT???

[Kitney]

Hi

I've been in an IVA for a year, and my friend has got wind of it and wonders if it is the right thing for her. The difference is I don't own a home and she does so she has a few questions below that I can't answer:

She is a 56 yr old home owner and currenlty has approximatley £25,000 of debt, and is paying them off in various loans and one credit card, ranging from 5 yrs to 9yrs remaining.

She can afford to pay £250 per month max but is currently at risk of
redundancy and therefore this amount may be lower.

She would like to retire at 60 years but understands this may not be
possible (her mortgage won't be paid off until she's 62) and she now has the dilemma of whether or not she should consider entering into an IVA or stick with what she has got.

She's seen many advertisements about having 90% off the debt written
off - though she understands this is usually not the case, and asks how does say having half the debt wiped off with regards to home owners?

Her concern is that if she only pays £250.00 per month the whole debt wouldn't be paid off and therefore would they require her to sell her house?

Of the two loans she has, one is secured and one is unsecured - am I
correct to think that if she wants to retire at 62 when these loans won't be paid off they can force her to sell her house to recoup the debt, or could the remainder be written off because she would be on a pension? Equally, if she goes into the IVA can they ask her to release equity or whatever happens (sorry not a homeowner don't know the terminology)?

Regard, Kitney

[Kitney]

Sorry forgot to add - is there an absolute minimum monthly amount to be paid into an IVA? I thought it was £250.00 but read it could be lower say £200.00
Thanks, Kitney

[MelanieGiles]

Hi Kitney and welcome to the forum

How much equity does your friend currently have in her property?

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[Kitney]

She pays £300.00 per month for her mortgage and will pay this for a further 7 years. I will call her now and ask about the equity. I forgot to say one of her loans is secured against her house.
Thanks very much for your promt reply.
Kitney

[Kitney]

Hi, said the equity is £60,000
Thanks, Kitney

[iva_squirrel]

Good evening Kitney,

Welcome to the forum.

It is great to see that you are trying to help your friend to sort out her financial situation however if her debt is £25K and the equity on the property is £60K (after the 2 secured loans), I am afraid your friend is not insolvent.

I could not suggest Debt management Plan option due to fact that she would like to retire in 4 years.

Perhaps downsizing her property could be an option.

Kind regards,



Julia Simavi

Shortlisted for Best UK Debt consultant by Credit Show 2007

View my profile:
http://www.supersonicsquirrel.net/julia ... rofile.asp

Visit my website:
http://www.supersonicsquirrel.net

[MelanieGiles]

And she could also try remortgaging to repay her debts. The interest rate for a higher mortgage will be far less than that she is currently paying on her loans and credit cards.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[Kitney]

Hi

Thanks for this info it is very useful. Can I just clarify that if she can’t go in to an IVA, she seems to think that when she comes to retire and she still has debt to pay (both secured and unsecured) that she will be able to make some kind of offer (clearly no where near enough) to them to finalise the loans because ‘after all I will be on a pension and they can’t expect me to pay that’ she said. I said that by that stage her mortgage would be paid off, so in fact she would be in a better position to pay it! Bearing this in mind, a few months ago she applied for an unsecured loan of £10,000 not realising it was the same company that she has a secured loan with and they suggested she extended her secured loan, but she said no because she didn’t want it affecting her house. I said that I thought that indirectly an unsecured loan was still connected to your house (eg. we were advised by over 10 lenders that non-home owners cannot get an unsecured £25,000 loan even if your credit is excellent). Therefore I suggested that she might have been better to combine the two, and save on x2 payments of interest and protection and advised her to seek proper advise, however, she still thinks the creditors will wipe the debt at retirement so it won’t be a problem.

Am I also right to think that if an unsecured loan creditor is not being paid they can take you to court and demand payment which may result in having to sell her house?

As for downsizing, her property is a two bedroom apartment and she is not willing to move.

Thanks, Kitney

[MelanieGiles]

I really do not think that your friend's creditors will be prepared to write off their debts when she retires, and certainly would not advise her to rely on that with regard to her future financial planning.

An unsecured creditor can quickly change to become a secured creditor by taking a Charging Order over her property. These are becoming more and more common, and can result in possessory action being taken in the event that the debt remains unpaid.

I think that your friend ought to do something proactive now to deal with her creditors, rather than wait for problems to come to her in the future.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[finebridge]

Hi Kitney,

I totally agree with MNelanie & Julies advise. She may find that in a DMP the interest could be stopped and certainly a remortgage is a positive option. Please keep posting and let us know how your freind is getting on.

kind Regards

Nicola

Finebridge Ltd
22 Laud Street, Croydon, CR0 1SU
0800 180 4212
www.finebridge.co.uk

[Kitney]

HI

Thanks for all your comments - I have passed them on to her and am keeping my fingers crossed!
Thanks, Kitney