Advice and Opinions Required

[Kingeer]

ok, further to another thread, just thought I would seek some opinions from the IVA.co.uk community

I have been given 3 separate answers on the following situation, these are :

BR - CAB
IVA - IP Company
DMP - CCCS

My situation is that i have 47k of unsecured debt, spread across the following :

Egg CC - 11.5k
MBNA CC - 16k
Halifax CC - 6.5k
M&S CC - 1.9
Barclays Loan - 11k

My partner and I have a joint mortgage of £120k, with the house valued at £127k (sept 2007).

We both pay £750 (£1500 total) into joint account, which pays all bills by direct debit, with the exception of food and entertainment.

My take home pay is £2200 and my partners is £1800

The current Monthly I&E (joint) is

Mortgage – 853
Water – 47
Council Tax – 80
Gas – 15
Electricity – 50
Buildings Insurance - 15
TV Lic – 12
Satellite – 51
Life Assurance – 13
Dental – 17
Car (road tax/insurance/servicing) – 65
Fuel – 80
Food Shopping/Cleaning – 500
Clothing – 100
Contact lenses – 37
Entertainment – 200

Total = 2135

We have gone through the above and made cuts in our expenditure to and come up with a monthly I & E of approx 1900.

However, our circumstances will be changing in April with my partner ending her full time contract and the arrival of a new baby. Hence the income changes. She will be entitled to SMP and we think we can claim tax credits. Our income then will be :

Mine - 2200
SMP – 448
Child benefit – 72
Tax credit (approx) – 40
Total £2768

My partner may go back to work after 9 months (Feb 09) but is not guaranteed a job, with her previous salary. If she did go back we would have childcare costs of approx £650 per month

So there we go – everything laid bare

Sorry for the long missive, but advice/guidance would be greatly received from all – professionals and those who may have been in a similar position.

Rich

[MelanieGiles]

A good insolvency practitioner - or debt advisor - will outline all of the options for you, including the advantages, disadvantages and implications of each one - leaving you to make the decision as to what is best for you. So rather than suggesting to you what is the right way forward, I'm going to give you just a few points to bear in mind.

In bankruptcy, your equity in the property will vest in a Trustee, who will want to realise this for the benefit of creditors. You will therefore need to find someone to come up with the money if you want to stay in the property.

You would appear to have disposable income of approximately £850 when your partner is off on maternity leave, but I am not sure if you have taken into consideration the additional costs that the baby will bring, so this could be reduced. If the figure is correct, and I believe from another post that you owe £47k, a DMP will take you 55 months to pay off if creditors are to stop charging you interest (this is not certain) and you do not pay fees to the DMP company. If you do pay fees, then the period of repayment will be longer.

Under IVA and to a certain extent bankruptcy proceedings, your expenditure will be carefully scrutinised, and there is no way that you will be allowed £500 for housekeeping and £200 for entertainment. (I am assuming that this is your first child??) There is less scrutiny of expenditure under a DMP - if you choose one of the fee paying companies to manage it for you. I understand that Payplan and the CCCS (non-fee paying companies) do operate fairly frugal expenditure allowances.

Under bankruptcy proceedings you will be required to make payments for a three year period of between 50% and 70% of your disposable income. In an IVA you will pay for five years, and are likely to have to remortgage your property at the end to raise additional money from the equity. The timescale for a DMP is uncertain, given that you have no control over creditors continuing to charge interest.

Which way do you feel is the most appropriate for you now?

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

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[pbeck]

Rich

Debt management will probably be the best option for you once your wife is only on the lower rate of SMP, particularly with a company like CCCS who are paid by the creditors.

Now if your wife is unable to get job once the SMP finishes, then yes, an IVA may be suitable, as by thay time you'd only have a few hundred pounds to spare for repayment of debts, but as her earnings are presently around £1,800 per month, it would be hoped that she could fairly easily find a job that would at least make it worthwhile after allowing for the childcare.

If she finds a job paying over £1,200 per month net, then after paying for childcare, you should still have around £1,000 left to pay off your debts each month.

In this circumstance I would not recommend an IVA, as under debt management you would be able to repay your debts in under 5 years, and it is cheaper than doing an IVA.

So to summarise, my suggestion would be, do a DMP for the SMP period, then see what kind of job she can get afterwards, if she can get a reasonable well-paid job afterwards then continue with the DMP, if she can't then an IVA may be appropriate at the time.

Philip Beck

Licensed Insolvency Practitioner and IVA specialist

[Beechy]

How about this
9x 938.00 8442
51x 490.00 24990
33432 Total VP's

This is based on the wife not returning to wok after 9 months. Also reduced the food, sky and social spending, but added contingency and clothing.

But not added an increase Tax credit




Dave Beech

[Adam Davies]

Hi
Bankruptcy seems a strange call from the CAB
A DMP until your wife has finished SMP followed by a review of your situation at that point seems the best option for you.
Regards

Andy Davie
IVA.co.uk Spokesperson and Website Manager

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[Kingeer]

thanks to all for the replies.

Melanie - to answer your question, my preferred route would be DMP initially, whilst reducing my expenditure and then see if my partner *wants* or can go back to work after the SMP has ended. This is our first child, and we may have more.

think the above is along the lines of whats been suggested by most.

Just for everyones information, here is what CCCS reviewed my expediture down to. This was taking into account the two of us and a new born child :

Mortgage – 853
Water – 47
Council Tax – 80
Gas – 15
Electricity – 50
Buildings Insurance - 15
TV Lic – 12
Satellite – 51
Life Assurance – 13
Dental – 17
Car (road tax/insurance/servicing) – 65
Fuel – 80
Food Shopping/Cleaning – 370
Clothing – 50
Contact lenses – 37
Entertainment – 30
Sundries/Emergency - 30

found it surreal that i could kep Sky at £51, but they cut my food down to £370 and clothing to £50, with a newborn child.

again, thanks to everyone who replied

Rich

[Beechy]

I understand where you are coming from Andy, but if Kingeer and his partner already know the answer re returning to work.

DMP ok,just as long as the DMP company does there job and stops the hassle phone calls and stops interest and charges.

The last thing people need with a new born is hassle from creditors.







Dave Beech

[Kingeer]

Beechy

you hit the nail on the head - my main concern about a DMP is the possible phone calls, visits, even CCJ's i understand, that could be placed upon us.

I will be at work, she will be at home with a new born.



Rich

[Adam Davies]

Hi
Agreed,many people forget that one of the biggest advantages of IVAs is the fact that it is a legally binding agreement and all chasing for payments,legal action and interest will stop.
I think whilst Kingeer's wife is not certain about returning to work a DMP would be the best option
Regards

Andy Davie
IVA.co.uk Spokesperson and Website Manager

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[Beechy]

From your posting I think you and your partner are looking to settle down and have more children.

Bringing children is is a full time job.

Chances are that your wife will not return to work and you will have lost 9 mths of an IVA

Dave Beech

[Adam Davies]

Hi
But if she does then technically they may not actually be insolvent and if in an IVA would find it very restrictive.
Let's not forget the equity release in an IVA plus inflexible expenditure allowances.
As with any advice on this forum we are only dealing with info supplied,a thorough fact find is required for difinitive advice

Andy Davie
IVA.co.uk Spokesperson and Website Manager

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[Beechy]

agreed, but the equity only appears to be 7k at this stage.


Dave Beech

[Adam Davies]

Hi
But it is most likely there will still be the provision within the IVA to remortgage,regardless of the equity now,and who know where house prices will be in five years.If they want to move into a larger house an IVA could restrict this.

Andy Davie
IVA.co.uk Spokesperson and Website Manager

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[Beechy]

There will be a provison in the IVA based on the ability to re mortgage based on 80/85% LTV,

Surely if people are in DMP the ability to gain further credit will be affected. there is also the potential issue of defaults, ccj's and charging orders to be considered

I am not saying an IVA is the answer I am just looking at the options

Dave Beech

[Adam Davies]

Let's hope that Kingeer chooses the best option.
Regards

Andy Davie
IVA.co.uk Spokesperson and Website Manager

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp