can an iva be settled early?

[mike_w]

Hello
I am currently involved in an I.V.A which has just 12 months to run.
I have a relative who is offering to pay the balance on this agreement in full, which has 12 payments left.
I requested a balance statement from my I.P and to my dismay.....was told that they will accept such payment in full but the funds will be " drip fed", and the agreement will end in 2008 as planned.

Can an expert advise me whether my I.P can do this as I read in many an article that an I.V.A. can be settled early in this way yet my I.P is saying they will take the money but not end the agreement?

Any advice would be most appreciated and please no advice to contact my own I.P as over the last 4 years they have been extremely un-helpful

Kind Regards

Michael

[MelanieGiles]

Hi mike w

Your IP should be offering an early settlement to your creditors which will avoid the costs he intends to charge in the last year - although he will probably charge a variation fee to compensate. There is no way the agreement should be unecessarily extended, especially when he could pay off your creditors a lot earlier.

I suggest you advise him that you will be informing your creditors if he refuses to comply with your instructions. Remember it is your IVA! If he still fails to comply with your wishes, threaten a complaint to his regulatory body.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.
View my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[mike_w]

Hello Melanie

Thank You for a swift reply to my post and many thanks for the invaluable information you have provided.

I found this site today after a long search for information and advice for serving I.V.A `s and cant tell you what a relief it is to gain some honest and straigh forward advice.

I will write to my I.P in the morning.

Thank You again

Kind Regards

Michael

[MelanieGiles]

Michael

Glad to be of help and that you have found our site helpful.

Good luck and don't be afraid to seek further help here.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.
View my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[mike_w]

Hallo, I have just received a reply:
The reply was: in order to accept a settlement we would have to convene a meeting of the creditors to accept the settlement of the i v a with the full balance being paid and this will incurr extra costs and therefore less paid to creditors.

My question is this: does the creditors meeting have to be convened to accept early settlement even though its the full balance of the i v a payments?

If I settle with the full balance on my i v a payments( which has 1 year remaining) can my creditors refuse and make me pay the monthly payments untill balance has cleared?

I hope you can help with this as didnt expect to have to ask permission to pay the full balance on my i v a

[MelanieGiles]

Yes - a variation will be necessary as you are altering the terms of the arrangement. Your creditors could technically refuse the proposed variation, but this is unlikely.

Depending upon the level of additional fees your IP thinks he needs to charge to do this simple piece of work, you may need to get your relative to increase their offer in order to get the same dividend returned.

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

[mike_w]

Hello Melanie
Thank You for your advice.

If I understand this correctly, If I pay the remaining balance and it is drip fed until January 2008, Then I pay no more than is left on my payments.

If I pay the full balance today, then I face further having to increase the remaining payment balance in case my creditors reject the variation because they will get less money.

Ok, sorry to appear stupid but how is having the remaining balance drip fed for the next 11 months cheaper than paying the full balance today?

Thats 11 whole months I.P. charges saved but more cost because I wish to settle 11 months early?

If I have learned one thing from this experience then its not to take on an iva. My creditors will have had £7000 out of £12500 paid back, thats a massive £5500 i will have paid to my IP for the privelage of not going BK yet I would have been released from this nightmare alot sooner than the previous 4 years and pending 11 months.

You said in a previous reply that it was MY iva. I will disagree Melanie, Iva`s help us yes, but IP`s make alot of money off our misery.

And now I see light at end of tunnel and you advise me my IP will try make more money. I already know they do not wish me to settle hense my early question. Even the reply doesnt ask if i wish to make a meeting merely that it will cost more money and less to creditors.

<sighs yet again>

[MelanieGiles]

Mike w

There is nothing to stop you paying the full balance to your IP now, but if you want the IVA closed off early he has to vary it - there is no provision in an IVA agreement for early settlement - but I am thinking of amending my standard documents to provide for this having read your notes. (Even IP's never get too old to learn new things).

I know that this seems barmy to you, that you have to pay additional fees for the IP putting forward an amendment to the terms, but he will have to do extra work and you cannot expect this to happen for nothing. If you are happy to sit out and wait for the IVA to be concluded at the time it was originally envisaged, then pay the lump sum over and do not incur any additional costs.

Maybe you and I have misunderstood each other. I assumed that you wanted to offer the lump sum and have the IVA closed early. This is not possible without variation. If you want to pay the lump sum now, and wait until the original closure date, then go ahead and do that. The reason that your IP cannot close the case early without variation is that he would then give up the right to claim any windfalls which you might receive from now until January 2008.

I am sorry that you feel so disgruntled with the IVA process, sadly a lot of people on this forum are very negative about a process which was designed to bring comfort back to personal finances. You don't mention anywhere how much you owe or the dividend which was accepted by the creditors. If you are paying back anything less than 100p in the £, I still feel that it has been a worthwhile process.

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

[mike_w]

Hi melanie

Thank You for your reply.

Well if there is so many disgruntled members on this forum then that should speak volumes.

Yes we get to write off a large amount of debt, which I might add in most cases, does not mean we led lives of luxury at the expense of our creditors.

For what ever reason a person embarks upon an IVA, it is because we wish to get our finances back on a level pegging to be able to get on with our lives.

So here I am after 4 years and 2 months, in a position to clear my balance through the kindness of a relative who has seen me struggle and making too many visits to my doctors.

Yet because of my IP not making their full last years charges I may have to carry on through to jan 08.

I know whats involved with a creditors meeting, I had to have one forced upon my IP over a year ago because they refused to put an offer to my creditors on my behalf. My offer may have been too low but it is my creditors who should decide whats too low and acceptable. NOT my IP who will have to charge less because of an early settlement. Well atleast until you explained they can charge a variation fee for bringing a creditors meeting etc.

So a letter to all 5 creditors and 5 phone calls on the morning of my meeting costs what?( as i said, I know whats involved, they rarely ever go to the meetings.) I have no idea what they will charge for the privelage of 1 hours work but I bet it isnt less than 200 pound!

So please help me out here, whos IVA is it realy Melanie? Mine? i have worked hard to get to this day with my IVA and now I am faced with another 10 months because my Ip will make further charges on top of the remaining balance of payments?

Nah, its not my IVA, nor is it my creditors, they receive very little out of £12500, in fact the last time I looked they get £7000.

Thats £7000 divided by 60 = £116

So why are my payments £200 per month?

It doesnt take a genious to work out why and I hope that even tho I come across disgruntled, there are some who sympathise with the fact that an IVA is surpose to make life more barable while paying back our creditors what we can afford, yet an IVA is by no means an easy option to go down and had the initial consultation explained what I now know, then I would never ever have entered an IVA.

I would have been free a year ago of my responsibilities had I declared bankrupt, yet because of my IP and their charges I will have to see out a further year.

What do you regard as a fair fee for writing 1 letter and copying this 4 times,posting or faxing those letters, and then making 5 phone calls?

Enough to make me suffer another 10 months of this hell?

An IVA should be explained 100% at the beginning and whats involved and all charges, not have to read of the charges 12 months into an IVA.

Before I go back to my life of luxury, my creditors saw not 1 penny until the third year, My IP had all their charges first!!

Its wrong and I feel you may know its wrong, but the people at fault are the companies who offer to clear your debts with fancy advertising on tv and online and once you entre an IVA with an IP they get thier fee for pushing you through the door of an IP with the offer you will be debt free in 5 yrs.

I might be debt free in 10 months but ive made myself ill getting their, they dont warn you of that when your giving them your details at the beginning.

More information for the decent people trying to get their finances straight please!!

Michael.

[thebear29uk]

Hi Mike

I can understand your frustration but you cant blame Melanie for this situation. An IVA is an agreement between you and your creditors to pay as much as possible to them for a fixed 5 year term. Whilst your creditors would probably welcome an earlier settlement it cannot be done without the variation meeting because, as I understand it, if you settled now paying for example 35p in the £ and then in 2 months time won the lottery or inherited money then you would not have to pay that into the IVA. We can argue all day about IP costs but the reality is IVA's cannot be arranged without an IP. Would we know where to start in negotiating with our creditors to reach settlement. I think its a bit simplistic to state they only need to write one letter and photocopy it. It would seem that a lot of phone calls take place to secure voting and the preparation of the legal documents will also take time. In my profession we charge fees that are often questioned but we charge the going rate. Hairdressers charge £100 for styling, personal trainers charge £30 for a workout but they haven't done half the examinations required to be an IP.
I do sympathise with you. Maybe 4 years ago you didn't have the benefit of this forum. I know I'll be well-informed having read so many posts here. Like with any industry there will be good and bad IP's and the level of advice will differ. It appears you were not given a full explanation at the time you started.
Given the fact this is making you ill I personally would request the variation meeting and pay the settlement now. That way you are completely rid of it rather than waiting another 10 months. I'm no expert but surely the variation meeting costs wont be any more than final year costs.

Wishing you well for the future

Dave

[stella]

I agree that an IVA is a good way of dealing with "overstretched people". As I have already posted, I had my creditors meeting today but it had to be adjourned. No I am not happy with that but until there is some regulation that everyone understands, unfortunately this is the way it is and IP's like Melanie and others on this site just have to answer our rantings and ravings of panicking people like me!! Personally, I am not disgruntled, just wish there was some order about it all. Hey ho! Glad that others had their IVAs approved today, just shows it does work!!

XX

[MelanieGiles]

Thank you for that very sensible post Dave.

We IP's do not make the rules in this game, that is done by Acts of Parliament and Statutory Instruments. We are here to carry out our jobs to the best of our ability. I can only advise on the basis of the law, my experience, and commercial common sense. Some people will like the answers, and others wont.

C'est la vie!

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

[neverending]

Hi
I can see why mike feels disgruntled but I can also see the point of view of the IP.
There are elements of the IVA system that are not quite right and there are IP firms that are not putting the best interests of both the debtor and creditor before their own commercial interests.
However this is the case in all industries and as the IVA market is still relatively young these problems and irregularities will be ironed out in time.This forum is the way forward and the more that people exchange information then the more that the end user,Joe Public,will be able to decide the good from the bad and the right way from the wrong.
Mikes post is welcome,as is everyones
Regards

[thebear29uk]

Hi Neverending
I totally agree with you when you say Mike's posting is welcome. You only have to have looked at the BBC "have your say" website this weekend to realise that not everybody is ready to acknowledge that people will get into debt nor be sympathetic to our cause. This website is a warts and all open forum for us to say as we find. There are plenty of rogues out there making money out of our misery but in Mike's case it seems a little more straightforward that to end his IVA now he will have to pay for a variation meeting as, I understand, you are also doing. Nobody is moving the goalposts or making it up as they go along.
I do think that people entering into IVA's having visited this website will be forewarned as to the pitfalls of making ends meet for the next 5 years and know which companies to avoid. Maybe 4 years ago this wasn't the case.
Also maybe as little as 4 years ago the stigma of bankruptcy was much greater than today. Somebody at the Debt Awareness Debate made the point that very soon bankruptcy will have no embarrassment and will be just something one does.

Mike I truly hope that whatever you decide to do, once the IVA is completed you get on with your life without sickness and worry.

Best regards

Dave