Complicated situation - undecided on what to do

[undecided]

Hi All,

I've recently come across this forum and it's great to see so many people coming together and supportig each other.

Like many people, we find ourselves in a tricky siutation and am uncertain as to what the best way forward is. Being in debt seems to change the way you think and I find I range from being positive and thinking everything is ok, to being all doom and gloom!

Anyway, trying to be objective as possible - I wonder if anyone can help with a couple of key questions (our situation is rather complex for a variety of reasons - though I guess evryone feels that way).

Quick summary ...
- £220k(ish) in debt, split between my wife and I.
- Self employed and thus an erratic income (essentially holding own 2 jobs and working long hours to help make ends meet - plus am away from home a lot which is hard as we've got young children).
- Not on top of all payments out, though covering the underlying interest - so need to keep borrowing to keep afloat (on the hope the business gets better).
- Unfortunately it's looking increasingly unlikely that the business will get better for the next few years.
- Own a home (probably only £20k equity) plus a flat we rent out. Between cash and other assets we could sell, we could raise about £40k (excluding the house).

Anyway, key questions are ...
- The flat we rent out probably has about £50k equity in it (give or take). However, it's been remorgated over the years and if we sold it then we'd need to pay the capital gains tax which would be more than the equity. How does this get handled if we went into an IVA? We'd be more than happy to do whatever reditors wanted for this - but don't want to jump out of the fire with existing creditors into a frying pan with the inland revenue!

- The debt if split (aprox 50-50) between my wife and I - though lately I'm the main breadwinner. Assuming that an IVA was achievable in terms of % return, how does this work as the debt is split (I undestand you can't do a joint IVA - may be wrong)?

- One of the businesses I run is to provide consultancy to a small IT company. They are keen to take me on as an employee and I have a good working relationship with them - to the point that I've explained our financial situation. If I could arrange this with them such that they paid an up-front payment to contribute towards an IVA for a full and final settlement (and take reduced salary), would that be acceptable if the numbers stacked up (which would be our preferred option to draw a line under the situation). I'd guess the amount to creditors would be upwards of £80k.

Thanks v.much

[Beechy]

There are several issues here,

How long have you owned the flat?
Is your business a Limited Company?

Just for you info you can do a joint IVA

Beechy

[undecided]

Hi Beechy,

We've owned the flat for 13-14 years (first property we ever bought).

Yes, the business is a Ltd company.

Thanks for the info on a joint IVA - that' positive. Presumably this keeps the fees down to ensure it's more attractive to creditors?

Thanks again!

[Beechy]

You indicate that you have more than one business, is the property owned by one of you Limited companies? Does any of the debt relate to the company or is it all personal?

You need to get some FREE face to face advice as soon as possible





Beechy

[MelanieGiles]

Hi undecided and welcome to the forum

There is no such thing as a joint IVA - what the othe poster means are mutual and interlocking IVAs which are dependent upon each other and where one "joint" payment is made to all creditors. This majority of husband and wife IVAs are put forward in this manner these days, and the creditors in both estates therefore received the sam repayment. This may not necessarily be suitable for you, but an IP would be able to look into this in greater depth and advise you accordingly.

A lump sum of £80k may be sufficient to propose a reasonable IVA based upon a full and final settlement, but again take more specific advice on this. If you are considering an IVA, make sure you appoint an IP who is experienced in proposing self-employed cases, as a lot of the larger firms do not do this type of proposal.

With regard to the capital gains tax issue, this could form a creditor in the voluntary arrangement if the property were to be sold prior to the IVA and the tax was not paid. If the property is sold after the IVA is in place, then this would be a post-IVA liability and you would be required to pay it. How much do you think the tax bill would be?

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

[undecided]

Hi Melanie,

Not entirely sure on the tax front as I think the rules have changed in the last budget (prior to that I think things are tapered). As an IP I guess you know better than I, though here are the figures ...
- Bought the flat originally at £54k.
- Was our main residence for 2-3 yrs until we moved and decidd to keep / rent out. Would guess that the value when we moved out was at £70k ish?
- Currently mortgaged at £212k, value around £260-270 ish (current property market makes that hard to say exactly).
- On the assumption that tapering CGT applies, then as we've been renting for over 10 years, I think that's 25% of the 'profit' since we moved out (270-70 = 200 * .25 = 50k!!). So likely not to have much (if any) real value. Though maybe the figures calculate differently.

Note that the Ltd company is not related to the property at all and all debt is personal debt, not in the company. It's doing two functions - consulatancy (which occupies much of my time) plus an other which has erractic advertising revenues. Sorry it's so complicated !!

[MelanieGiles]

You will need to take specialist tax advice with regard to the investment property, although your figures look reasonable. Don't forget there is an annual allowance of £9,200, which if the property is jointly owned you can both use, and indexation as well to take into account. There may therefore be a little left over if you were to sell.

Are you saying that your prospective employer may be prepared to put up the money for a full and final settlement?

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

[undecided]

Hi Melanie,

I'll drop you a detailed e-mail through your web site over the next couple of days to give a full breakdown of our situation and a little more background.

Thanks v.much for all of your help so far.

[MelanieGiles]

That would be fine - and I am sure that we can help you a little further with the decision making process.

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

[undecided]

Hi Melanie,

Just wanted to check if you received my e-mail from your site? If you could let me have your direct e-mail I'll prepare / send the details.

Thanks

[MelanieGiles]

Hi there

I cannot check from here, so will check in the morning and provide you with my details as I am not allowed to post direct e-mail addresses on this site.

Alternatively, Andy would be more than happy to pass this on to you if he is able to access your e-mail this evening.

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

[undecided]

That's great, thanks Melanie.

If Andy is reading, please feel free to pass my private e-mail onto Melanie.


Thanks again.

[Adam Davies]

Hi
Already done !!

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

[undecided]

Many thanks Andy.

I hope you guys get some time away from the computer sometimes as you always seem to be online