Full & final figure

[Abundance]

Hi

My husband and I are currently in an IVA with Payplan. We started the IVA in June 2012. Please see the figures below outlining our debt taken from the paperwork we have.

Total Debt = £85237
Total IVA = £45000 (based on 60 x £750 monthly payment)
Total due to creditors £27960

We have so far made 14 payments totalling £10500.

We are struggling to keep up with current payments and are just about to submit an I&E form to attempt to try and reduce our monthly payment.

However, we are currently also looking into ways of getting out of the IVA through a F&F payment. We do have a mortgaged property and today have had valuations of between £250000-£275000 which would give us equity of between £35000-£60000. We also have a relative who depending on the F&F figure, could help us out.

Regarding our mortgage, we currently only pay interest only but if we were free from our IVA, we could then start paying the mortgage fully.

Our question is, which would be the best option, either trying to release equity (if the mortgage company allow) or using the money offered by a relative and also based on the above figures, how much to offer for the the F&F payment?

Any help/advice would be greatly appreciated.

[Michael Peoples]

When your new I&E is done you could multiply the new surplus by 46 to give the contribution figure within the IVA. This wcould be offered together with some contribution towards equity as a remortgage would be almost impossible. If the property values at £250 there would be no equity to release as I assume your mortgage balance is £215k which exceeds the 85% loan to value figure. If the property valued at £275k you would need to raise equity or extend the IVA by twelve months.

Personally, I would offer about 50 times your current surplus income based on the new I&E and I feel that is a reasonable offer. Let us know how you get on.

[Abundance]

Thanks for getting back to us.

Our new I&E works out that we only have £300 to put towards our IVA. I know this is considerably less than the £750 we currently pay but we are about to send our son to nursery and this works out at £210 a month. So the actual difference we will be asking to reduce the IVA by is £240 plus the £210 for nursery fees.

So from what you have said, we should offer 50 x £300 = £15000??

[Michael Peoples]

That would seem reasonable to me and hopefully to creditors too.

[Abundance]

Thanks so much, very helpful.

[MelanieGiles]

I don't understand why so early into an IVA, the payments have become difficult for you guys. The nursery fees ought to have been factored into the income and expenditure at the start, as I assume they could have been forseen. A staggering of payments at the appropriate time could have easily been factored in - was this something you discussed with your IP at the time the proposals were being presented?

Or were the payments simply set too high from day one, and was this based on suggestions from your IP, or did creditors seek an increase at the creditors meeting?

[Abundance]

We were told we could vary our payments to our situation, that was at the start, we told them we were struggling around 6 months in, but they basically told us to get on with it.

We asked at our yearly review to bring our payments down but that was nearly three months ago.

If we can get out of our IVA with a family members help then we will do as its caused a lot of strain on our marriage.

[MelanieGiles]

Being advised you can vary your payments at the outset of the IVA, means that it is likely that your expenditure was being squeezed from day 1! Did your IP present the expenditure figures you provided to them, or did they tell you what you could and could not spend.

It seems that this exercise may have been completely pointless if the IVA ultimately fails because a proper assessment of your income and expenditure may not have been as thorough as it could have been.

[Shaun Vickery]

Melanie and Michael are far more qualified than me to comment in respect of your IVA itself. In terms of being able to borrow in order to release equity I'm afraid to say that is extremely unlikely to be successful given your equity position and the fact that your IVA was so recent.

[Abundance]

I don't feel we were given any realistic advice, were weren't told what we could and couldn't include, so we basically got rid of everything, from gym membership (which I actually felt was necessary due to helping immensely with PNdepression) to all kids clubs.

We have a totally unrealistic budget, we can't save for anything, Xmas, contingencies etc.. We buy horrible cheap food because our food budget is so low for a growing family of four, we have more stress than when we just owed money to credit cards, loans etc. at least then we had options, I don't feel we were given sensible advice and wish we were back 18 months ago, I'm not sure I would have chosen this option, even though it seemed like a god send at the time.

[MelanieGiles]

It does sound as if not enough thought was put into the IVA in the first place, but I guess you share some responsibility for this as well if you agreed to pay an amount that you felt at that stage would be unaffordable.

I think you do need to take a serious look at your finances, provide your IP with a current and accurate income and expenditure account, and seek their advice as to what might be acceptable to your creditors by way of a full and final settlement.