Is an IVA my best option?

[ordinary_world]

Hi,
Its great to find a forum for discussing IVAs with the experts and those people experiencing an IVA in some capacity. The information and advice floating around the forum is superb and it is relieving to hear that my partner and I are not alone. I sympathesise with many of the cases I’ve read on the forum and really hope it turns out well for them.

My partner and I are currently considering entering into an IVA with PayPlan - we have a total of £113k unsecured debt accumulated over the years (mixture of joint and individual). Although we have a relatively modest monthly income (total approx 4.3k) our outgoings have hit an all time high with priority debts (excl. arrears) at about 3k per month and unsecured debt at 2k per month. We are not behind on any loan/credit card payments....yet! We have been struggling to eat for the past 3 months now and this month will be the first time we will be unable to make the full contractual monthly repayments to our creditors. I’ve just written to most of our creditors explaining the situation (outgoings greater than income and seeking solution with the help of PayPlan) and offering token payments of £5 for current month and that I’ll be in touch with an update within four weeks.

For those creditors who we have a functioning account with we’ve paid them the full amount so that they don’t close us down….just in the process of opening a ‘parachute’ account. After completing numerous income/expenditure configurations, we are working out a configuration with PayPlan that will be suitable for an IVA over 5 years.

We haven’t agreed to go through with the process yet - we have so many questions(...many of which have probably been answered by the superb experts on this forum). For example:

1. my salary will probably go down by £250 a month in Sep, some credits/costs would rise/fall during the course of a five year iva (child benefit, child care, utility bills). Does one have to project worst case scenario over the 5 year period?

2. During the period of an IVA, how often do creditors want a report on finances and what type of evidence do they require? i.e. how close are they watching how we use our account?

3. What if we cant get a remortgage in the fourth year due to the IVA (or are there always a lender to help out IVAers)?

4. If we can get a remortgage, does the IVA take into account the increased mortgage repayments?

5. If the IVA fails, is it definite bankruptcy or can one go onto debt management for the outstanding amount?

6. Do the voting agents for creditors use clear and common criteria when voting or is it simply down to creditor-specific guidelines and the 'human aspect' (personality of individuals involved at that time).

7. What level of influence do we have during negotiations for an IVA? For example, could we refuse specific demands of an individual creditor e.g. creditors want 60% of an additional income during period whereas we argue to give them 40% etc

Although we’ve considered numerous options, the IVA seems to be the most suitable to get us out of debt faster and repair credit record....although cant help thinking it's more in the creditors interest than ours and it appears high risk (fragile agreements and you end up going bankrupt anyway!). I dont like the idea of debt management as they're informal, potentially go on for years and your credit record is affected for 6 years after the plan has ended.

Anyway, given my details at end of message any advice regarding the IVA or alternative solutions warmly welcomed (e.g. consolidation loans, remortgage, settle with equity).

Best
OW

Monthly Income and Expenditure

Total Income £ 4,408.30
Total Expenditure (Priority Debt) £ 3,259.86
Total Surplus Income: £ 1,148.44

Equity: 38,076.00

Current unsecured debt: £112,050.00 (across 17 creditors)
Existing monthly outgoings on unsecured debt: £2,200

[Adam Davies]

Hi Ordinary World
Welcome to the forum and I,m glad that you find it helpful.
I will answer your questions for you but can I ask you to look at several IVA providers before commiting to one,the companies that post on this site are trustworthy and fully transparent.
To answer your specific questions

1]You would need to explain the fact that your income would fall in September to your IP,they would also need to know about other factors regarding child care.It is not unusual to propose an IVA with diferent payment levels in each of the five years if factors are known pre IVA.
2] Your creditors will ask for info at each anniversery of your IVA.They will require an updated income and expenditure form.They normally ask for your wage slips on a quarterly basis and do not usually ask for bank statements.
3] if you are unable to remortgage due to income restrictions or loan to house value issues then it is quite normal to extend your IVA by a twelve month period instead of the remortgage.There are nearly always lenders happy to remortgage you as secured lending is less restrictive than unsecured.
4]Your remortgage will produce higher mortgage payments and hence less disposible income.This will only be for a few months and your creditors will understand this as they will be benefiting from the extra money raised.Completion on your remortgage could be timed to coincide with the end of your IVA.
5]Only about 3% of failed IVAs turn into bankruptcy so yes you will probably go into some kind of DMP.
6]There are no clear and common criterea regarding creditors acceptance,just read some of the posts on this site.It really depends on the financial implications for your creditors but also the relationship that your IP has with the creditors and the way your proposal is presented,hence my advice to shop around.
7]You do not have to accept any demands the same way that your creditors do not have to accept an IVA.Your IP will negotiate for you and will have your best interests at heart.Do not agree to any demand that you would not be able to keep to.For info the 50% clause for overtime is pretty standard across the industry.
Quote "Although we’ve considered numerous options, the IVA seems to be the most suitable to get us out of debt faster and repair credit record....although cant help thinking it's more in the creditors interest than ours and it appears high risk (fragile agreements and you end up going bankrupt anyway!)"

An IVA is in both your interest and is only high risk if you fail to keep up the repayments.The agreement is far from fragile as it is legally binding to safeguard you.As stated before bankrupcy following a failed IVA is uncommon.
The figures that you post seem to show that an IVA would be possible.
Speak with a company on this site.
Regards



Andy Davie
IVA.co.uk Spokesperson and site manager
(aka Neverending)

Please check out my blog: http://andydavie.blogs.iva.co.uk

View my profile here:
http://www.iva.co.uk/andy_davie_profile.asp

[ordinary_world]

Hi Andy,
Many thanks for the reply and answering all of my queries! The information you've provided is invaluable and I now feel much more confident about the IVA option.

With respect to shopping around, I'm not sure who else to approach. I've heard so much bad press about the TV companies. The reputable IP firms I've heard about, as well as www.PayPlan.com, are www.ThomasCharles.com and www.debtcounsellors.co.uk. What criteria should I compare IPs against?

After reading some of the threads on the IVA forums, it sounds like Northern Rock are tough cookies when it comes to IVAs....which is unfortunate as they are one of our major creditors! Hopefully they wont show when it comes to voting! [:D]

Many thanks,
OW

[MelanieGiles]

Hi Andy

Great advice already given there by Andy, so all I am going to ask is what is the value of your property and the level of equity you have available now? Sometimes it is better to effect a remortgage at the beginning of an IVA, when this does not appear on your record and you then do not have a big black cloud hanging over you for the next four years, in terms of mortgage availability and affordability. You can then make reduced monthly contributions to take into account the increased mortgage payments for the following five years. With my clients, I always try to err with certainty rather than uncertainty - as five years is a long time.

Northern Rock, in my personal experience, are not a difficult creditor, but they will expect you to put your best foot forward in terms of making an offer. Do you have the "together" product with them? I have not had one case turned down by Northern Rock, and I do find them easy to deal with, but they expect high standards of research and presentation in terms of your IVA proposals.

Good luck in your search.

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

[olympic_torch]

blimey, i must have been absent from school when they explained the terms 'relatively modest income'
i don't mean to offend, and i know people live to whatever means they have, but, over 1k a week coming into the house, i wish.
are you both professionals? do you have children?

[ordinary_world]

Many thanks Melanie for the excellent advice (never thought about remortgaging before the IVA!).

My only concern is that in January, when it hit home that the monthly outgoings for priority debt (excluding food and fuel)and unsecured debt consistently exceeded the monthly income, we went to our current mortgage lender (Nationwide) to discuss remortgaging for loan consolidation. The assistant said that given our level of unsecured debt, its unlikely they would remortgage...so the advice was 'tighten your spending' and avoid getting a black mark on your credit record caused by a failed mortgage app.

So would we get a remortgage now, given the unsecured debt and that, for the first time, I've defaulted on all payments this month by providing only a token payment of £5 each and a promise to be in touch again within four weeks (personally or via IP). For future payments, based on the figures at the end of my original message, we intend to pay them the amount calculated by the British Bankers Associated spreadsheet which calculates pro rata payments for creditors and will hopefully be very similar (perhaps a little less) to what they would receive through an IVA.

Details of our property are:
Estimated current value : 180,000.00
Mortgage outstanding : 141,924.00
Equity 38,076.00

Relieving to hear about Northern Rock, thanks - I guess we just need to be 100% sure we've got the right IP representing us. What evaluation criteria would you recommend we use to select an IP?

Many thanks once again for the excellent advice - its really appreciated.

OW

[ordinary_world]

Hi olympic_torch,
Yes, we're both professionals and many of our friends are on a lot more than us and with a lot less debt....so its all relative. We currently have £2.2k going on unsecured debt which leaves little for food and fuel once all the other priority debts go out. [:-(]

Yes, we have 3 children.

Best,
OW

[Adam Davies]

Hi O-W
Personally, from my own experiences ,I would choose an IP that asks for a face to face meeting with you given your circumstances and the Northern Rock factor.
Speak with the companies on this site,you know that they are fully transparent via this site and open to criticism.
Good luck and keep posting !!

Andy Davie
IVA.co.uk Spokesperson and site manager
(aka Neverending)

Please check out my blog: http://andydavie.blogs.iva.co.uk

View my profile here:
http://www.iva.co.uk/andy_davie_profile.asp

[ordinary_world]

Many thanks Andy, I'll go through forum and compile a list of IPs to consider.

Alternatively, if any IPs are reading this thread and are happy to deal with the Northern Rock issue, have a face-to-face meeting with us and consider our situation to put forward a workable proposal that is highly likely to be accepted by us and creditors....please let me know how I can contact you privately.

Again, many thanks for the advice and support.

Best
OW

[MelanieGiles]

Hi again

I am sure that you would qualify for a 90% mortgage with another lender. Do you have any redemption penalties which would eat into the equity being raised? The mortgage payments on that sort of loan, would be approximately £875 per month (interest only), so I suggest that you explore that to see what could be raised.

Tony Parsons, who posts on the forum as Welsh Boy, is an expert in the adverse mortgage world, and can get you a free, no strings attached quote which you can then consider in light of the other advice given.

If you want to talk to me about this privately, then my details are at the bottom of this page.

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

[ordinary_world]

Hi Melanie,
Many thanks for the superb advice.

Yes, we are in the second year of a 5 year fixed mortgage deal so there will be penalties for leaving in the second year (would need to check precise fee). Thanks - I'll contact Tony for a free quotation.

Great, got the link so I'll contact you privately.

Best
OW

[ordinary_world]

Hi Melanie,
Just to let you know that I've emailed you via your website.

Best
OW