IVA application - Full and Final Settlement

[Wrecsam]

Hi

I have £40/45k worth of unsecured debt and approx 8 creditors. I am married and the mortgage belongs to my wife (always been solely in her name). I'm looking at applying for an IVA.

I am self employed, my work is seasonal and between October - March will be very quiet and a struggle to even put food on the table. Crude calculations suggest I have £150 per month available to make payments between April - August. I have no assets or anything of value which can be sold.

Recently I confided in a relative about my situation and they have stated they would be very surprised if my offer of £150 per month (April - August only) would be accepted by my creditors. They suggested I enquire about a full and final settlement and have made the very generous offer of funding the full and final settlement up to a maximum of £10K.

My questions are

1) Is this possible?
2) What kind of settlement figure would be accepted by the creditors, is £10k enough?
3) Are their any recommendations for IP's to use/avoid?
4) How long would the process take?

I made my last payments around January/February time this year and have had my head stuck in the proverbial sand. Letters from my creditors are getting a bit serious now and it goes without saying I'm very keen to get the process underway.

Thanks in advance for your help.

[Foggy]

Yes, a F&F lump sum IVA is possible and £10k is not unheard of for a debt of that level -- but, of course, it will be down to the creditors to decide. I would suggest you have a word with a couple of firms and would advise tending towards the small / medium firms who will treat you as an individual, rather than a grain of sand on a very large beach. We have a couple on here who post regularly as well as the forum sponsors themselves, Vincent Bond.

The process normally takes about 8 weeks to set up the arrangement, then a couple of months post payment to sort everything out. Your credit record, though, will be shot for 6 years!

[Michael Peoples]

This is actually quite common and does sound sensible given that your income is erratic. The IVA will encompass any debts to HMRC as well as standard creditors and this will allow you to move on. The liability for 2017/18 will be included within the IVA so the IVA cannot be closed down until after April 2018 when you submit the tax return. You will receive a new unique taxpayer reference number [UTR] and be completely debt free.

I suggest you use a firm with experience of self employed cases and I am sure you will be fine.

[Lisa Thomas]

If you own no assets then Bankruptcy might be more suitable option for you.

https://youtu.be/mAkQsVSCnqo

Alternatively if you are going to raise lump sum funds (perhaps from your wife remortgaging?) then you might be able to reach a settlement direct without the need for an IVA.

[Wrecsam]

Hi Lisa,

Bankruptcy is not a route I want to go down, although I have considered that.

Re an early settlement without applying for an IVA, this sounds like the best option. How would this work and what kind of %'s would the creditors be looking at (average) to settle the debt?

There is little/no equity in the house to release funds, but there is the generous offer of a maximum of £10k to settle everything and have a clean slate. Would my creditors really be willing to deal with me direct an accept 22p in the £1? It is more than they would receive if I was to apply for an IVA due to there being no IP fee's etc.

I'm keen to get the wheels moving in this asap now, if only to stop the phonecalls.

Many Thanks

[Wrecsam]

Foggy & Michael,

Thank you for your replies, I never thought about my 16/17 tax liability if i'm honest, nor my 17/18 tax liability come to that. As minimal as my liability will be, and we are talking a couple of hundred maximum, it will still have to be taken into consideration.

I'm glad I stumbled across this forum. Lots of helpful information.

Is there anything else I should be aware off or take into account?

Many thanks

[Foggy]

The only drawback to doing it yourself is the hassle of dealing with creditors piecemeal and the possibility that some might not play ball. In an IVA, although you need to get a 75% majority (by loan value) of those who actually vote to say yes, those (if any) that vote no will still be bound in.

[Michael Peoples]

Personally I would not try and settle with eight different creditors as we would likely be still here next year. If you only had one or two it might be an option but getting them all to agree would be a nightmare. Some will accept, some reject, some ignore you etc. Will you then pay out to those who accept without knowing how the others will decide?

At least with an IVA it is a legally binding agreement and there is a meeting of the creditors. The decision is made there and then and is voted on by people whose job it is to review IVAs. This is much better than trying to haggle with numerous creditors from umpteen banks and in different departments.

[Lisa Thomas]

Hi Lisa,

Bankruptcy is not a route I want to go down, although I have considered that.

Re an early settlement without applying for an IVA, this sounds like the best option. How would this work and what kind of %'s would the creditors be looking at (average) to settle the debt?

There is little/no equity in the house to release funds, but there is the generous offer of a maximum of £10k to settle everything and have a clean slate. Would my creditors really be willing to deal with me direct an accept 22p in the £1? It is more than they would receive if I was to apply for an IVA due to there being no IP fee's etc.

I'm keen to get the wheels moving in this asap now, if only to stop the phonecalls.

Many Thanks

Put of interested why have you dismissed Bankruptcy?

Every creditor will be different depending on their policies etc. 22% is quite good - I've seen creditors settle for a lot less. As Michael says 8 creditors will be a lot of legwork so it depends how proactive you will be but it can't hurt to test the waters and ask.