IVA or Bankruptcy

[pdc1980]

We are in over £60,000 in debt and have now reached the point where we either apply for an IVA or Bankruptcy. The latter only as a last resort. The question that I have is what happens if your IVA is approved and your salary goes up? Is it correct that being an excess to what you need to survive (being previously calculated) that it will all go to the creditors?

If this is true then surely I should refuse a promotion at work. I am very likely be offered one in about 1-2 years time but although my salary could jump by £10,000 We would see none of it despite the extra work and responsibilty required for the role. While I have no problem in paying my creditors back extra, would they agree to an extra 50-60p in the pound for anything extra earned due to the pay rise? or should I just accept my current salary for the next 5 years?

[catullus]

Each IP has a different policy when carrying out annual reviews (the process of considering whether your annual payment should be changed)
My policy is to look quite generously at the debtors cicumstances, taking in to account generous allowances for inflation and acceptable changes in circumstances.If the income is there to cover the increases all well and good, if its not then unfortunately the debtor will have to struggle on with the original contribution.
You would be ill advised not to accept the promotion, whatever the policy of the IP, because you won't be generating additional income to allow your expenses to be reviewed upwards and you may never get another offer of promotion, particularly if you have previously turned one down!!
Furthermore once the IVA is completed you'll have all that income to yourself.

[aguise]

Hi there M
My propposal states 50% of any rises in basic income so if it were me I would get to keep half as I do with overtime etc. So You would have to tell your Ip when preparing the proposal that this is how you would prefer it and see what they say. I know what you mean about little incentive to improve yourself and this is debated a lot on here, my view is that even if you pay all of it , which I dont think fair, at least at the end of the iva you would be a lot better off, the promotion may not be there then. A 10,000 rise though could put you in a position of paying the full amount back and finish a little earlier.
The 50% rule seems fairer as it does give the incentive to earn extra as you keep the half, and we find that helps a lot for the extras that popo up and saves the pressure you can have living on a budget.

Ang

[aguise]

Sorry catullus cant type quick enough.
Ang

[Adam Davies]

Hi
It seems strange that IPs will have different policies regarding pay rises.Surely it should be one rule for all ? The fairest way forward would be for payrises to be split 50/50 after allowing for extra expenditure.
It should not be down to a lottery of who your IP happens to be
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[BlueShoes]

Hi
I agree with you on this one Andy. Where is the motivation to better one's self financially if the creditors are going to take all the excess (minus any increased costs?)
Whilst we are keen to repay what we can, there has to be some mutual benefit in lieu of future payrises, even if you only keep a percentage.
Blue

[catullus]

Andy
In many ways I think that it is a lottery or, put another way, the review is an art not a science.
I believe in giving the debtor an incentive and encouragement within the IVA to keep going without being so generous that I get a reputation for being a soft touch such that creditors start rejecting my proposals.
Other firms, I believe, can take a much harder line since they see themselves as creditor friendly.
On the other hand my proposal doesn't have the clause in it that Aguise mentions above. The full benefit of any pay rises falls in to the IVA, subject to the effect of the annual review and increased expenses to set off against it. Overtime, bonuses etc are set at 50% which I think is pretty standard.

[Cybus]

Income and expenditure reviews should be just that.
Your IP ought to request evidence of your income, just prior to the anniversary of your arrangement and at some point really should be asking to see your P.60. Some folks in IVA's think they are being clever by sending selective payslips that might not show overtime or commissions earned. It does not work.
More and more creditors are requesting that details of income and expenditure are provided to them with the annual reports.
So whilst an IP may consider he is being generous in allowing increases in income to be cancelled out by increases in expenditure, there is only so far that will work. If someone's take home pay were to increase by £100 a month, I would not expect them to suddenly turn around and say their expenditure has gone up by that amount. It does not work like that.
You should not turn down the promotion, just because you feel you are not going to see the benefit of it.
Consider your creditors and their position. Only the best offer should be put forward



Tell it like it is.

[Adam Davies]

Catullus/Cybus
Lets not make it an art.It should be a standard clause for all,not determined by how the IP wants to be seen by creditors.No one can be expected to push for promotion if they are not going to see the benefit from it.Yes it,s great to be paying back more to your creditors but there should be an equal incentive of extra money to make your life a little better.Promotion often leads to extra unpaid hours of work and increased stress.Would anyone do this for nothing ??
I doubt it
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[keh]

I totally agree with Andy and have said before..

There should be a set system of rules covering IP fees, pay rises etc...

If everyone charged the same it would make IVA'S a lot easier and quicker to set up with the clause stating that 50% of overtime, pay rise etc should be put into the iva


Keith

The long and winding road will straighten out eventually....keep the faith

[catullus]

I'm not sure that I agree with you Andy,
There's been a lot of discussion within the profession about a standardised proposal but, with the exception of the introduction of standard T & C's, it hasn't got very far for a good reason and that is that one size does not fit all.
In theory two identical people would have the same income tax return filed for them by their accountants but in practice that doesn't happen because of different uses of allowances and interpretation of legislation.
The fact is that the tighter you make a proposal the more chances there are for defaults to occur. I would estimate that 75% of people who have succesfully concluded an IVA with me were at one time or the other in default but because of fairly loose wording of the proposal it allows me to turn a blind eye if I think that the debtor deserves it.
In theory you are right but in practice I think that the sort of standardisation you would like actually plays in to the hands of the creditors and particularly those thaat would like to see every IVA fail!!

[keh]

Let me clarify my post about set fees....

a set fee is say 15% of the total debt

So debtor x has a 20k debt = 3k ip fees
debtor z has a 60k debt = 9k ip fees

I'm sure this a simple and logical solution to take


Keith

The long and winding road will straighten out eventually....keep the faith

[Skippy]

I agree with you Andy. I have an interview on Friday for a job that could pay a bit more than the one I have at the moment. If I was still in my IVA I doubt I would have gone for it as it is a lot more responsibility, and I would want to see some of the reward for that. Now I am BR, I know the OR will only take a percentage of any extra that I earn, if that. OK, I know I borrowed the money but if 50% of the extra was paid into the IVA, that's more than the creditors would have got originally, and more than I would get by not taking the job and it would make the 5 years of the IVA more bearable, and therefore the IVA more likely to succeed.

Yesterday is history, tomorrow is a mystery, today is the present - a gift to make the most of.

View my blog at http://skippy13.blogs.iva.co.uk/

[Adam Davies]

Catullus
I am not promoting a standard proposal but a standard clause relating to payrises.
Surey a standard clause that allows for 50% of a payrise to be kept by the creditor and 50% to go to the debtor [after allowing for any extra expenses before the money is split]is a fair and sensible approach.Afterall overtime is treated like this as is a bonus[most].So why should a payrise be any different ?
The one size fits all works for overtime and everyone seems happy with this "standard clause".
With respect I can,t see your argument for not having this clause.
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[keh]

What IP's fail to see is that inflation rises every year so the cost of living rises with it..

50% should cover this rise with the other 50% going into the IVA

I'm 1000% with Andy on this

One simple clause...50%


Keith

The long and winding road will straighten out eventually....keep the faith