IVA

[makaze]

Hi, I'm writing on behalf of freinds who are in a dire situation and can't seem to either get (or understand) some answers to fears they have about courses of action open to them.

They are married. Sue has about £20000 debt on cards (her name only. She obtained while in full time employment. She was only on £11,000 so god knows why they let her have such a facility. The debt is about 6 years old and she's paid more than that in interest alone and not managed to clear any of the outstanding debt.

Having seen a debt worker through the CAB this is her understanding.

If she opts for an IVA, her husband can stand as guarantor. She will have to agree to pay back £200 per month. Her husband will have to provide proof that he will be able to pay this in the event of her not meeting the payments.

She is under the impression that when her husband provides proof he can meet the £200 should he be required to, the creditors will see his income and up the £200 per month they want from Sue to say £400.
Can this be the case?

The other option they are told is for her to go bankrupt. She is the sole name on the motgage (which isn't in arrears and is with the same compnay as the credit card debt. The house is in negative equity or at best there is no equity. She is being told that it is very unlikely the creditors will seek to have the house repossesed and is thus favouring the bankruptsy option.

Sue's husband is very worried about losing the house if they pursue the bankruptsy ooption.

The debts have been amassed while she was looking after a very sick mother with severe mental health issues. Her mother committed suicide a few months ago and so she is under a lot of stress and psychological pain so I'm not sure she is understanding the advice she is being given.

If someone can shed any light on the two options I would be grateful.

Thanks.

[kallis3]

Hi,

Sorry to hear of your friends situation.

Firstly, I have to say that I have never heard of anyone having to stand as guarantor for an IVA. The IVA is between her and her creditors and whilst her husband will obviously have to contribute to the normal monthly outgoings, I think that would be it. Hopefully one of the experts can shed some light on that.

If she were to opt for bankruptcy, and the house is in negative equity, then it should be safe from the OR. Her husband, or someone else, could buy the beneficial interest from her for £1 plus £211 court costs.

I recommend that she takes advice other than the CAB. Visit www.iva.com for a list of companies and reviews. Give one or two a ring and sh will receive free and impartial advice as to all the options open to her and the best way forward for hr circumstances.

[Michael Peoples]

If she has only one creditor an IVA would probably not be an option anyway. As for her husband guaranteeing the IVA, this is bizarre advice and just shows the standard of help available for those in financial trouble.

Bankruptcy is certainly an option or she could make reduced payments to the credit card company. The danger here is that they move to secure the debt on a property already with no equity. It would be worth her while speaking to an IP firm for some proper advice.

[kallis3]

It does say cards, so I don't know how many creditors there are.

I thought that was strange though - I didn't think anyone could act as guarantor, but just wanted an expert to confirm for me!

This is the only problem with CAB - they don't tend to have advisors who know about debt solutions in any great depth.

[Michael Peoples]

I saw that Jan but she also said the credit card debt was with the same company as the mortgage so she may have more than one card with the same bank. Maybe Makaze can clarify.

As for guarantors, it is possible but unusual to have a guarantor but it would not be your spouse or partner. We did it once where a father stood as guarantor because creditors would not accept the son's IVA. He had been a compulsive gambler and creditors believed he would return to gambling and the IVA had no chance of lasting. His father offered to guarantee the payments and creditors approved the IVA. Ultimately, it proved easier for the father to collect the money from his son and pass it over than for the IP to get it every month.

[kallis3]

Sorry Michael, I missed that!

I suppose I can accept them wanting a guarantor if the debts were for something like gambling - I'm afraid I wouldn't be doing that though!

Just never heard of it before.

[liamjames]

Michael is right- and on top of this I would be very wary about applying for an IVA if she will be relying on contributions from her husband. This always puts stress on a relationship.

She should talk to a couple of different IPs to check if the advice she has been given is accurate and in her best interests. Without more information regarding her assets, current income or employment I would not be considering an IVA in her circumstances.

[size5]

It may just be a misunderstanding of course, the advisor at the CAB may have indicated that an IVA couldn't be proposed without her husbands details, and this has metamorphed into he is guarantor. Just a thought, but it would be wrong to criticise the advice given without further details, and the CAB do do a sterling job, on the whole.

Regards.

[kallis3]

I do agree that they do a good job, but on the debt side they seem to fall down. We have had a few posters on here who have been given duff advice by them.

It would be interesting to see exactly what they said.

[Michael Peoples]

It seems to be fractured and each CAB appears to be autonomous with no central structure. I have seen advice given by CABs that borders on negligence yet others have superb staff.

I accept that CABs cannot have experts on everything so if in doubt they should be able to refer the clients to an IP. We have an excellent working relationship with our local CABs and in the few occasions that they feel the case is too complex we are more than happy to help. We also advise our clients to go to the CAB to check on benefit entitlements as they do an excellent job there.

[MelanieGiles]

There is nothing wrong with seeking a guarantor for IVA payments. I have done this several times, where I have had concerns as to the debtors commitment or ability to pay - but have never had to call one in.

[makaze]

Hi, thanks for the replies. The main debt of 15,000 is with lloyds/tsb, 4,000 with HALIFAX, 1,000 Tesco.
Her husband only earns around 5k he is part time self employed, so they can seen no way clearing any of the balance. The interest I think is around £400 a month and is killing them, so they do not want to carry on as they have been doing.

Kallis3, you said "If she were to opt for bankruptcy, and the house is in negative equity, then it should be safe from the OR. Her husband, or someone else, could buy the beneficial interest from her for £1 plus £211 court costs"

Can you explain that in absolute idiot proof terms please and how to procede with such action. Thanks.

This help is much appreciated.

[kallis3]

If they were to proceed with bankruptcy, they would need fees of £510 each for the court. There are forms which need to be filled in and which can be done online and saved as you go along. You either make an appointment at the court, or just turn up, depending upon what the procedure is at your local court. The judge looks at the forms and will then stamp them and you effectively become debt free.

You will then have an interview with the Official Receiver who will look at the circumstances surrounding your debts. If you have disposable income of less than £100 per month once priority bills have been paid, you will not have to pay anything towards the bankruptcy, if it is over that then you will pay between 50 and 70% of the excess for three years.

As regards the house, if it is in negative equity, it is not worth the OR selling is as there will be no profit for them. Someone, a friend or family member can buy back the beneficial interest for the sum I mentioned which means that the house is safe.

Take a look at this site:

http://www.insolvency.gov.uk/

It will explain more about it, and the forms are there to fill in as well.

Also visit the link I posted previously and give one or two companies on there a ring.