snowball effect of events leading me to debt!!

[al77]

hello there i have got myself into major debt! it was all fine to start - i was paying £200 a month on a loan (still am)and had about 8000k on cards. payments were fine (if min was £20 i was paying £100) then i moved in with girlfriend (an borrowed) then we split up an had to borrow to move out, around this time work started to slow down (im a self employed window fitter - last years tax return saw £25k net)but in this kind of work you have good spells and bad spells then to cap it all off i put my shoulder out an couldnt work for 6 weeks!

work didnt seem to pick up was living for 'soon it will come'and found myself using cards to pay other cards and bills, sorry but theyd sent low interest deals through the post and it seemed the only way. so in a nut shell iv found myself in control to a one after an another snowball effect of events leading me to £30k of debt!! - im thinking of binning the building trade off an going for a guarranteed wage an taking a 'normal' wage, i have an interview for a job but its only £14k and after rent food petrol etc il only have £200 a month to clear debt - what should i do??

[Adam Davies]

Hi
If you secured your new job and presuming that you are not a property owner you could consider a debt management plan,IVA or bankruptcy
£200 per month,if paid into a debt management plan,will take you 12/13 years to pay off,if you can get interest suspended.If you entered into an IVA you would be able to return at least a 25p dividend so as long as you can find an IVA provider willing to propose your IVA you may have a chance of acceptance.You could also consider bankruptcy,this will draw a line under your debts almost instantly
I think that you need to speak with an Insolvency Practitioner to discus your options and your situation in full
Regards

[al77]

hi thanks for the reply, firsly you say 'if' they accept an iva - why would they not? surely something is better than nothing, also 2 years ago my brother and i bought an apartment in spain £50k he put the money up an we split the mortgage (£150 a month each), i really dont want to go bankrupt and have read about iva's they say you keep assets, can they take the house when its joint??

[cr15py]

The reasons they might not accept an IVA are:

1) £200 per month is right on the lower end of the spectrum for a "monthly contribution"; the general view is that this will increase in the near future
2) 25p/£ is also on the lower boundaries of acceptance for an IVA.
3) It depends who your creditors are (could you list them to give us a better idea?) - certain creditors are not too favourable towards IVAs, some require a certain pence-in-the-pound (i.e. HSBC 40p)
4) It depends on the breakdown of your debts. If you owe >75% to one creditor, then your IVA would probably not work.

As for the house in Spain, they would probably be looking for some form of equity release, but that's one above my head - time for the experts to step in!!

[MelanieGiles]

"Surely something is better than nothing"!

Well you would like to think so, but occasionally creditors do not agree, and as Cr15py says you may struggle to find an IP to represent you with such a low contribtion if you feel that you would like to try an IVA.

The equity in the house in Spain is an asset which ever way you look at it under bankruptcy or IVA. You will need to get this valued for the purposes of showing your creditors the extent of your assets and liabilities, but if you could release the equity in the property - perhaps by getting your co-owner to buy you out - you could make some inroads into your debts without the need for formal insolvency proceedings.

[al77]

okay doke - cr15py q,3 theres four creditors,
1, mbna loan around 3.5k left (only 18months left)
2, citibank card 8k
3, mbna card 8k
4, barclaycard 7k
how does this dividend thing work? not sure how the 25p is worked out.
also i dont want to sound sneaky but the house abroad was put up by my brother as a long term investment we simply splt the 'running' costs, surely i can take my name off basically signing the house to him?

[cr15py]

The dividend is worked out as follows:

Total debt = £26,500

Monthly contribution = £200pm x 60 = £12,000

IP fees (say £5,000) - not really sure about what these would be and whether the equity would affect the level of fees.

Contribution going to creditors = £12,000 - £5,000 = £7,000.

Therefore, £7,000 / £26,500 = 26.4p in the pound dividend to creditors.

As mentioned, the fees are the only thing that could change, and this would push the dividend up or down.

I'm not sure about the house position, that's one for the experts!

The only point I would make is that MBNA are not one of the more favourable creditors, and as they account for 43% of your debt, you would need them to either vote in favour of your IVA, or not vote at all.

[al77]

£5000k for fees!! jesus im in the wrong buisness - how can they justify that amount? that almost halfs the amount i could pay! can you propose your own iva or am i being daft?
or ask them to freeze the interest and i split £200 between them eg £26500 divided £200 = 132 months (11 years) christ il be 42!![:(]

[MelanieGiles]

If the house has equity in it, and you are an owner, this must be declared if you are to present an IVA offer to your creditors. By signing the property over to your brother, you would be putting an asset beyond the reach of creditors, and this would be deemed to be a transaction at undervalue, which could be overturned by a Trustee in bankruptcy.

How much equity do you think there is in the property?

[jpj]

al77 . when your in debt ,sadly you dont have the luxury of long term investments! Although £26k is a lot, there are many on here with MAJOR debt (mine was £127K!) As Melanie says ,I would look to releasing some equity in Spain. I remember days before my IVA was approved creditors were calling me and saying "just give us 50% of the debt and we will write the rest off!" so you could possibly negotiate the debt down with some threats of IVAs and Bankcuptcy!!

[MelanieGiles]

Members of my profession justify the fees that we charge on the basis of the amount of work we have to carry out on behalf of debtors and creditors over a period of at least five years.

You cannot present an IVA without the involvement of a licensed insolvency practitioner - whose fees are actually covered by creditors unless you are offering to pay 100p in the £.

[al77]

i understand what ur both saying the investment wasnt mine tho my brother stumped the £6k into it i share the mortgage with him, theres prob £10-15k of equity before fees but half is only mine can they seize the lot?
the reason i ask is not to pull a fast one and hide assets its a case of let him keep the house that then frees up £150-180 a month to pay creditors, surely if something isnt yours they cant touch it?

[buttercup]

From the times on some of the emails I get from Melanies team they work all hours Gods send helping people with debt like all of us. I agree it must be a booming business (what does that say about our society) but from what I can see there is a hell of a lot of work putting IVAs together, more than I ever thought & I have only just started.Plus we all rely on these experts to be at our beck & call for every conceivable question we ask.

You only have to look at some debt/IVA management companies struggling to realise that there is a lot more than meets the eye workwise.

[cr15py]

For the amount of work that IPs put in to preparing IVAs, believe me they do earn their fee. Preparing, managing and reviewing annually an IVA isn't a five minute job!

I know there has been a movement towards fees being set at a certain percentage of monthly contributions, but at the end of the day, a £100k debt with 5 creditors I wouldn't imagine is too much different to a £20k debt with 5 creditors if that is the only different in the proposal. The fee isn't 5 times higher for the £100k!!

Why would you want to arrange a DMP and take 11 years to pay it, when you could do the same in 5 years with an IVA? Is it purely you begrudging paying the IVA fees? I don't think you can prepare your own IVA. It might not be a bad idea if you could have a go at it, because it might show you how much work is involved!

Incidentally, whether the fees were £5 or £5000, you would still be paying £200 per month as this is what you can afford in accordance with your income and expenditure that you would be submitting with your IVA proposal.

[MelanieGiles]

If your brother put up the initial deposit for the property, then that should be deducted from any calculation of equity before you apply the split. Would he be in a position to buy out your share, which could then be included in an IVA to creditors perhaps with ongoing contributions which might then be affordable if you were not funding the Spanish mortgage.