Full and Final settlement advice

[bobby279]

Just found this forum and think its very helpful. I was wondering if someone "in the know" could give me some advice.

I have an IVA and have been paying it now for 17 months. My original debt was £41000. When my IVA was set up it stated that I must pay the creditors 25p for every £1. Over five years the chairmans report said that I would pay £16500. I have a 4th year equity release. I have currently paid £5300 into my fund.

I approached my IP regarding a full and final settlement. They said that £10500 would be suitable to give the creditors their minimum of 25%. They also said that from my 3 monthly checks they feel I am struggling with my payments although I don't feel I am. A family friend has offered to lend me this money with a view to selling my house and repaying them (the equity in my house would be approx £10500).

My IP has said they would be suprised if the creditors refused this. What do other members think? Am I being badly advised or does this seem suitable / normal? What happens if they refuse? will they give me the chance to re-negotiate?

Many thanks in advance.

[Debt Monkey]

Posted - 31 July 2007 : 14:41:51
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I think that you will struggle to persuade creditors to accept an early settlement now, if they have the benefit of ongoing contributions and an equity release in two years time when property may well have increased in value further and your mortgage reduced (if you are paying on a repayment basis).

However, if there is any specific reason for the early settlement - ie you are struggling to make the payments due to a change in circumstances, you may enjoy more success. Discuss this with your IP before you get your hopes up too high.



DM

[MelanieGiles]

I am suprised that your IP has suggested such a settlement, but they obviously feel that they can get creditors to accept it, so go with their advice. And don't forget to let us know how you get on!

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

[bobby279]

Thanks for those responses. My IP (Varden Nuttall) are telling me they would be suprised if the creditors reject the offer. However, having read similar posts on the board I am not as convinced. I think my IP is coming from the angle that I am struggling with payments, which may look more beneficial to creditors if there is a chance of going bankrupt.

Are creditors more likely to accept in this circumstance?

Thanks again

[Adam Davies]

Hi
Your creditors will be guided by your IP and as they seem to be recommending your offer then you are in with a very good chance.
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

[bobby279]

Thanks again for the responses. I really appreciate it.

Just one further question (if thats okay!!)

I am 17 months into my IVA paying £280 per month. I have also made an extra payment of £480 from overtime worked. My original repayment arranged by creditors / IP was £16500 (25p in the £1). Obviously I have already explained my situation and what my IP has told me. However, what would the experts on this board think was a suitable offer to make to the creditors as full and final settlement? My IP has said they have to allow creditors 28 days to give an answer on this and creditors normally respond on the very last day? is this normal practice?

Many thanks again

[MelanieGiles]

I would suggest that you take into account the remaining number of payments - ie 43 @ £280, plus the value of your equity in the property now, based upon the 85% LTV rule.

You will also need to demonstrate to creditors the reasons for wanting to settle early - ie are you struggling with the payments, as they may wish to take their chances on the property market increasing in value.

I would not accept your current offer if I were a creditor, but again be advised by your own IP who will have to account to you in the event of failure. You chose that firm to represent you because you felt they would do a good job, so have faith in them and be guided by them.

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

[bobby279]

Thanks for the response Melanie. Through this board I am beginning to understand more about IVA's.

My property is currently worth £92000. My mortgage has £63000 left to pay over 23 years. I have a secured loan on the property which has approx £15000 left to pay over 13 years. Am I right in thinking that at 85% LTV It would only allow up to approx £78000? (I may have misunderstood this). If so then I would not be able to release the equity in my houseas it is already taken up with the mortgage and secured loan.

I have been offered the money (£10500) to pay IVA off if they would accept this and I am struggling for payments at the moment. I can then pay this money back by selling property and rent instead. Having explained a bit more, does this sound more appealing to creditors?

The only reason I am questioning this is that I am not entirely convinced by what my IP has said. Even less so, now that I have read posts on this board. Is the 28 day deadline an accurate one?

Many thanks again. Sorry for all the questions.

[MelanieGiles]

OK - so you have no equity in your property now, but if you continue to make your payments over the next 43 months the secured loan will reduce, your mortage may also reduce if it is on a repayment basis, and the property may increase in value. This is the gamble that creditors will face if you put an offer of settlement forward - money now or more money if they wait?

I would certainly not go in at any lower than the full value of your remaining payments = £12,040 - but I am only one IP and importantly I am not yours!

The 28 day lead time is quite normal.

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

[bobby279]

Thanks again Melanie.

Would it sway the creditors to accept the decision if I was struggling to make the payments at present? Obviously they could get money now or risk going bankrupt and getting only a small percentage.

I think this is the argument that my IP is putting across to them.

Thanks again

[MelanieGiles]

Anything is possible in the strange world of IVA creditors meetings! I wish you the best of luck with your offer, and will be delighted for you if it is eventually accepted.

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