very confused about payment ratios

[arsenalfan]

Hi,

I've recently landed myself in about £80k's worth of debt. £15k of it was my own doing, £65k of it was down to business finance I personally guaranteed while working for my dad's company, which went under in the Summer.

Obviously, when the company went under, my job went with it. I've only recently got a job on £1,350 per month. Bankruptcy is not an option to me, as I work in a highly regulated job - I'd be out on my ear.

I keep hearing the '25p in the pound' lower limit, which I could afford as it ties in nicely with my disposable income. 25p would be £330, I can afford about £350. I've called a couple of IVA companies, and all I've had is figures around the £450 - £500 mark.

I've also heard wildly contradicting opinions about what happens in the event of pay rises and marriage. At one end of the scale I've heard that I'll have to put in 50% of any pay rises, and marriage won't affect my partner at all. At the other end of the scale I've heard that I'll have to put 100% of any raises in, and my (future) wife will have to contribute too.

What's going on??? I'd really appreciate someone giving me some decent advice and recommending a few companies.

Many thanks!

Are there any companies out there that can get me near to the £350 mark?

[MelanieGiles]

You will need to convince an insolvency practitioner that your disposable income is actually £350, as the firms that you have already approached seem to be suggesting that you can afford more. Could you post the details of your expenditure so that we can assist further.

The 25p in the £ benchmark is not there to work towards, but as a bare minimum requirement that a lot of creditors operate under.

With regard to pay rises, in my practice your income and expenditure is reviewed annually and rises are taken into account in conjunction with increased expenditure, and if your disposable income is higher then you will be asked to pay more - but of course the general spirit of an IVA is wanting to pay your creditors as much as possible.

With regard to getting married or living with a partner, your partner's income is taken into consideration, but only to ensure that you are both paying your fair share of shared expenditure based on the same ratio as your earnings.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[arsenalfan]

Thanks for the reply Melanie.

On the contrary, the firms I have spoken to have agreed that my disposable income is what I say it is, but that I need to find more in order to hit the £450 per month 25p in the £ barrier.

That confused the bejeesus out of me. 450 x 4 x 60 isn't £80k.

I don't mind paying more as raises come through - but I thought that having to give up 100% of it would be detrimental to both myself and the creditors. If I know I'm going to be on (real take home pay after IVA) ~£900 per month for the next 5 years, what motivation have I got to put the hours in at work to get promotions? Both I and the creditors would miss out on potential extra money. I'd probably be better off going bankrupt and living off benefits (ooh, has my back just gone? [:D])

Don't get me wrong, I do want to pay back as much as I can. For reasons I won't go into, the business debt was not my fault, and I was well and truly led up stitched up. But at the end of the day, I signed the papers, it's my responsibility, so I'll try to pay it back as best I can.

The job I got is on approx half the wage I was on previously. It's all I could get after 3 months of unemployment, but I really enjoy it and it's got good prospects. I'm not trying to work the payments down to £350 because I want to, it's because I have to because it's all I can afford.

Advice much appreciated, thanks.

[james.c]

Hi Melaine

I always respect your answers, but on this one you have left me confused. You have said that he would only have to prove his future partners/wife pay to show that they are pating the correct % of the bills compared to their pay Ie pro rato. But on other postings you have mentioned that the disposable income form your partner, that creditors would expect this to be paid in as well.

I am not having ago, or may be i have mis understood, but could you explain it fully please

no matter how bad money gets, theirs stll alot more important things in life

[MelanieGiles]

You have missed out the IVA costs from your calculation, and on the basis of my firm's standard charges you would need to be paying about £450 per month as well to make your offer fit 25p in the £ criteria. You could always go in with a lower offerm, but a lot of practitioners would be reluctant to do this on the basis that there is more risk of rejection.

Who is the business liability with? They may be prepared to accept a lower offer, and you could always offer staggered increases based on your expectations of future earnings. An increase of an extra £25 per month each year, would bring you to approximately 21p in the £ for instance - which is not a mile away from the "magic" figure. Also has anyone else guaranteed that debt, and they may be able to contribute somthing to reduce the liability.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[arsenalfan]

hi,

unfortunately, my dad was the only other guarantour and he has gone bankrupt.

I didn't realise that IVA fees were so large! I'm in the wrong business working in IT [:)]

Thanks for clearing that up. Looks like I'll have to go and do some more sums... Fingers crossed, I'll get there in the end!

[MelanieGiles]

Trust me those fees are well earned for the amount of work involved in putting and IVA together and running it for five years, and probably are a lot smaller than the interest which would accrue on your debts over the same time period.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[Adam Davies]

James
If before you enter into an IVA you are living with a partner your joint disposible income will generally be used,as creditors often feel that each party has benefited.However if you are single going into the IVA and after whilst in your IVA move in with a partner then it is just income ratios that are used and your new partners disposible income will not nbe asked for
Arsenalfan
We have seen IVAs accepted on this forum for less than 25p dividend,if £350 is all that you can afford then stick to this,I'm sure that you will find an IP to propose your case
Regards

Andy Davie
IVA.co.uk Spokesperson and Website Manager

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

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

[james.c]

Thank you for clearing that up Andy

no matter how bad money gets, theirs stll alot more important things in life

[MelanieGiles]

Sorry James I missed your earlier post, but Andy has adequately answered the point.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp