have been lurking on this board for couple of days

[dj_]

Hi All,
We have been lurking on this board for a couple of days, trying to work out if we are eligible for an IVA.
A little background.
Firstly, I think that we are gutted, embarrassed and extremely worried to be in this position to start with. In hind sight we should have stopped our spending at least 18 months ago. We have been robbing Peter to pay Paul and as of this Thursday we have maxed out all our credit cards and have completely used up our overdraft facility.
My partner has a mortgage on the property that we live in, approx £155,000, and a secured home loan in joint names for £65,000. The house is worth a MAX of £195,000 which leaves us with a negative equity of £25,000.
The bulk of our debt has built up over the last five years, I stopped work to have our first child and did not return we have two children 3 and nearly 2, and have now not been earning for the last four years.
My debt is £20,000 split between three creditors, Barclaycard, SKY Visa Card and Cahoot Loan.
Partners’ debt is £58,000 split between five creditors, Barclaycard, Cahoot Loan, Egg Loan, Halifax Visa and an Alliance and Leicester Loan.
Joint debt is £9,000 Virgin Master Card.
Giving a total of £87,291 of unsecured debt. Our main questions are:-
1. As there is negative equity in the house are we likely to be able to keep it?
2. Are the creditors that we owe money to likely to agree to an IVA, i.e. I have read that some companies like Northern Rock are harder to deal with.
3. I understand that it is and Individual Voluntary Agreement, but as some of the debt is joint and some individual how does this work, do we each have one each or can it be agreed jointly.
I think that about covers it, thanks in advance.
Any advice would be greatly appreciated.
J & D

[freelili]

Hi

Firstly I am not an expert but will try to help with as much as I know.

Firstly you need to work out what your income and expenditure is WITHOUT making payments of the unsecured part of your debt. Including things like dental, prescriptions. childcare and clothes etc. Your budget should be basic but sustainable for a five year stint. Whats left over would be your disposable income. This disposable income will be used for your IVA.

Your IVA's will be paid as one but will be seperate and interlocking.
but dependant on each other. There is usually an equity release clause but I believe that if this is not possible then the IVA can run for another year, and would solve the negative equity in your case, I hope I am right on this.

If your car/s are on HP then the normal payments will continue outside of the IVA. If they are on a finance loan basis they will be included as part of the unsecured debts.

If your figures for disposable income are enough to return at least 25% of your debt in the 5/6 year period, and also allow for IP fees then an IVA is possible for you.

If your could work it all out and post back then I am sure one of the experts here can give you more advise.

Finally do not be ashamed, we all feel that way at first and are desperate for a way forward. Believe me you are not alone and you have already taken the first important step in trying to address this problem.

Good luck and keep posting



LILY

I believe that angels breathe and love will live on and never leave. I cherish all you gave me everyday.

[dj_]

Hi Lily,

Thanks for your response. I sorted out the list yesterday so have it to hand.

Income Partners Salary £2800.00
Child Benefit £123.00
Tax Credit £45.00
Total Income £2968.00

Our outgoings are presently:-
Mortgage £1078.3
PictureIT £745.00
HP Car £110
Telephone £35
TV Licence £8.63
Sky TV £0
Council Tax £123
Water £44
Electricity £70
Family Equity Plan £0
Gas £41
Car Insurance (both) £78
T-Mobile £10.01
(Internet) £19.98
House Insurance £34.81
Life Insurance £16.72
Food & Essential £200
Petrol £220

Total £2834.45

Leaving £133.55

I think that realistically I am going to have to get a job in order to even be able to pay an IVA.

Thanks for looking.

J & D

[freelili]

Hi again

Gosh that was quick, I am sorry but I really dont think that is enough Disposable income for an IVA. As I said I am not an expert, just another person dealing with my debts. However do not give up, there will be a way forward. It might work if there are two incomes, however it depends how feasable this is and how much childcare would cost. The only other viable option is Bankruptcy, I know this sounds scary. Debt management would take forever to repay and the creditors do not always stop interest. It has to be sorted now, and you do need an answer, it may be best to wait for another expert with more knowledge to help you with this, its early yet but I am sure that one of them will be around later. Stay with us as your circumstances and the possible solution may be similar to someone elses, this is a very supportive place and we will be here for you whatever happens. I realise this must be a very difficult time for you. Hang in there for now.

LILY

I believe that angels breathe and love will live on and never leave. I cherish all you gave me everyday.

[Adam Davies]

Hi dj
Freelili is correct that on the info supplied you have little or no disposible income,I think that £200 per month for food is unrealistic with two youngsters.
On debts of 87k you will need to offer a monthly amount of approx £500 per month to return a 25p in the £1 dividend[60x£500 =30k,less IP fees of 8k leaves 22k for your creditors=25% dividend]
All is not lost though because if you can find employment giving you £4-500 per month then an IVA could be a realistic option for you.Even though you are at present in negative equity there would probably be an equity release clause for the final year of your IVA as property will more than likely increase.Also with regard to your car HP once this finishes the monthly amount can be included into your IVA
You could also consider bankruptcy and this is not as bad as I seems,have a look at a couple of blogs from other forum members that have gone through this.
You have found this site and it is the fist step to sorting out your debts.We are all,or have been,in the same boat as you and will not judge you.
Keep posting

Andy Davie
IVA.co.uk Spokesperson and site manager
(aka Neverending)

Please check out my blog: http://andydavie.blogs.iva.co.uk

View my profile here:
http://www.iva.co.uk/andy_davie_profile.asp

[jane.l]

I really sympathise with you, your situation sounds very similar mine. Its just been the most awful few weeks. We tried to sell our house but it was a no-go as we had negative equity and the secured loan compay will not release the seond charge and allow a sale, as there will still be a huge shortfall we will owe them. We looked into an IVA but the monthly figures were very high and I just know we cannot afford to pay that for 6 years. We left stopped all our creditors (its been 3 months now) and moved out while our credit rating was still good, we found a rental house and just pay essentials now, rent, gas, electric, council tax. We also have 2 cars on HP. We will be petitioning for bankruptcy. Our house will be repossessed. I am not sure in your situation if you would be able to keep your house, if you wanted to stay or not. I am still confused about our house situtation so are doing nothing for the time being!

[MelanieGiles]

Hi dj

The suggestion of finding a job is a good one - not only to increase your disposable income but also to demonstrate a willingness on your part to put your best foot forward in dealing with your creditors. It is, I am afraid, a fairly sad state of affairs that in this country giving up work to raise a family is more and more unaffordable - and you appear to have done this purely by living on a high level of borrowings.

Your creditors will also not be happy to see that 61% of your income is going in mortgage and secured loan payments totalling £1,823, which is a clear demonstration of living beyond your means - I agree with Andy Davie that some of your other expenditure seems unrealistically low.

Given the magnum of your debts, bankruptcy could be a better option for you, and moving into cheaper rented accomodation would also be a good idea, albeit this would leave you with an unsecured shortfall to Picture loans which other forum members, and several of my own clients, are currently having difficulties with.

The thing to do is to do something now - you cannot carry on living with the sort of outgoings you are currently bearing for much longer, and you should not take out any further borrowings as you will not be in a position to repay 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

[jane.l]

good advice there, our secured loan is with Picture and they have been absolutely awful to deal with, very aggressive,(until we unplugged the phone) They are refusing to budge and allow a sale, I can't say I blame them as they know they will not get their money back! If I had known all this would have happened I would never have tried to sell the house, we have now got an irate buyer on our hands and a £2000 estate agent/solicitor's bill which we cannot pay. I can relate to Melanie's comments about not working and looking after childen, this is exactly how we got into this mess, I stayed at home for 13 years whilst my children were young and we only had one wage coming in, and unfortunately, we just consolidated loans over the years again and again! I just wish I could live my life over again!! I have soooo many regrets!

[dj_]

Hi All,

Many thanks for all your replies. I am slightly overwhelmed at the moment. I think that in our hearts of hearts that we knew that we were not realistically eligible in our current situation. Our current plan of action is:-

1. Get a job; this is where my partner and I have our main disagreements. I would be more than will to go back full time but he thinks that it is a waste because we would have to pay so much in childcare. So I think that a evening position i.e. stacking those shelves will have to be the way forward.

2. Family have come in to the resuce and offered to pay a chunk of the Picture Loan, reducing the equity to zero, not negative. So that we can put the house on the market.

3. Not really sure on what to do with housing, would we be wrong to try and get another house with a mortgage, say under £100,000? Or would we be better to rent? I think that this is pride more than anything and I realise that we will have to make substantial sacrifices, we spent the money we need to do everything we can to pay back as much as possible.

4. Informally contact our creditors, explain that we are currently experiencing difficulties in pay our debt and ask them to freeze the interest and let us make token payments, accompanied by supporting schedule of our current monthly costs? Hopefully giving us enough time to sell our property and move into something cheaper either rented or mortgaged.

Once again thanks for all the replies already received and I look forward to reading more. It is very comforting not to feel like the only one.
Kindest Regards,

J&D

[scaredkez]

jd your decisions sound quite good, but what i would say is in reality, if your creditors seen you as being preferential to one over the other they may not like this, ie paying off the picture loan, then again if i am wrong someone will correct me, a DMP or token payments does not take away the hassle of the creditors from you and it can be very tiresome and upsetting, i have just declared myself BR, i have lost my car and my house will also be sold, but because i have young children i may get up to 2 yrs in present house.to be honest it took me 10 months to get here trying everyhting i could to please the creditors but i could take no more as they want more and more off you and threaten with charging orders on the house, its not going to be easy but going BR is the best decision i could have ever made and i am now on the road to a fresh start
take care in what ever you direction you go and please let us know how you are getting on
kerri

Please view my blog at: http://scaredkez.blogs.iva.co.uk/

[dj_]

Hi Kerri,

Thanks for your reply; I see what you mean about the other creditors not being happy about favouring one loan over the others. What I was trying to do was free up the cash in order to pay them back; I guess it is not as black and white as that.

I have read your blog and it has really helped shed some light on what happens when you have to go through BR, thanks for taking the time to do it.

D & J

[tracy.h]

Hi dj
Firstly id like to say welldone,for addressing your problems it is a very brave step to take,its really hard to finaly admit that you can't go on living with this great burden round your neck,and even harder with a young family to care for so now you have taken the first step on the road to recovery,hang in there as there will be a solution but it has to be viable,so that you and your family can move on and find a life without all the stress of trying to keep afloat.
I understand about the child care as even though mine are grown up and have there own families my son has a 10 mnth old and his wife has gone back to full time employment,the cost of childcare is half of her income but they look at it if she didnt work then the half she keeps wouldnt help pay for the mortgage and they would struggle more,not an ideal situation but it seems more and more young mums are going back to work,and the goverment are helping with childcare as an incentive to get people back out there,i see in your income you have included taxcredit would you not be entitled to any other help with child care if you did go back to work,just a thought may be worth looking into.
Keep posting you will get technical advice and emotional support from all of us at any time you post
even if you just feel a bit down someone will always be about.
Take care
Tracy

[MelanieGiles]

Hi again

The problem with buying another house is that you will not have anything to put down as a deposit, unless your family can also help out with this. If you have the opportunity to remain on the housing ladder I would certaintly take that chance, but why not get your family to buy the house, and you to rent it with the option that you buy it at today's value once the IVAs have completed. In that way you avoid creditors grabbing any of the equity both now and in the future. Your relatives could set the rental level at the same amount as their mortgage payments, so they would hardly lose out.

Once your property has been sold, and you have found a job to supplement the income side, you may find that you are in a position to propose IVAs then in any case - although bankruptcy proceedings are also an option if you have no assets.

Kerry is right to point out a potential preference if your family pay off the unsecured element of the Picture loan.

You really do need to sit down with your partner and map out where you see the future lying for you all - in terms of career, education, housing and finances. When this is determined, and you have prioritised the areas which are more important than others, I am sure you will be able to decide which is the best route to deal with your debts. In the meantime please do not borrow any more money!

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

[freelili]

Hi

Just one thing that I would like to add about child tax credit, you are allowed to claim working tax credit, I am not sure if you are doing this already and it does depend on how much you earn. I used to get them when I was working. The best thing to do is go onto the tax credit site and have a look at what you may get (you would have to guess your salary though).

Good luck and please keep posting

LILY

I believe that angels breathe and love will live on and never leave. I cherish all you gave me everyday.