I don't want to get myself into anymore debt!

[emily.c]

It has been suggested that I take out the option of an IVA, I have debt of approx £16500. I have a car currently coming to the end of a finance agreement (HP) and I have a balloon payment of £3000 to make. My parents have offered to lend me this amount to pay off my car and I will pay them back over the next year. I have been told that this will cause a problem and it is best for me to trade in my car against a new one and continue with a higher purchase car finance agreement? What should I do as I don't want to get myself into anymore debt! Help

[MelanieGiles]

Hi emily and welcome to the forum

Your debts are quite low to make an IVA viable, but there are some practitioners who will take on work at the lower end. Have you also considered a Debt Management Programme which might be more appropriate?

If your parents are going to fund the balloon payment for you, you will not be able to repay them during the IVA and they will have to rank as a creditor under the proceedings. Also creditors may well ask them to forego their right to receive a dividend payment.

You might be better just trading the car in now for a newer one which will last for the duration of the IVA. Take the agremeent out over five years, to keep the repayments as low as possible. HP payments are allowable expenditure during an IVA, but you must still have some disposable income left to offer to your creditors.

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

[Oliver]

Have you investigated the possibility of refinancing the ballon payment over a period of time, i.e. keeping paying the HP amount until the baloon is paid off too.


Best Regards
Oliver

Thomas Charles and Co Ltd.
Experts in personal debt solutions.
Read customer feedback at: www.thomascharles.com/about_us.asp

[Andy2]

Not having a car, I do not know how the "final balance" payments work but I understand if you do not meet it "on the day" you can then opt to pay off the final payment via more HP instalments. As Melanie says, these are allowed in an IVA proposal (as long as they are not excessive) and they would look better attached to an existing car rather than a new one taken out "just before" an IVA. I would look into the option of extending the HP then.

[emily.c]

Thank you for all your advice and help regarding my last question about starting an IVA with car finance. My car finance is coming to the end and I have to take up an option of a trade in. Would I still be able to take an IVA if I am unable to refinance a new car in my name as I have been declined? My parents are happy to have it in their name but I'm not sure what will happen with the IVA?

[MelanieGiles]

Hi again

Explain to your IP that your parents have taken out a HP agreement in their name, if you are unable to source finance directly. They may present your proposals on the basis that this was done for convenience, and if you do not continue to refund your parents they will be forced to return the car and then you would be unable to travel to and from work.

I have done this in the past and this has been acceptable to creditors - so long as it is fully disclosed and not "hidden".

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

[emily.c]

Just wanted to say a huge thank you for all your help. I have been through stress and worry and it's nice to know I'm not the only one and there is a lot of help and support! Thanks again.