Am I better off going bankrupt?

[jaykay]

I have been on an IVA for a year now and haven't missed a payment. I don't usually have a problem with the payments or any increments due to pay rises. However, I received a small one-off bonus last year and our pay rise was paid very late this year, meaning I had several hundred pounds in back pay, although it only represented about £30 a month. My insolvency advisor is now asking for half of both those amounts (although not seemingly with any great urgency), most of which I have had to spend on essential major car repairs (I live in the back of beyond and run a 12 year old car).
I am concerned that my payments, while usually fine, allow no scope for major outlays like this and I have to use the occasional "windfall" like my bonus and back pay, or borrow money from my partner, to cope with them. I am divorced, paying child maintenance, have no assets and rent a property with my new partner who is in much the same boat. Am I better off biting the bullet and going bankrupt?

[MelanieGiles]

Hi jaykay

You should keep details of all exceptional expenditure that you incur during the year, so that when your IP does you end of year review this can be taken into account. Of course do expect your 50% of any enhanced earnings to be used up first.

As you are managing your general IVA payments adequately, I would not have thought that bankruptcy is a sensible option for either you or the 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

[Adam Davies]

HiJaykay
Your IP is only doing what they are paid for and that is to oversee your IVA.You will have to pay 50 percent of your bonus but I would argue your case regarding your back pay as it is your annual payrise and your increased expenditure should off set this.
Did you fill in a fresh income and expenditure form at your annual review ? Have you got an allowance for car repairs etc ?
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

[Brownowl]

Does this mean that if i get an annual payrise I have to give 50% of it to my creditors - I thought that once payments were agreed under an IVA that they stayed fixed for the full 5 years or this is what I have been told my friends who have IVAs. I am confused !!!!!!

[MelanieGiles]

Hi Brownowl

This will depend upon the terms of your actual IVA. do you have one yet? It is quite normal for creditors to seek 50% of any additional earnings you have, and your IP will conduct a review at the end of each year to see if you could afford to pay any more.


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

[jaykay]

Thanks for this. There seems to be some uncertainty though about whether I should have to pay 50% of any payrise because it might be argued that this is to cover costs of living rises. Is this not something that is fixed or do IVA s vary in this respect?
Yes there is an allowance for car repairs, but it's something like £30 a month. Of course it never works out like that - we had to pay out £400 in one go.
The other thing is that as I'm 50 next year I have the chance, if I can do it, to retire early on a reduced pension with a lump sum. I know I'd have to get another job, but would there be any claim on this lump sum? There is also a possibility looming of redundancies in the next year or so. the same question applies - would there be any claim on any redundancy payment?

[MelanieGiles]

Hi jaykay

I can only explain what I do in my practice. At annual review time we look at a client's income and expenditure to reassess the level of payments. In less than 5% do I experience actual increases, and my reassessed baseline income figure, is then used as the basis of calculating 50% uplifts for the following year.

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

[Adam Davies]

Hi
A redundancy payment and a lump sum from a pension are not generally regarded as a windfall as they are there to compensate for loss of all earnings[redundancy] or part earnings[pension] so they should be safe from your IVA.However if you find work in either case then they may be deemed as surplus and could well then be vulnerable.
You need to speak with your own IP and be sure with their response as policy may vary from IP to IP.
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