I have been trying to get advice for a few months as to whether an IVA is better for me or if I should go ahead with bankruptcy. I have a mortgage (there is less than £2000 equity in my flat - if that as the current market is not good). I have unsecured debts of about £60k and my o/s balance on my mortgage is about £127k. I am 3 months in arrears with my mortgage but trying to make a payment plan with them (northern rock) to pay the arrears and possibly change to interest only repayments until my situation improves. I am in full time employment however Payplan did an income/expenditure for me which left me too little to live on each month! I really don't know where to turn. I have completed all the bankruptcy forms and am ready to go and file but everyone keeps giving me conflicting advice because i have a mortgage.
The most important thing to think about when deciding on the right debt solution is ... you! And especially how you see your future over the next few years.
You have to be able to comfortably afford any repayments, or be prepared to possibly surrender assets to enable your creditors to be repaid. In your case, assuming that your only asset of material value is your property, it does not appear that it would be really affected by bankruptcy proceedings given the current negative equity. If it is proven that it would not be worth the Trustee pursing the asset, you could probably agree for a relative or friend to acquire your interest for the nominal sum of £1 plus the costs of transfer. The property then is deemed to be outside of the bankruptcy, but you will need to keep on paying your mortgage to avoid possessory action being taken by Northern Rock.
What disposable income do you feel that you could comfortably afford to repay creditors?
Thanks for your replies. PayPlan said that mortgage arrears were not allowed to be included in my expenditure budget. After all my essential bills were accounted for they were leaving me with £300 which had to pay for my mobile phone (non essential) and broadband (non essential even though I have to have it for work) and I wasn't allowed a clothes or emergency allowance so I was left with almost nothing for food etc based on their plan. I think on my income I would be able to fairly offer about £600 - £650 a month to my creditors but they said I should be offering £1100.
Does the Trustee take into account any early re-payment penalties when considering the beneficial interest in a property? Based on the fact that (and I have valued my property on those in my road currently being sold) I think there is about £1000 or so of equity, the early repayment penalty is about £4000 and then there are legal fees etc to consider so I can't see how disposing of my flat would increase any payments to my creditors.
I have asked Northern Rock to agree to a payment plan to help with the arrears, I have written to them 3 time and haven't heard back from them yet but will give them a call as I'd like to get a formal arrangement in place as soon as possible.
If retaining your home is a priority you really must focus first on clearing the mortgage arrears (before starting to clear unsecured debts yourself or via a debt solution).
At a minimum a deal should be done with the mortgage lender so that you know how much extra will need to be allowed for in your expenditure.
I'm frankly staggered if you were advised in the way that you describe.
Andrew Graveson
Bright Oak Ltd
UK Debt Management Company
Website: www.brightoak.co.uk
Absolutely dreadful advice in my opinion as well - and there are definately other options available to you such as an IVA based upon the figures you were quoted. Great advice from Andrew to deal with the mortgage arrears as a priority, and I am sure that Northern Rock will be helpful with this. At the same time, discussions directly with an insolvency practitioner would assist you in deciding on an appropriate way forward with regard to your unsecured debt.
I simply cannot understand the logic of some firms advising clients that they have to live to drachonian budgets. What on earth are they trying to achieve??
Last edited by MelanieGiles on Thu Nov 06, 2008 10:43 am, edited 1 time in total.
Andrew Graveson is right - if your priority is to protect your home you need to sort out your mortgage arrears first and formost.
If you were to go bankrupt, the Trustee would not be able to deal with your home (i.e. sell it) unless there was in excess of £2,000 equity in it. There is however a protocol that says it should not be touched unless the equity is in excess of £5,000.
Subject to that the Trustee has three years to deal with the property after which legal ownership of it will automatically return to you.
What would probably happen is that the Trustee in bankruptcy would have the property valued now and again in a couple of years time. If the situation has not changed - your level of equity has stayed the same - then the house would not be touched. If the equity has increased however you may be able to do a deal with the trustee to purchase the interest back. Costs of sale are taken into account when considering the equity in the property.
What you have to consider is the risk involved in seeing what the market will do over the three years.
Like Andrew, I am surprised at the advice you have been given. I would suggest that you speak to another IP and get further more detailed advice on your situation.
Kind regards, Elizabeth Pywowarczuk, Insolvency Practitioner.
If you would like me to advise you about an IVA and if appropriate propose one for you, please visit my website at www.liberta.uk.com
Thanks everyone, your help is invaluable. I have recently started talking to CCCS (this week) but its still in the very early stages and they haven't yet given me any advice regarding IVA's or bankruptcy as yet.
You've all given me a lot to think about, and I'm very grateful for your help.
It seeme a shame that PayPlan are not giving the best possible advice, I've spent months working with them and now it all seems like a bit of a waste of my (and their) time, and the most disappointing of all is I could have been well on the way to a suitable arrangement with my creditors months ago!
I'm going to talk to Northern Rock today about the arrears so hopefully something positive will come out of that conversation too.
CCCS should give you a range of options, one of which should hopefully suit your current circumstances and where you want to be in the future. Let us know what they do eventually advice, and good luck with the application.
Well the good news so far is that Northern Rock have happily agreed to my suggest payment plan for my arrears. I have decided to go with the bankruptcy option and am going to my county court tomorrow to file my papers! Thanks again everyone for your help. I'll let you know how I get on.
It is great that you have thought everything through carefully now, with a little help from your forum friends. Keep in touch and do let us know how the bankruptcy application goes.
Can I suggest before you make that final decision you speak to an Insolvency Practitioner.
Regards, David Mond, Insolvency Practitioner for over 46 years. Personal Insolvency Practitioner of the year 2012, Personal Insolvency Practitioner of the year finalist 2013 & 2014 awarded by Insolvency & Rescue Magazine and 2015 finalist for Personal Insolvency Firm of the Year.
You've both mentioned in your posts on this thread that sallya should speak to an Insolvency Practitioner.
I'm interested in that point in general terms as the evidence from both this site and IVA.com is that clients have wildly varying experiences of the quality of service and advice from IP's with whom they have dealt. Some of the feedback available is actually quite worrying.
This point isn't to demean the professionalism of the majority of IP's. In particular the fact that you both (and several other IP's) place yourselves and your companies in the public eye on this site demonstrates terrific confidence and pride in level of service that you all provide.
This point is also not to compare the professionalism of IP's against Debt Management companies or Mortgage Brokerages. Being honest there are certainly more bad apples in these two industries than in the insolvency profession.
My point is that surely people should seek advice on all of their options from individuals and firms in which they, for whatever reason, have reason to place confidence in. This should include IP's but perhaps others as well? If Debt Management or Refinancing might be alternative options worthy of consideration wouldn't it be better to talk to a reputable firm that specialises in these areas as well? We all know, based on comment seen on this site as well as other sources, that some IP's have fallen to the temptation to "shoe-horn" cases into IVA's when other options might have been more appropriate.
Taking advice might therefore mean taking a range of advice before making a decision. Given that there are some IP's out there who fall well below your standards (in terms of the feedback they receive from clients) do you think the advice "speak to an IP" might end badly if someone unfortunately called the wrong IP?
Andrew Graveson
Bright Oak Ltd
UK Debt Management Company
Website: www.brightoak.co.uk
You make some very valid points in your post Andrew - and can clearly demonstrate the issues raised, given that the original poster has already contacted an IP firm who have given advice which has not been well received by their client?
I think it is very important that IPs stick to delivering a range of insolvency advice, and that other professionals are used for things like mortgages and investments - indeed we are not qualified to offer such advice.
