Should we take the leap???

[daisyW]

Hi, thanks again for all the fantastic advice and support I have received so far on this site. Things are still up in the air for me unfortunately, we have received a proposal from 'Money Debt and Credit Ltd.' with a figure of £270 per month IVA payments over 6 years. Our exact debts are as follows...
Virgin cc (mine) £1222
Alliance and Leicester cc (mine) £4150
Barclaycard cc (husbands) £643
HSBC loan (joint) £21507
This payment guarentees the 'supposedly' 40% for HSBC.

Our problem is that we did an I&E last night and after taking into account our secured loan (which we have managed to reduce the payments by extending the term)after everything, it doesnt leave us anything to live on. We have included everthing else we can think of and left just food/clothes allowance till the end and there was nothing left for it. Thing is, at the moment I am pregnant and redundant so out of work, therefore our current income is only for the next 22 months, after which my toddler will qualify for free nursery and the new baby will be old enough to go to nursery and I can get another job to subsidize my husbands salary. We will also receive more benefits once this baby arrives next May. We are waiting on an insurance settlement from a car crash which should ammount to around £3000, we have also decided to sell one of our cars to raise another £3500. Our (very shakey!) plan is to keep the cash and spread it out to live on just over these next turbulant 22 months. I have asked the IP about saving and he says that there is no problem if he can justify them i.e. new baby coming.
Its just scary to be entering into a plan which currently leaves us no budget to live on, however this cash would divide into around £300 a month for food and clothes.
Are we mad to think this could work???
(Just for the record, I posted previously about a company who were offering us a 'cheaper IVA', I was suspicious as I thought the fees were taken into account after considering what you can afford? This other company are 'Ideal Debt Solutions'.) Thanks. x

[Lisa2009]

Its worthwhile talking to 2 or 3 companies if you want to enter into an IVA.

I can recommend Melanie Giles who posts on this forum. You will get completely free and non-judgemental advice from her and her team.

[Michael Peoples]

Hi Daisy.
I can see a number of problems with your plan. The insurance payout may in whole or in part be a windfall which would be captured by the IVA. This depends on what the payout is actually for i.e pain and suffering, loss of earnings, repairs etc. Also, if you do not need two cars the proceeds from the sale should be introduced into the IVA.

However, if the IVA was structured to bring these monies in and to take into account the change in benefit entitlement in May, it could be viable and acceptable to creditors.

In addition, there may be other ways of enhancing the dividend by for example remortgaging to reduce the payments[if there is sufficient equity] or to switch the main mortgage to interest only. I would be hesitant to enter into an IVA if at the very beginning there are doubts over affordability. Given that you are expecting a baby you will need to take as much care of yourself as possible and eat the correct diet. Leaving little or no money for food and clothes is not how IVAs should be framed.

It may be worth speaking to whoever drafted the proposal to see if it could be amended to a more affordable and sustainable proposal. Alternatively, bankruptcy should be given serious consideration by your husband and yourself.

[liberta]

Hi Daisy.

I read your post with great concern.

You should speak to someone who looks at your income and expenditure first and takes into account the fact that you are expecting a baby and the cost that will entail. They should then advise you on the options open to you, bearing in mind the equity in your home.

The solution should be made to fit you not the other way around. If an IVA is not the best way forward for you at the moment then, as Michael says, you may need to consider a DMP or bankruptcy.

[size5]

If there was nothing left for food after all other expenses were allowed for then £270 per month for a possible IVA proposal is patently unaffordable and would be better used feeding yourselves, even then it isn't a lot for 2 mouths let alone 3.

I can only echo others concerns and suggest you speak to 2 or 3 other providers to take a look at ALL options open to you, whether BR, DMP or even a temporary DMP to be followed later on by an IVA once things have settled down for you.

Regards.

[Adam Davies]

Hi
It will be well worth getting another person/company to look and talk over your figures.
As someone that has been through an IVA I can't stress enough how important it is to have a realistic expendiure allowance.
Five years on a tight budget will seem like a lifetime
Regards

[freelili]

Hi Daisy

I am just wondering which way round this IVA proposal was done? Did they tell you what you need to propose and you find you have nothing to live on or did you give them the figures about what you need to live on and they took the disposable income. The latter is how is should be.

There is absolutely no point in going forward with this if its unrealistic now. You cant survive on the sale of items and ifs and buts for 5 years. You really need to speak to a couple more companies to find out what all of your options are and I would recommend speaking to one of the professionals on this site.

Good luck.

[daisyW]

Hi, thanks for all the replies.
£270 was the minimum we were advised we could pay due to the majority of the debt being with HSBC and not wanting to risk offering them lower than 40%. I cant see how another company could work out a lower payment without compromising this 40% and therefore risking a rejection from HSBC. The IVA provider did do a basic I&E but didnt take into account everything, we basically told him what we had coming in, he took off the big outgoings and allocated the rest to living costs. When we did it ourselves though, we found after all the bills and DD's it didnt leave us anything spare to live on.
The car insurance payout is made up of half for the value of my car which was written off, and half for my injuries. It is settled and we are expecting the cheque any day. As the IVA isnt started yet and we have no other savings, we intended on cashing it and keeping it back.
If I sell my car, there would be no point using it to pay off some of the debt as it wouldnt make much of a difference to the payment amount, yet the money could keep us until I am back at work.
When my little boy turns 3 in 2010, he will qualify for free nursery and then I can justify going back to work, afford one nursery place for the baby, I will have my working tax credit re-instated which is worth about £400 p.m.
Its only next year we will struggle until I am working again, not the full 5 years.(All being well!)
We are already on a DMP, the big issue being HSBC have rejected every offer of a reduced payment and although we are paying them what we can afford through the DMP they are adding on penalties every month so we cannot continue as we are.
There is no equity in the house, as we are currently on an interest-only mortgage and we also have a secured loan which takes up the rest of the equity. (we have spread this loan out over the maximum period to reduce the payments down)
We desperately do not want to loose the house, especially with two small children (nearly!). Renting would cost as much as the mortgage we are paying now, and with the market as it is we would loose out with a current valuation.
Help please! Thanks. xx

[freelili]

HSBC are one of the worst creditors in any terms but this IVA is unrealistic. This proposal is suiting the company who are preparing it, not you the end users. OK, so I am not an expert, I dont know all things IVA but I had HSBC as a creditor and know only too well what they are like, lets not forget that the company you are using will gain earn well from your IVA but at what cost to you? I can understand that youre desperate, you need to know where you are and you need to find some way through to a peaceful life. I dont know if you have said how much you owe, but it seems that a DMP isnt working and HSBC are adding to this burden. Youre desperate enough to grasp at any straw and thats exactly what this company are counting on. Any IP worth their salt wouldnt leave you to manage on nothing, its just doomed to fail.

If you go BR, with no equity you may not lose your home, you need either a realistic IVA that can work, or BR with the proper advice.

Please, Please, Please, get someone else to look at your figures, if you can only give HSBC a 30p in the pound dividend in an IVA or a big fat zero in BR then they would be stupid to reject it. I know that size 5 got one through for less than the 40p this year.

Also if you get money from an accident, it may be classed (earnings loss) as a windfall and be swallowed up by the IVA clause anyway.

You really need to consult someone else on this, I dont think youre being treated fairly by looking at the needs of HSBC before the needs of a client.

I know this must be such a stressful time for you, however making the right choice or going in the right direction now could save you a lot of stress in the future.

Good luck, I am sending you a hug.

)))))) hug (((((((((

[Moneyworries]

Hi Daisy

As others have stated i would seriously consider speaking to other IP's. If you explain your I&E to whoever you speak to they will tell you ALL the options available to you (IVA, DMP, Bankruptcy). Please dont accept what this company has told you (im not saying they are wrong), but what i mean is dont accept anything because you are in a desperate and vulnerable situation - 5 years is a really long time to struggle.

As far as Bankruptcy is concerned, and (depending on any other assets you have) when your house is in negative equity then a third party is usually allowed to buy the beneficial interest for £1 plus fees of about £211.......Please think of all your options, but most importantly take care of yourself and baby, your family comes first.

Good luck

Jenny

[daisyW]

Thankyou again for the support, it means so much to me.
I have an application from another company for an IVA so I think I'll get that sent off too, have also sent my info through on Melanie's website, so look forward to hearing from them.
To be honest, I think like a lot of people, I considered an IVA to be the absolute last resort, and to find out that even that may not be the answer is just devastating. We have not even considered or looked into bankrupcy, as we presumed we would loose everything, my husband needs his car for work, our families know things are tight for us but not to the full extent of how bad things have got. [:(]

[Lisa2009]

Try not to worry,there WILL be a sollution for you xxxxxx

[kallis3]

With your car, as long as it is not worth a lot of money, you are usually allowed to keep it in bankruptcy.

You will possibly have to pay a certain amount of money a month for three years, but it depends on your disposable income.

You may find that you are better off doing this.

Be guided by what the other IP's tell you.

My hubby and I tried to do an IVA with MDC and they told us that we couldn't do one, we could only go bankrupt - and that with a disposable income of £650 a month! I don't rate them, but each to his own.

Good luck.

[Moneyworries]

I think its great that you are contacting other IP's, and feel that you definitely have not been informed of all options and pro's and con's for each one.

Wishing you lots of luck.

[daisyW]

I have just read most of the posts on the bankrupcy forum and am thinking it maybean answer. [:0]
A few questions that are really concerning me are...
Am I right to say if there is no equity in the house (valued at £104,000, mortgage of £94,500, secured loan of £17,500)then if we can keep up payments on the mortgage and secured loan we can keep the house??
When working out a monthly payment, they wont take benefits into account? We have no surplus income, especially if not including benefits, does this mean we wouldnt have to pay anything monthly?
What happens if we inherit anything substantial during the bankrupcy period? We both have elderly grandmothers (not nice to think about but a possibility )
God this is scary!x