I started my IVA (through Step Change) in July 2013, but have already had a 6 month payment break due to divorce related expenses. Total debts were around £33000 and my house is included in the IVA, current equity at least £40000. I am looking at probable early retirement due to ill health within the next few months. I am lucky to have an old style defined benefits NHS pension, and the lump sum on retirement will be around £35000, but I understand that the lump sum will be considered a windfall that has to be available to pay my debts. What is the likely way this will play out and what can I do to make the best of things, if anything?
TIA
EDIT: I could just resign: will not get pension or lump sum for another 6.5 years, but what would attitude be then? I am unlikely to be able to replace my current income in another job, probably only earn about half of that elsewhere....
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
I would think you should consider a full and final settlement now and then when the IVA is over you can decide what to do regarding the property, pension etc. If you cannot raise the funds from family or friends you should speak to Shaun Vickery from Select who posts here about getting a loan. Creditors usually accept full and final settlements especially where it is clear you have been struggling and there are health issues.
Just talked to Step Change: Looks like pension is not excluded, certainly not the lump sum which will be considered a windfall, which should be paid into the IVA, less amounts already paid off the the original debt, but I can offset certain costs. I'm guessing, but maybe this could be short fall in income (according to living expenses) until I get another job. Thinking I might need to retrain for another job, so could possibly offset cost of that as well?? Alternative is to try and make Full and Final offer to creditors.
I don't quite understand the loan to pay a Full & Final offer option? How could that be possible and with whom given my current credit rating status??? I can see the advantage of paying off creditors that way then retiring after IVA completed, if accepted Full and Final offer is substantially lower than the full debt. I am off sick on full pay to mid April, then half pay theoretically for 6 months, but got to check details of my employers' policy re medical termination.
Do not draw your pension down as then it cannot be grabbed as a windfall unless creditors agree to accept some of it as full and final.
There are loans available to people in IVAs provided they are used for full and final settlements and Shaun Vickery has access to such products. It would certainly be worth looking into as once the IVA is over you can then sell the house, retire or do whatever you like. The sick pay might be an issue but if full pay at the moment it might be worth moving quickly.
Hi Niggle. In terms of raising funds to offer an amount to your creditors, as Michael says it is possible and we have access to a lender who offers funds specifically for this purpose. It offers terms with no Early Repayment Charge which means that you are able to settle it from funds from another source in the future (in your case perhaps when your pension funds are received). It's important to say however that the repayments in the meantime would need to be affordable and this is something which obviously needs to be considered given your circumstances.
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The full and final lump sum normally comes from third party funds or from a draw down of the pension but take specialist advice before drawing down your pension and get the variation agreed FIRST otherwise they might want all of the pension and the IVA to continue!!
Have a word with Shaun and see if he can help you.
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
OK so this looks encouraging, but what would be a sensible offer? Allowing for the 6 month payment break and the added on 6th year following likely refusal of re-mortgage I currently have 36 payments left, currently at £127/mth, so a total of £4572. I could probably borrow £4000 from family and pay back when pension pays out...
You could try a slightly lower offer to start off with.
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
Sounds a reasonable offer to me. Given your circumstances I personally would want to get as close to the figure as possible as it is in your interest to get it closed down.
Just to let you all know, my mother in law offered to loan me £3K and my creditors accepted a full and final offer of the same amount, which is a bit of a result IMO MIL will be paid back on retirement at a later date, hanging in there at work as it will be massively better to stay until my official retirement age Sept next year, thanks for all your help
Always better (IMO) to try to preserve pension funds for the future, if possible, as the short term gain could easily be dwarfed by the long term loss !
Onward and Upward
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
MIL will be paid back on retirement at a later date, hanging in there at work as it will be massively better to stay until my official retirement age Sept next year, thanks for all your help 
