www.iva.co.uk

Hello, I read posts about f&f settlements but I'm not clear on how they actually work.

Please can you experienced IVAers and experts explain how a final settlement would work with this example?

Total creditor debt = 60,000.
Propose to repay 40,000 over 6 years.

Will the IP fees be included in the 40,000 so if they are 10,000 then the creditors should receive 30,000?

If part way through the IVA (say 15,000 paid) the debtor was able to make an offer to repay in full and settle the IVA, would the f&f figure be based on the total debt or the proposed repayment?

So if paid 15,000 do they need to pay 25,000 (IVA) or 45,000 (total debt).... or somewhere in between?

Finally, I understand that the IVA time will remain at 6years from acceptance regardless of clearance date. When the payment has been accepted, is a line drawn underneath everything so there is no need to remortgage?

Hope that makes sense.

When I calculated the offer for my full and final I didn't worry about fees etc. I just took the monthly payment and multiplied that by the number of months left. Fortunately I was able to come very close to that figure with my offer and the creditors accepted it. However there are other considertations. If you have an equity release clause (you mention the need to remortgage)then you may have to factor the amount that they would expect from that into your offer. On the other hand if you are facing redundancy or a change in circumstances that would reduce your monthly payment then the creditors may accept a lower amount, rather than nothing at all.
As you can see there is no standard offer as it is based on individual circumstances but hopefully this has helped a bit.
Hopefully one of the real experts will be along shortly and may have some other advice for you.

Hi zzalsnp!

In your example you would need to make the agreed remaining payments of £25,000 plus any equity. The IP may then be able to complete the IVA early without asking creditors, subject to the exact terms of your proposal. As you're with Melanie's company I'm sure she'll be able to privately tell you exactly what you would need to do to fully complete your own IVA.

Only in the case of a windfall or inheritance would you be expected to pay up to the full debt of £60,000, plus the fees of the IVA and statutory interest. So if you won the lottery for example.

Creditors may also consider reduced offers when an individual is struggling and their situation will not improve, and these can be lower than the full amount owed into the IVA. Changes to the terms of the IVA like this will need a "variation" meeting, where creditors are allowed to vote on whether or not to accept the changed terms.

Hi there

You do not have to be struggling for creditors to accept a settlement lump sum that is smaller than the total of your remaining payments. If you have two years to go and are paying £400 a month, you would pay £9600 on a monthly payment basis. However, your creditors might well accept a lump sum which is less than £9600 to settle early as they are being paid up front. This would include any outstanding IP fees.

If you are a home owner, any potential available equity would have to be taken into account when agreeing the sum. However the overall deal would have to be based on the creditors giving up any future claim on the property.

James Falla wrote:

Hi there

You do not have to be struggling for creditors to accept a settlement lump sum that is smaller than the total of your remaining payments. If you have two years to go and are paying £400 a month, you would pay £9600 on a monthly payment basis. However, your creditors might well accept a lump sum which is less than £9600 to settle early as they are being paid up front. This would include any outstanding IP fees.

If you are a home owner, any potential available equity would have to be taken into account when agreeing the sum. However the overall deal would have to be based on the creditors giving up any future claim on the property.

Hi,
If you have had your payments reduced through increased expenses etc. Would the final figure be unchanged or just a multiple of your remaining payments ??

Thx

Hi Moneyprobs

Has your IVA has been formally varied allowing you to reduce your monthly payments due to changes in your circumstances? If so then this may have been done on the basis that you simply pay the same number of payments or your creditors may have asked for the number of payments you make to be extended to compensate. You should double check with your IP if you are unsure.

I think you would need to find as close to the original dividend as possible, and as Liam and James have said, if you have equity release this has to be taken into account.

Thank you all for your comments. It was a hypothetical question as I've not even started an IVA yet.

It seems that there is not standard formula for a f&f, however, at least there is one good thing to come out of negative equity.

How would an equity release be factored into a full and final at the moment when it is impossible to raise equity inthe present climate?
Would it be based on hypothetical figures?

Where there is equity that cannot be released, I assume they would factor in the additional twelve payments or the equity value itself. There is nothing to say that because you cannot release it now you wouldn't be able to in three or four years. There are already signs banks are showing more appetite for lending...so a relaxing of the lending criteria can only be a few years away at most.

Our extra 12 months was factored in at the creditor meeting. We have enough equity, just won't be able to release it.

James Falla wrote:

Hi Moneyprobs

Has your IVA has been formally varied allowing you to reduce your monthly payments due to changes in your circumstances? If so then this may have been done on the basis that you simply pay the same number of payments or your creditors may have asked for the number of payments you make to be extended to compensate. You should double check with your IP if you are unsure.

Hi james,
This is a bit of a strange one, At present If I do not complete overtime every month then I would be £90 short of the required payment.
My IP has advised that I can go for a formal variation with the possibility of an extended term and they would claim 50% of my overtime, alternatively I can continiue doing overtime and make the same payments and not have to pay a percentage even if it exceeds the difference required ???

Hi, it was interesting to read thread,we are hoping to do a F&F one off settlement IVA with help from my parents,our talk with Tina re income & expenditure figure doesn't leave much(husbands wages have dropped a lot due to cut backs in the company he works for. i wasn't sure of how a figure is reached for a F&F,the thread gives me a better idea of what we'd need(i've been worrying about it as my parents are retired).

we haven't got any equity,the news said house prices are set to fall even lower over the next year. it was depressing to realise how the value of our home had fallen. i can't ever remember times being as hard as they are at the moment.

finding it very difficult with visitors staying &creditors ringing.