Any help and advice would be much appreciated.

[dave.m]

Hello I was hoping to get some advice.
We currently owe £86000 to several creditors the ammounts as follow

Northern Rock £30000 (together mortgage)
Alliance and leicester £8600
Alliance and leicester £6400
Virgin credit card (mbna) £7200
Natwest credit card £7500
Natwest loan £24000
Peugeot hp £2400
Argos £600
Freemans & littlewoods £200

We have been through our disposable income with our ip and have come up with £403 to offer per month. DFD advised us to part exchange our car for around £7000 and buy one for £3000, clear the hp and leave us around £1500 to put into the iva.
Our offer to the creditors would only be 25p in the pound over 6 years. We have cut back on absolutely everything that we can and I was hoping that someone could help with a few of our worries.

What are the chances of the iva being accepted on such a low offer back in the pound. Would they take into consideration that we may be able to remortgage in 4 years and maybe put a lump sum into the iva as there is only around £10000 equity in there at the moment and that when our son starts going to preschool my partner would be able to pick up some extra money. She originally started a full time job and we put our son in nursey thinking that we could claim upto 80% of the fees back. We were told that we earnt too much to be entitled to claim back any child care costs (around £30000 a year between us)
Because we owe so much would the lenders be more likely to accept an iva than to make us bankrupt as I think that any equity if any left in the house would be divided between all of the creditors, and if we paid the same £403 for two years in bankruptcy that would recieve a lot less than in an iva.
We have asked for some help from most of our creditors to see if they could restructure the debt to make it more affordable but they have not been very helpful and a&l said that after 3 months they would issue a default and maybe put a charge on the property.
Natwest said they could not help.
Our iva is ready to get the go ahead once i tell dfd that i am able to trade in the car.
I have found this website very helpful over the last couple of months and have been a avid reader and it helps to know that we are not alone in our problems.
Any help and advice would be much appreciated.
p.s Sorry my post is so long. Dave

[kezza]

Hi and welcome,

Your mortgage would not be included as an IVA only includes unsecured debts, which may be just as well as Northern Rock seem to be one of the creditors who stipulate a larger dividend. Keep your chin up and I'm sure one of the experts will advise properly.

[dave.m]

Hello Keeza

Sorry, I shold have said that we have a mortgage of £139000 along with a £30000 unsecured loan built in on top which Northern Rock call their together mortgage.

[neverending]

Hi
Your case is unusual in that DFD are proposing a six year IVA,is this so that you are not required to pay any equity ? Can you confirm
Also you state Peugeot HP as a debt but you state that you are going to trade down and clear your HP......Please confirm as HP is not usually included within an IVA.

You have a few things against you in that you are offering a very low dividend over an extended period,also and probably a bigger problem is the fact that you have Northern Rock as a creditor and they seem to have a policy of not accepting an IVA returning less than 40%[usually].
Did you speak to any other companies other than DFD and have you paid any money upfront ??

To be honest on the info given I would be very suprised that your IVa would be accepted and am even surprised that it will be proposed.

Bankruptcy would,in my opinion and on the facts given,be a better option for you and as you have only a small equity in your house it would be safe from a forced sale.

[MelanieGiles]

Hi dave

You need to ask Debt Free Direct why they think IVA's with a dividend return will be accepted by Northern Rock, who have a minimum dividend criteria generally of 45p. Yes they do occasionally accept a lower return, but in your case the return is much lower and I suggest that they are stretching the IVA to 6 years to meet the other creditors generally accepted minimum dividend of 25p in the £.

I smell a bit of a rat here with regard to the car. Make sure that you are not just trading this in to pay Nominee fees to your IP for IVA's which on paper are very unlikely to be accepted. I would be very interested to know why DFD are putting this forward.



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

[dave.m]

Hello neverending
Thanks for your quick reply.
DFD have said that it is quite likely that the proposal will be rejected and have said that bankruptcy would be the option if the proposal was refused.
I mentioned that I had seen on this forum that northern rock were wanting a highed dividend and they said that they new this but they were putting lower offers anyway as they should look at them individually.

DFD said that i should trade in the car because in an iva or bankruptcy which seem to be the only option left to us that we would be made to sell the car and replace with one worth around £3000 as we should be able to keep that to get to work.

Also by removing the hp from my expenditure free up £116 extra a month towards the iva otherwise the offer would be less than 25p in the pound.

Because there is little equity in the house at the moment and with our current salaries they said that it would not be possible to offer a remortgage in the proposal in the pound (would need to be more than 5 times current salary). They did say that remortgage and lump sum would be built into the proposal anyway just in case our situation/earnings improve enough to get a higher remortgage in 4 years.

Offering a 6 year iva also meant that we would be paying a minimum of 25p in the pound back.5 years would leave us short.

I have seen mixed reviews on dfd but I have found them to be quite helpful and upfront to us with our options.They have not asked for any fees upfront and we would not have to pay any money to them unless the iva was approved.

If we did go bankrupt would dfd arrange it for us and would they want to sell off all of our household goods. Are there items that they cannot take/sell such as our sons toys. I think that a reciever from the courts deals with everything and have read somewhere that a family member could offer a lump sum payment to settle the bankruptcy. is this true and how much would this need to be

[MelanieGiles]

I really do not see the point in putting an IVA forward that is likely to fail.

You will need to ask DFD whether they will help you with bankruptcy paperwork - I suspect not.

Rest assured that in bankruptcy, none of your household effects will be touched - unless you own anything of very high value.

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

[dave.m]

Hi melanie would you recommend that I still trade in the car as it is valued at around £6000 and how would i go about going bankrupt, would my creditors do it. how would it affect my mortgage with northern rock if i went bankrupt, i have requested that my mortgage be changed to an interest only mortgage for now.

My northern rock mortgage conditions state that the mortgage debt becomes immediately payable if a bankruptcy order is made against us or we enter into a voluntary arrangement with our creditors.

[neverending]

Hi Dave
A strange one
Why would DFD submit a proposal if they felt that it would not get agreed? They will have spent a fair amount of time on this and to not receive a payment seems very unusual.
I suppose you have nothing to lose in proposing it but i think Melanie may have spotted a way that your IP will get their fees covered,so do not pay this money in until[and a big if]your IVA is agreed by your creditors.
I am no expert on bankruptcy but can tell you this.........the days of bailiffs coming round and emptying your house are long gone.You will be allowed all items unless they are valuable and having a young family will insure that you are protected.
I believe that a family member can purchase the equity in your house for a nominal sum but have not heard of them being able to pay off your bankruptcy..........however I,m sure that a more knowledgable expert can help you here.

[dave.m]

Do you think that we would be able to keep the house or would we be forced to sell to release the equity and have to rent. I think that we will end up going down the bankruptcy route i just wanted to use up all other options first.

I will call dfd and check that we will not have to pay them any fees if the proposal is turned down just in case they are trying to be sneaky with the sale of the car.
could anyone advise me whether i should still sell my car and clear the hp and use any money left over to pay for the court fees for bankruptcy if the propasal does not go through or turned down.
I have looked at the bankruptcy site and they say that the value of the car should not exceed £2000.is this correct

[MelanieGiles]

Hi Dave - I recommend the following:-

1 Let DFD put the proposal forward, but do not pay over any money and do not agree to trade the car in unless the IVA is accepted (unlikely). Neverending is right - you have nothing to lose!

2 I have not seen this mortgage condition in a NR mortgage deed. Get a lawyer to check it out for you, as from what you are saying this will be called in the minute you are made bankrupt. If this is correct, IP's (including myself) and NR themselves are not acting upon these provisions. If you want to stay in your current property, and it seems to me that this is unaffordable, you will need to find new mortgage facilities and this will not be possible when you are bankrupt.

3 When you have verified the position regarding the mortgage, I would consider bankruptcy proceedings if the IVA fails. The creditors are unlikely to meet the costs of petitioning, so you will need to fund this personally.

And do let us know what happens. If NR accept this - the floodgates for NR proposals will be open again! Am just sorry that you seem to be being used as a pawn in a strange DFD game.

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

[dave.m]

Thanks for the advice
The mortgage debt payable immediately upon bankruptcy or voluntary arrangement is stated in my mortgage conditions 2001 section 8 . If this is correct could they take immediate posession of the property.

Section 9 states that if the mortgage debt becomes immediately payable we may do all or any of the following

1) sell the property free from restrictions in section 103 of the law of property act 1925,

2) take posession of the property (after getting any necessary court order)

3) appoint a receiver

4)exercise any of the other powers given to mortgagees by the law of the property act 1925.

5)grant, or agree to grant, leases or tenancies of the property free from the restrictions in section 99 of the law of property act 1925

[MelanieGiles]

I am going to look into this tomorrow. Has anyone else come across this provision in a mortgage deed? I will speak to Northern Rock to get their policy on this - I suspect the provision is there if they want to rely on it, but that this is rarely enforced.

Good to know about this though Dave, and thank you for drawing it to my attention. This forum never ceases to amaze me, and I can honestly say even "experts" learn something every day!

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