asking for a 3 month break

[h.o]

Hi everyone, I have recently joined the forum after viewing for a month or so and now I have a question that I need to throw into the mix!

My wife and I each have an IVA and our total monthly expenditure on them is around £860. The IVA's have been in place for 18 months and running smoothly but we have now reached a difficult point. We had a baby towards the end of last year and my wife's maternity leave is about to run out.

If she returns to work every penny she earns (bar a very small amount) would have to go on childcare. If she stays at home we have lost her income and she was the major earner. When we were initially advised we were told that 6 months is built into the IVA to cover "difficult" periods but at the end of the day if the IVA fails then we would be made bankrupt. I called my IP to discuss our options as I understood that it may be possible to renegotiate our IVA's to a lower monthly amount and they agreed this might be possible, but the creditors could add up to 2 years onto the original agreement to compensate for lower payments. They also said if our income increased again in the future we would have to pay an increased amount for any additional period that had been arranged. I said but what if the IVA fails? And was told that I may not be bankrupted at all and that the creditors can then chase me for the full outstanding amount plus charge interest from the date the IVA was arranged. To say I am upset and disheartened is an understatement.

My only immediate thought for a course of action is to ask for a 3 month break which should allow me sufficient time to find additional employment and to somehow try and make our existing arrangement payments. Any other suggestions?

For a bit of background the debt was split about 70/30 in my favour as my name was on most of the bills, we rent and have zero assets.

[ivoriva]

You could ask for a temporary halt in payments whilst you try to improve your financial position. Check your proposal for how many payments you are allowed to miss, it is normally 3 months these days. These missed payments can be added on to the end of your original repayment term.

You could also ask your IP to call a variation meeting where your creditors will consider a lower offer on the basis of your change in circumstances.

If the IVA fails, you are always free to bankrupt yourselves, though this costs nearly £500 each to do. If you do that, then obviously you will be protected from your creditors. If you fail the IVA and you arent made bankrupt, your IP is right that the creditors can pursue you as they would of done before the IVA was in place. I think interest that can be applied is 8% per year.

[MelanieGiles]

Hi hoario

I would suggest that you go for a variation based upon reduced payments but over the same time period. You have the perfect reason to ask for this, and from my experience I do not feel that creditors will necessary need to see an extension of time. Discuss this through with your IP, and remember it is your variation and not theirs, so if you are making a feasible offer insist that it is put forward for you.

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

[Adam Davies]

Hi
Just to agree with Melanie on this one.
work out your new disposible income and insist that your IP proposes a variation to allow your creditors to vote on this.I,m sure that your creditors will be sympathetic.
Regards

Andy Davie
IVA.co.uk Spokesperson and site manager
(aka Neverending)

Please check out my blog: http://andydavie.blogs.iva.co.uk

View my profile here:
http://www.iva.co.uk/andy_davie_profile.asp

[h.o]

Thanks for your input, my only worry is that any variation would see me offering significantly lower payments, possibly somewhere between £200 - £300 a month.

Do you really think creditors would consider this offer reasonable?

I'm not sure if it would make much difference but 50% of my creditors (possibly more) have "sold" our debt to another company of Solicitors/Debt Recovery people (Eversheds?) who will be managing the money I owe from now on. Is that likely to make getting a variation more difficult?

[ivoriva]

If debts have been sold on, this can often work for you rather than against. As it is likely the debt was sold on for a lot less than you owe.

Is there anyway you can arrange for a full and final payment, ie through release of equity or money from relative? Considering the change in circumstances, & the fact your debts have been sold on, you may find a considerably reduced F&F offer based on your original proposal a possibility...

[h.o]

Hmmm...interesting!

We will not be able to offer anything at this point but may be able to get our hands on £8000 later this year or closer to £20,000 this time next year.

On the assumption that the IP has been paid in year 1, the creditors are due approx. 44 more payments @ £860 (£37840). With a change in circumstances that could see the IVA fail would creditors really swallow an offer as low as £8000? How high does it need to be?

[ivoriva]

Well, Im no expert, but 20k sounds a whole lot more reasonable than 8k. But then, if you got a variation approved at a rate of £300 p/m for another 44 months that only brings in a further £13200 anyway.

I would in the short term try for a variation, as the experts have suggested. As you do have valid reasons. Just remember it is your variation request so make sure it is done taking all your new I/E into account, including all the costs of the baby.

If your variation is approved, then a bit further down the line surely 10k or so as a final settlement would be welcomed? But then, as I say, Im no expert - just another debtor...

[MelanieGiles]

A lump sum now, with reduced payments of £300 could well work. You now need to speak to your own IP who has far more detailed knowledge of your case.

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

[ivoriva]

Ah ha, well done Melanie, I've learnt something new today that you can do a lump sum and reduced payments. That is handy to know, for future reference.

So hopefully, Hoario - you now have a very viable solution, good luck with your IP...

[h.o]

Right, I have spent some time making more accurate calculations and the outlook is bleak.

Using the Budget planner from Money Saving Expert and our bank statements I have just spent some time creating a much more accurate picture of our finances now we have lost an income.

Based on my current calculations we will have a monthly deficit of £153.74.

If we can obtain Housing Benefit this would equate to a monthly surplus of £136.27 (assuming my local council's online calculator is correct).

Either way things do not look rosy.

[ivoriva]

Sorry to hear that Hoario. Based on the figures, maybe you would be best off going for BR. Does the deficit figure include repayments to your IVA, and if so at how much per month?

I believe you can stop paying your IVA at anytime and after 3 missed payments it will automatically fail. You could use the 3 missed payments to live on and hopefully scrape together the br fees?

Do you have anything to lose in BR, in regards to your jobs or assets?

[suzz]

Hi you mentioned claiming housing benefit, what about trying for council tax, child tax credit and working tax credit, just a suggestion.

sue

[h.o]

Does the deficit figure include repayments to your IVA, and if so at how much per month?

Do you have anything to lose in BR, in regards to your jobs or assets?

No it doesn't include any IVA repayments, which is why I would have to look at extra employment.

I work in Finance (no, really), if I go BR I become unemployed! We have no assets.[:0]

[h.o]

Hi you mentioned claiming housing benefit, what about trying for council tax, child tax credit and working tax credit, just a suggestion.

Hi Sue, all other income such as Tax Credits and Child Benefit I have included in my calculations. [:(]