What a mess

[rainbow210801]

Hi,
I've been reading this forum for a couple of months now. Both myself and my wife owe in the region of 100K each (unsecured debt) to various creditors (in the region of about 15 creditors in total - Most high street banks and Credit card companies). This sum has built up over a period of many years whereby we ended up using credit to pay for credit over numerous years. As we both have professional jobs our credit rating was excellent. We got to the point about 3 months ago of accepting that enough was enough and we had to do something about our situation. Lendors to the present day are still offering further loans and credit but taking further credit would only add to our debt.

We have spoken to two companies. One seamed more geared towards the DMP and the other towards an IVA. We opted for an IVA application as we were advised that with DMP and the number of creditors we have debts with, it would be difficult to get all of them to freeze interest. We have not rec'd our draft proposal and have been promised something in the post over the last two weeks. The IVA application process started in June. Our IVA company have verbally recommended we pay in total £900 to our creditors a month with a possible release of equity from our house in the fourth or fifth year as a proposal after looking through our income and expenditure. We have not had to pay any charges for the IVA proposal and assume the IVA company will add there costs to our debt at the end of the process.

Both our salaries total in the region of £67K. We pay about about £1400 towards our mortgage a month and the remainder of our income goes on bills, shopping for our two children and paying off debt or should I say interest on our debt.

Bankruptcy has not been proposed I assume because my partner works in financial services and my role is also linked with financial applications. I would prefer the IVA route as I believe this will enforce all creditors to legally accept a reduced payment and help freeze interest and late payment charges etc, thus allowing us the reduce our debt.

My only concern being that reading the forum our debt is rather large and I am concerned that bankruptcy will be favoured by our creditors.
At present we have about £80K equity in our house.

Please let me know your thoughts on the above. Is the payment proposal likely to be accepted given the debt we owe.

[MelanieGiles]

Why would your creditors wish to see you made bankrupt and then not receive anything - or at best very little? I am sure that they will support and IVA any day.

I wonder if you have considered whether it is better to address your equity at the outset of the arrangement? This would deal with that up-front and not leave a black cloud hanging over you until the end of the IVAs. I assume that the IP you have chosen to represent you has advised you of the creditors general wishes with regard to equity release - but I always prefer to do this up-front if possible. Depending upon the amount you could borrow - usually based upon 85% loan to value - you would have to see what effect this would have on your ability to fund ongoing payments, but of course you would have the benefit if five years of repayments rather than potentially taking out a larger re-mortgage at the end of the arrangements.

You do not say that you have been advised much about the equity issue - what has your IP mentioned about this very important are? Can I say at this stage that it is more than possible you will be faced with the equity modification - in fact these days it is an absolute certainty.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

Appoint me as your IP:
http://www.melaniegiles.com/ivaEnquiry.asp

[catullus]

On the face of it Rainbow, I would say that you have a good IVA in the making.

Motive (good reasons for not wanting to be made bankrupt) and level of offer (potentially sounds OK)In addition I think that the advice that you've been given about the advantages of an IVA over DMP are probably right for you.

I would strongly recommend that you consider carefully any proposed income and expenditure account that is presented to you by your IP and ensure that it represents reality. In addition also insist that the I and E is based on a sustainable level of income.

Creditors will hardly ever push you to bankruptcy and, if they vote against your arrangement, will asssume that you will enter a DMP. You've nothing to lose, from the facts that you have given, in proposing an IVA, in the circumstances.


ps. you should also consider converting to an interest only mortgage during the course of the IVA otherwise you will only be adding to the equity that you will have to refinance at the end of the term.

[rainbow210801]

My IP is Grant Thornton who have said very little if anything about the equity release. Maybe all will become clearer once the proposal s rec'd. I was on a Interest Only Mortgage already and was advised by GT to give our hire purchase cars back to free up further capital.

I thought with bankruptcy. You still make payments for three years after being made bankrupt. In which case creditors would receive all funds from sale of the house and we would continue to pay creditors for three years. Which is why I thought creditors prefer bankruptcy over an IVA as they receive a larger proporation of funds sooner.

Also in an iva arrangement could the creditors insist on the sale of the house in the first year or before the IVA is agreed Or remortgage in the first year or remortgage straight away as a condition of going into an IVA.

[MelanieGiles]

Make sure you fully understand the implications of the treatment of your home within this IVA. Have you had a full interview with the IP yet, as this is one of the most important things that should be discussed with you.

It is unlikely that creditors will insist on a sale, but you need to fully understand the implications of equity release, which is why I prefer to see it address up front where possible in my own clients' proposals.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

Appoint me as your IP:
http://www.melaniegiles.com/ivaEnquiry.asp

[rainbow210801]

Hi

We're still waiting for our proposal but apparently it is going to be sent out tomorrow - its been 8 weeks now since we sent the IVA company all of the info that they requested so we're both quite surprised it's taken this long.

Hopefully it will come through tomorrow.

Today though apart from all of the other letters we came home to 1 from a solicitor on behalf of a lender, - it's a notice of termination and they're asking for the full balance back within 7 days - i owe them the least amount and havent yet mentioned iva to them so i'm surprised they're doing this. Is this normal? I'm worried because I don't know what they will do next as I can't pay the full balance off - i don't want bailiffs turning up.

Also should it take this long to come up with a proposal?

The part we're not sure about is if there is an equity release in year 4 then obviously our mortgage payments will increase, but we'll still have to make our payments to our IVA so how will this be achieved?

[catullus]

Don't worry too much about the termination letter. The chances of further action before the IVA creditors meeting are minimal.

8 weeks is a long time if you were quick in dealing with the questions from the IP,

If you are rquired to remortgage the terms of the IVA will be either that the IVA will come to an end at that point or your payments in to the IVA will be reduced by the extra mortgage payment, so don't worry on that score.

[lily]

I am also a debtor not an expert, just wanted to say that the letter you have had sounds like a default notice, its standard where there has been a breach of the contract. It really means very little and they usually use quite scary language. I have had quite a few. I believe the breach of the contract gives them the right to demand all of the money you owe but no actual power to get it. Only a county court baliff can enter your home following a breach of a CCJ.

Some threaten a home visit but rarely if ever send anyone out, even if they do, you do not have to discuss anything with them. These people are very good at scare tactics, just explain youre in the process of setting up an IVA.

Good luck with everything.

lily

[rainbow210801]

thanks both - it is reassuring to read your responses.

We have been quick with our info, in that everything that was rqstd was sent to GT 8 weeks ago and they havent had to come back to us for anything. I guess we should find out today. After we agree the proposal do you know what happens next?

[mikebdomain]

I have to seriously agree with Melenie about your need to consider remortaging up front to raise equity for the IVA.

If you were to remortgage now whilst your credit rating is still good, you could obtain a three or five year, very good fixed rate. If you wait until the fourth year of your IVA, you are going to be rate ‘loaded’ for your credit rating.


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[rainbow210801]

Had my proposal sent to me finally. Constant phone calls to my IP.Spelling and grammar appear quite poor in the proposal. The return to creditors appears to be 29p to the £. With remortgage offer of 15K at end of year five.
29p to the £ appears quite low from what I have read on this forum for a approval.
What do you think

[MelanieGiles]

I've responded to this on your other post!

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp