What would you suggest

[d.hd]

Hi, I'm currently in a lot of debt and i'm trying to decide whether bankrupcy or an IVA is most suitable for me. I owe circa £22000 in unsecured loans, £20000 to my parents and £16000 to the SLC.

I'm working full time and have about £250 a month disposable income at present, although I'm getting promoted shortly and this will lead to a payrise of around £5-7000 per year, so this disposable income is likely to increase.

Can my parents debt be included in an IVA? Should I include the SLC, as I've read they are likely to reject and as I owe more than 25% to them it should be better to leave them out.

I should be OK with an IVA, but i've got no real assets (renting at the minute and my only item of value is a car which is only worth around £500), so i'm not sure whether it would be better to just go bankrupt, as this would clear my debts sooner.

Is the bankruptcy only on my credit file for 6 years? Do I have to declare it after this point? What would you suggest is the best course of action in my situation? Thanks in advance for any help

[MelanieGiles]

Hi dhd and welcome to the forum

I am assuming that your debts are £58,000. The Student Loan company are likely to reject and IVA, and they hold 27% of the overall votes, so this is probably not an option, and student loans can also not be abandoned under bankruptcy proceedings. Are you paying anything back to the loan yet, and if not I assume that you will be with your forthcoming payrise.

It may be possible to propose an IVA by leaving the student loan outside, but these only generally work if you are already making student loan repayments, and of course this will have to be disclosed to the remainder of your creditors for them to assess whether they are happy with such preferential treatment towards one creditor.

Your parents debts should be included in any insolvency proceedings you choose. As you have no assets of real value, then bankruptcy is an option which does remain on your credit file for 6 years - as does an IVA. Only you can really choose the best option for you, but bankruptcy brings an end to the debt pressure at a much early stage than either an IVA or DMP.


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

[d.hd]

Hi Melanie, thanks for your advice on this.

I am paying back some of my student loan, as i'm earning over the threshold, although this is only around £15 a month at present.

What's the difference between an IVA and bankruptcy in regards to overtime/payrise/bonuses once they've started? I'd read that with an IVA you should be able to keep 50% of any extra you earn, but i'm not sure if this still applies with bankruptcy. The reason I ask is I get a pay review/rise every 6 months, which is approx 2-5% increase, and we also get a Christmas bonus, which has been over £800 the last 2 years, so this could account for a lot of my disposable income.

I wasn't aware the money I owed my parents could be included in my bankruptcy, which is a good, as this was the main thing which was swaying my decision to an IVA.

My only concern with bankruptcy is in getting a mortgage after the 6 years has passed, as an IVA would be cleared off my credit file after this time, but some mortgage companies ask if you've ever been bankrupt. I presume I'd still have to declare this even after the 6 years have passed.

Thanks again for your help with this

[MelanieGiles]

Hi again

In bankruptcy, your disposable income will be assessed at the beginning of the year to see whether you can afford to make ongoing payments under an Income Payments Arrangement, and if so this will last for three years. You are duty bound to keep your Trustee appraised of additional earnings, but in reality this is rarely checked.

In bankruptcy, your creditors may not received any repayment of their debt, so the position regarding your parents loans is somewhat academic. As you will receive your discharge from bankruptcy after one year, you can then seek a mortgage, but expect to pay a higher rate whilst the bankruptcy remains on your credit file for the six year period.

Hope this helps.

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