Hi. I'm seriously considering pursuing an IVA and I have a few questions. I am married, with a joint mortgage and a reasonable amount of equity in the house.
All of the debt is in my name. I earn quite a bit more than my wife and pay quite a bit more in terms of expenses. We have just had a baby and my wife is now on maternity with a reduced income.
So here are my questions:
When it comes to negotiating what is affordable, will they take into account my current circumstances (my increased expenses due to my partner's reduced salary)?
Will they try to argue that my wife has benefited from the debt in any way and therefore is liable to contribute to the IVA?
As well as being employed full time, I also have supplemental income as a sole trader. However this income has really only been maintained to service my debts. It's not guaranteed and it is something I don't really want or have time to do (less so now I have a child). Will my prior additional earnings be taken into account during the process?
Is there anything I can do to help ring fence my partners credit rating. When the IVA is closed, it may be that we need to apply for a mortgage in her name and I'd like to protect her as much as possible from this situation.
Even after the IVA market has been removed, I understand that lenders can hold their own records indefinitely. I still have available credit. Would it make sense for me to consolidate my debt prior to pursuing and IVA? Would it be better to deal with two lenders rather than - say eight? Common sense suggests I will alienate fewer lenders in the long term, but securing an agreement may be more difficult with fewer lenders at the table? Is this faulty logic??
Finally, will my spending habits in recent months affect the lenders decision to agree or not? There have been some fairly heavy home improvement costs. Will this have any bearing on my ability to secure an IVA?
When it comes to negotiating what is affordable, will they take into account my current circumstances (my increased expenses due to my partner's reduced salary)?
They normally apportion expenses on a pro rata basis -- if the solvent partner refuses to divulge details they will assume 50/50
Will they try to argue that my wife has benefited from the debt in any way and therefore is liable to contribute to the IVA?
Some do -- particularly the "IVA Factories", especially the so called charity firms often recommended by creditors.
As well as being employed full time, I also have supplemental income as a sole trader. However this income has really only been maintained to service my debts. It's not guaranteed and it is something I don't really want or have time to do (less so now I have a child). Will my prior additional earnings be taken into account during the process?
If you stop the sole trading before the IVA starts it will be ignored. I was a sole trader, part time, on top of my PAYE job and the income from this was treated in the same way as ocassional overtime. HMRC will, however be a creditor for the current years tax. But, your IP might work around this.
Is there anything I can do to help ring fence my partners credit rating. When the IVA is closed, it may be that we need to apply for a mortgage in her name and I'd like to protect her as much as possible from this situation.
Disassociate yourself financially ... no shared accounts at all. However, the joint mortgage will prevent this.
Even after the IVA market has been removed, I understand that lenders can hold their own records indefinitely. I still have available credit. Would it make sense for me to consolidate my debt prior to pursuing and IVA? Would it be better to deal with two lenders rather than - say eight? Common sense suggests I will alienate fewer lenders in the long term, but securing an agreement may be more difficult with fewer lenders at the table? Is this faulty logic??
Faulty logic .... a consolidation now will mean the fewer creditors have more voting clout and could reject the IVA easier ... and be more likely to do so on the basis of too recent lending.
Finally, will my spending habits in recent months affect the lenders decision to agree or not? There have been some fairly heavy home improvement costs. Will this have any bearing on my ability to secure an IVA?
Spending habits in general won't .. although high lending might. It will help if the spend is for reasonable projects, rather than an Aston Martin or gambling.
You need to speak to a few firms, as they do all approach things differently, and compare advice. The IP will not proposa an IVA he / she thinks will be rejected.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
I have another question. Our mortgage deal is up for renewal in June, so I'd like to be able to keep struggling on and try to get a new deal secured before any of this plays out. During that time, any sole trader work I take on... should I use these chunks of money to pay down debts, or stockpile it to use as an upfront payment to my creditors as part of any 'deal'. Should I just follow the standard practice of paying down the highest APRs first? Should I pay it off my mortgage, given that my share of any equity is unlikely to come close to covering my debt?
Also, I'm wondering what constitutes a reasonable period of time between spending and an IVA? Let's suppose I've spent/borrowed 8k on home improvements over the past couple of months. If I cease any further borrowing, make a few sizeable payments - say 4 or 5k - on top of my monthly commitments between now and June, will this stand to benefit my chances of them agreeing to a deal?
It sounds quite callous to be strategically planning insolvency 8 months from now - and I appreciate it might not sound like I need to file for an IVA, but my debt levels are very high indeed and I'll simply be treading water, regardless of how many payments I make.
Difficult to say what the best way forward is going to be. Personally I would stop spending / borrowing now. Save up a modest emergency fund ( only a few hundred, or it will be sucked into the arrangement as an asset) and start paying off the highest APR loans. But I would speak to an IP now, although the IVA is still on the horizon, you can see it coming --- get professional answers to these queries and start laying the foundations. The IP might be able to say which lenders are likely to be the most awkward and you could then work on reducing their voting power (although they could still swing the result if others don't bother to vote -- again and imprecise science).
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
