IVA Information

Get expert opinion. This is the place for new questions to be posted.
14 posts Page 1 of 1
User avatar
kerry267
Posts: 8
by kerry267 » Mon May 14, 2018 6:07 am
IVA applicant has debts of approx £30000 owing mainly to HMRC with a bankruptcy petition against them, debtor is expecting cash injection of £39,000 imminently from a deceased spouse estate payout as well as pension payouts £4255.19, Monthly pension payments £310.12 per month.
Do you think a debt management scheme would be a good option?
An IVA is agreed, bankruptcy is annulled, IVA includes the estate payout and pension. IVA fees expected to be £5500.
1 month later the £38,000 cash injection is paid to the supervisor. Would you expect the debts to be paid off immediately? or would you expect the IVA to remain active awaiting the pension to be included?
what should be the priority for paying the creditors?
in such situations can an IVA be fulfilled before the 5 years?
User avatar
Foggy
Forum Expert
Posts: 26093
Contact
by Foggy » Mon May 14, 2018 7:06 am
The debts will be paid off according to the schedule agred in the proposal and will be divided amongst the creditors pro rata. If this is a lump sum IVA it will end as soon as the agreed funds are paid in (allowing a 6 month admin period). If it is a standard 5 or 6 year term IVA it will continue with agreed monthky payments until such time as the term ends or the full debt, plus fees and possible statutory interest is paid in.
This is all dependent in the individual terms agreed within the proposal, which can vary.
User avatar
kerry267
Posts: 8
by kerry267 » Mon May 14, 2018 7:37 am
Thanks for the info.
I can't understand why the insolvency practitioner didn't do a lump sum IVA? They knew the lump sum payment of the estate would probably cover the debt but they made the IVA 5 years and included pension paid in monthly.
We were not given lump sum option or debt management plan option.
When they recieved the lump sum they paid their own fees of £9000 Nominee and supervisor. But did not make any payment to the creditors HMRC.
Would you say this is negligent?
User avatar
kerry267
Posts: 8
by kerry267 » Mon May 14, 2018 8:01 am
Also the insolvency practitioner didn't negotiate any reduction in debt and didn't include any details of schedule of repayment of debts in the debtor proposal (which was accepted by HMRC).
The only information it included was that they would prioritise their own fees above creditors :shock:
User avatar
Lisa Thomas
Industry Expert
Posts: 6695
Contact
by Lisa Thomas » Mon May 14, 2018 8:38 am
Is the debtor already Bankrupt as you imply in your initial post?
User avatar
kerry267
Posts: 8
by kerry267 » Mon May 14, 2018 8:55 am
He was bankrupt. But insolvency practitioner annulled it and put IVA in place. Subsequently The IVA failed because they couldn't get pension paid in directly. They have since successfully petitioned again for bankruptcy to get the property.
But my question is do they have duty to make a fair proposal and pay the creditors?
They received a lump sum of £39000 one month into IVA which would have paid off debts especially if they negotiated interest reduction.

They seem to be the main profit on this situation. They prioritised their own fees and systematically applied each month time cost fees. Fees now £30000+
User avatar
Foggy
Forum Expert
Posts: 26093
Contact
by Foggy » Mon May 14, 2018 9:10 am
Fees are usually prioritised, with the agreement of the creditors and then dividends paid according to the agreed schedule ( often quarterly, 6 monthly or annually). The IP is not there to negotiate on the debts.

I do not understand the need to have made pension payments diectly, it is usual for them to go into your bank, as with any otherincome, and for you to then transfer the funds by dstanding order or direct debit.

They can only charge fees as agreed -- check your papwerwork for the agreed terms.
User avatar
Lisa Thomas
Industry Expert
Posts: 6695
Contact
by Lisa Thomas » Mon May 14, 2018 9:37 am
I presume as the Bankruptcy was annulled all of the Bankruptcy costs were paid off in full?

Assuming yes then would the £39k have paid off all the IVA creditors, interest and IVA costs and was it paid?
User avatar
kerry267
Posts: 8
by kerry267 » Mon May 14, 2018 9:55 am
Lisa Thomas wrote:
I presume as the Bankruptcy was annulled all of the Bankruptcy costs were paid off in full?

Assuming yes then would the £39k have paid off all the IVA creditors, interest and IVA costs and was it paid?

Apart from the fact they billed for £9000 fees when they quoted £3500.
Debt total was £36150 including their fees. They pushed up the fees and prioritises themselves. Buy that still leaves £30000 to give to creditors.
User avatar
Lisa Thomas
Industry Expert
Posts: 6695
Contact
by Lisa Thomas » Mon May 14, 2018 10:25 am
Was their quote fixed or an estimate?
User avatar
kerry267
Posts: 8
by kerry267 » Mon May 14, 2018 10:28 am
Lisa Thomas wrote:
Was their quote fixed or an estimate?

Unfortunately estimated
User avatar
Lisa Thomas
Industry Expert
Posts: 6695
Contact
by Lisa Thomas » Mon May 14, 2018 11:09 am
Unfortunately creditors approve the fee.

It will almost be academic now that they have been made Bankrupt again as they will have to find funds to cover the shortfall to creditors, interest and the Bankruptcy costs in order to annul it again.
User avatar
size5
Industry Expert
Posts: 3080
Contact
by size5 » Mon May 14, 2018 5:13 pm
A full and final settlement looks as if it was never an option, if I have read the posts correctly.

The only way to annul a Bankruptcy that has already been paid for by creditors is to give them a better return that they would get in Bankruptcy. This especially applies to HMRC, who are very patient in waiting for their payout where property is involved. HMRC don't like DMP's at the best of times, and would never agree to one in these circumstances.

A lump sum one off payment, minus costs, would give them a lesser return so was never going to get accepted. The logical way is to pay the lump sum, plus a monthly payment as well to pay 100% back, plus all costs. Never an ideal scenario as a starting point, but had it had worked then the property was safe.

The cost of I.P. IVA fees are also far less than the cost of I.P. fees when acting as Trustees in a property case. An outside I.P. appointed as Trustee will almost certainly sit on the property for 2 and a quarter years with potentially very high ongoing fees during that period, and their fees are preferential as well. This will leave much less in the pot when the asset is realised, if anything at all.

All in all, an IVA to annul a BR is perfectly feasible, I've proposed hundreds, but the key is to get it right at the outset or there may be a terrible price to pay later on.

Regards.
User avatar
Lisa Thomas
Industry Expert
Posts: 6695
Contact
by Lisa Thomas » Tue May 15, 2018 8:16 am
One of the biggest costs in BKY is the £6k \Secretary of State fee that is applied to all asset realisations (unless 3rd party funds are used to source the lump sum payment)
14 posts Page 1 of 1
Return to “Ask IVA Forum and Industry experts”

Who is online

Users browsing this forum: No registered users and 8 guests