IVA vs Bancruptcy

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Cathy Lockwood
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by Cathy Lockwood » Tue Mar 20, 2018 9:42 pm
Hi all,

I am £30,500 in debt. My income is £15,545 per annum and my husbands is roughly £6200 per annum.

My job current started in October so we currently receive £520 in tax credits per month, mainly to cover childcare costs of £370 per month.

We also receive £82 child benefit. My husband is in the final year of his own IVA for debt accrued before we met, for which he pays £80 per month.

As of April our tax credits will go down to roughly £320 because of the full yearly wage being taken into account. If we are very frugal our outgoings will leave us with approximately £150 per month which we could put into an IVA.

If my husband takes on more hours we would have to take on more childcare and get a dog walker, and of course pet allowances are very small on an IVA.

My parents are buying a second house to rent to us, we would essentially be paying off an interest only mortgage for which they have a duration of seven years (they are in their 70s), and then my husband will look to get a mortgage for a longer period - we are currently in social housing. My husband would hopefully be in a position to get a modest mortgage at his point because our daughter will be older so he can take on full time hours.

I applied for an IVA in September when I was on part time hours and they accepted my proposal to pay them £100 a month with modifications. The modifications were that the IVA would be 6 years, and that I sought full time hours, and that when I got full time hours that 100% of any extra money would be put into the IVA. I was told by the provider that they would take into account expenses incurred for meals at work, fuel, car maintenance, childcare etc. However when the paperwork came through I discovered that they had only allowed for childcare and fuel. I also discovered that I would not be allowed to make pension contributions over 5.3%. My employer's pension scheme is set at 5.4% which means I would have to opt out of my pension for 7 years.

On the basis of this I decided that I would allow the IVA to fail and apply for bankruptcy when it did. For some reason I thought that you were able to pay in installments for bankruptcy AFTER, not BEFORE the application was made.

I am now in a situation wherein it's going to take me four months to make an application for bankruptcy because of the fee, but I am worried that the creditors will make us pay unaffordable fees if I enter into an IVA, and that I will not be able to pay into the work pension scheme. If I went for bankruptcy would the creditors take me to court during the next four months? Also my car is essential for work but is currently valued at £1075 (with the milage going up quite a lot per month due to our remote location and the nature of my job in four months time this is likely to be more like £1025). Any help would be greatly appreciated.
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Foggy
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by Foggy » Wed Mar 21, 2018 7:55 am
If you go BR you might well end up with an arrangement to make payments, at a similar level to those in the IVA, for three years (yes, still shorter than under the IVA terms), which is another factor to bear in mind. I assume that you declined the amendments proposed at the creditors meetng and that the IVA didn't actually start (rather then, as you say, "allowing it to fail" ). As reagrds to punitive fees -- the creditors can only charge those fees and penalties as agreed in the loan arrangements when you took them out ( or subsequent amendments). They will add back any missed interest ( and that interest is, of course, compound, so you will be paying interest on the interest! ). They could also levy late payment charges is you are / have been late with any of the payments. So the debt could increase in the meantime, but this would all be absorbed into the BR arrangement. The fates of car and pension would be up to the OR to consider.
Cathy Lockwood
Posts: 3
by Cathy Lockwood » Wed Mar 21, 2018 5:33 pm
Thanks for the reply Foggy, no the IVA did start but I never made any payments into it. I made the mistake of taking what they had said to me over the phone regarding the modifications at face value, and then signed online, skin reading the documents. Whe it came through in paper I reread through the modifications and noticed that they hadn't mentioned the allowaces discussed over the phone, and I brought this up in an email discussion with the IVA provider, who took over three weeks to get back to me and didn't clarify, so I didn't ake any further payments, particularly after starting my new position and discovering the situation with the pension. It is my understanding that if the amount paid into a pention is not at the discretion of the employee then this should be allowable, but since they had included that in the underwriting I was no longer happy to o ahead.

My main concern is that if I wait four months to get the BR fees together the creditors will take me to court. Would you think this would be likely to be an issue?
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kallis3
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by kallis3 » Wed Mar 21, 2018 5:37 pm
I doubt the creditors will take you to court - it will cost them too much money.
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Foggy
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by Foggy » Wed Mar 21, 2018 6:04 pm
It is difficult to call but I doubt the creditors would get their acts together to do much in a few months. A lot would depend on the current processing times at the court. If they get CCJs granted these would be overridden by BR anyway. You have no property they could put charges on.
Cathy Lockwood
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by Cathy Lockwood » Wed Mar 21, 2018 6:56 pm
Ok thanks very much for your help both, it's very kind of you to reply :) Wibble wibble!
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