I have an IVA that was a total debt of £12,000. The terms of my IVA was to pay £150 per month over 5 years at a total of £9,000 and the rest written off. I have been paying it for 1 year now.
I have just been made redundant and am soon to receive a redundancy sum of around £6,000. I have also found another job immediately so as I understand I need to pay the entire amount to the IVA company (Hanover Insolvency).
I tried to query with them (though the answer is as clear as mud) if I get paid £6k (the figure is nearer £7k minus tax so I don’t know what I will exactly get until it hits my back account) will the money get paid off the IVA agreement (£9k) and shortened or will it be paid off the entire debt (£12k) and I still have to pay the IVA agreement for the next 4 years? They couldn’t comment until I give an exact figure. Whether they class it as a windfall or whatever else - no comment.
I’m really at a loss as to what to do as surely if I end up paying the entire debt (which is fair enough) AND the full 5 years on top...... I may as well let my IVA fail and attempt to come to an agreement with the debtors directly which will ultimately mean I pay the full debt anyways and get to keep my redundancy payment (which I really could do with for housing) as opposed to be paying more than the total debt into my IVA agreement? And if the debtors don’t come to an agreement (I reckon £100 each for both of them was substantial) and I’m made bankrupt it’s on my file less than the IVA is anyways???
Have I got something wrong here? Can anyone enlighten me on this situation? Many Thanks!
Hi Jules -- you have got it all wrong I am afraid! During an IVA you always owe the full amount of debt, plus fees and possible statutory interest. It is only at the end that anything unpaid is written off, So, they will take the full redundancy payment and IVA payments will continue until the end or until you hit that magic figure above (full debt etc).
If you go bankrupt -- or they make you BR, they will take the redundancy payment anyway and make you make payments for three years on top. The 6 year clock will also be reset and your files trashed to 6 years from the date of BR.
Knowing that you are trying to deprive the creditors of the redundancy payment will not make them amenable to assisting you further and enforcement could be made against you. They will also add back lost interest and charges.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
The 12k is a arbitrary figure arrived at by multiplying the amount of payments over 60/72 months and isn't your full debt, fees and interest so you need to totally forget about the 12k as a total, it is the minimum dividend that your creditors agreed to in the initial proposal. You will owe the full debt plus fees and interest during the period of the IVA. It is only at the final stage of the IVA that the outstanding amount is written off, If you pay more than the initial proposed dividend then all is good for your creditors.
Last Payment made 04/12/14. Completion Certificate 25/7/15. IVA company GT. No Issues
Foggy wrote:Hi Jules -- you have got it all wrong I am afraid! During an IVA you always owe the full amount of debt, plus fees and possible statutory interest. It is only at the end that anything unpaid is written off, So, they will take the full redundancy payment and IVA payments will continue until the end or until you hit that magic figure above (full debt etc).
If you go bankrupt -- or they make you BR, they will take the redundancy payment anyway and make you make payments for three years on top. The 6 year clock will also be reset and your files trashed to 6 years from the date of BR.
Knowing that you are trying to deprive the creditors of the redundancy payment will not make them amenable to assisting you further and enforcement could be made against you. They will also add back lost interest and charges.
Hi Foggy! Thanks for the reply!
Sorry if I have not made myself clear, i was trying to clarify if I pay them the redundancy and complete the 4 years left of the IVA then I will have paid more than the initial debt (I will have paid £9k plus given £6k redundancy so will have paid £15k when I only had £12k debt to start). So ultimately they should shorten the IVA until all my payments hit £12k (plus fees and interest etc) is what you’re saying? I will also receive sizeable annual bonuses in my new job and therefore they would shorten the term also? As I’m getting confused reading different things that they take the money but I still have to pay the full 5 years of the IVA?
Jules -- I am afraid it is all as clear as mud ! They do not make these things easy !! The point of an IVA is to pay back as much as possible during the agreed term, not just the agreed payments ( which are a minimum expected return, not a set figure). During the IVA you owe the lot : full debt, fees and possible statutory interest. When you hit the agreed term anything unpaid is written off at that stage. If you pay in that figure before the agreed term the IVA will end early.
On a £12k debt you are looking at paying roughly £16k plus statutory interest (sometimes this is excluded) at 8% per annum on the reducing balance. On the figures that you have given you have paid in £1800 so far .... add in, say £6k redundancy during year two and 12 more payments ... at the end of year two you would have paid in around £9,600 --- let's say £10k with a bonus payment thrown in. At the end of year three another £1800 plus, say a £200 bonus, so you have paid, so far, £12k. Year four, same again: £1800 in regular payments and £200 bonus, you will have paid in £14k --- if the same is repeated in year five, by the end you will have paid in £16k and they will write off around £2k in statutory interest.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
Foggy wrote:Jules -- I am afraid it is all as clear as mud ! They do not make these things easy !! The point of an IVA is to pay back as much as possible during the agreed term, not just the agreed payments ( which are a minimum expected return, not a set figure). During the IVA you owe the lot : full debt, fees and possible statutory interest. When you hit the agreed term anything unpaid is written off at that stage. If you pay in that figure before the agreed term the IVA will end early.
On a £12k debt you are looking at paying roughly £16k plus statutory interest (sometimes this is excluded) at 8% per annum on the reducing balance. On the figures that you have given you have paid in £1800 so far .... add in, say £6k redundancy during year two and 12 more payments ... at the end of year two you would have paid in around £9,600 --- let's say £10k with a bonus payment thrown in. At the end of year three another £1800 plus, say a £200 bonus, so you have paid, so far, £12k. Year four, same again: £1800 in regular payments and £200 bonus, you will have paid in £14k --- if the same is repeated in year five, by the end you will have paid in £16k and they will write off around £2k in statutory interest.
Ah that makes a lot more sense now, thank you so much for clarifying!
