Would an IVA work for us

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simon609
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by simon609 » Fri Aug 17, 2018 8:15 am
Hi, my wife and have contacted Stepchange who recommended an IVA. We are trying to work out if it's likely to be accepted, and what action we need to take. We have around £78K debt over 13 creditors, Stepchange looked at our budget and believe we can repay around £682 per month. We have around £6000 assets which we could sell and a fully paid-off car worth maybe £5000. The mortgage is in my wife's name and we have maybe £30k equity. We haven't yet missed any payments to creditors, and haven't yet contacted creditors (I've been working with Stepchange for 3 days). I'd love it if anyone can help with advice to questions

1, Based on the amount of debt (~£78K) and the calculated monthly repayment (~£682), is the IVA likely to be accepted by our creditors?

2, We have a priority to pay our electricity arrears. (~£3600). I was told this can be included in the IVA, with the electricity paid off before all other creditors. This would be our preferred solution, but is this arrangement likely to cause the creditors to refuse the IVA based on the fact they would receive less overall, over the life of the IVA? If this was the case, could we offer to extend the IVA a further 6 months, so the creditors still receive the full 60 / 72 payments even after the electric arrears were paid? Alternatively, could I attempt to sell assets to clear the electric arrears and remove it from the IVA to make it more palatable to the creditors?

3, If the IVA isn't accepted by our creditors, can we renegotiate another offer, or look at a Debt Management Plan as an alternative that might be accepted? Naturally, we want to avoid bankruptcy.

4, What would our options be if both IVA and DMP were rejected by our creditors?

5, We have a couple of very small debts (£30 to one creditor, £125 to another), is it there any point selling assets to pay these relatively small debts off and therefore involving fewer creditors in the IVA?

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simon609
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by simon609 » Fri Aug 17, 2018 8:35 am
6, We have our joint bank account with HSBC. My wife has a credit card with HSBC which we are including in the IVA (~£2000). Would this affect the bank account? It currently has a £300 overdraft facility. If the overdraft facility is withdrawn we could potentially sell an asset to cover that shortfall. However if the account is likely to be frozen or closed, I'd want to move Direct Debits over to a new account before informing HSBC of our situation. Would you advise attempting to sell assets to clear the HSBC debt before the IVA meeting, or should I look into opening a new basic bank account now, to be on the safe side?

7, Are we likely to be able to keep our car? It's fully paid off and I estimate worth around £5,000. I need a car for my job as public transport cannot get me to my workplace early enough for some shifts.

8, Although I do not expect any substantial change in finances in the near future, I have Grandparents in their 90's, If I received an inheritance in the event of their death during the life of the IVA, and it was large enough to clear the entire debt, could I settle the debt at that point and end the IVA?

9, We understand that we'd be required to attempt to release equity in the house in the 4th year of IVA. At this point I think my wife would be at least 12 years into her original mortgage which I think is a 25-year loan (I'd have to confirm exact figures with her). Am I correct in understanding the repayment period of any remortgage could not exceed the original end date of the current mortgage, and that the monthly repayments of the new mortgage can not be more than 50% higher than the repayments of the current mortgage? And that our credit ratings would both be poor at the time of the re-mortgage application, meaning that we would be unlikely to be granted a re-mortgage for a 13-year loan, and if we were granted, it the monthly payments would be higher than 150% of the previous payments?

I'm sorry for the avalanche of questions but naturally we want the best possible chance of the IVA being accepted so we can move forward with the best resolution for all parties. I have not yet informed any creditors we are in financial difficulty as I was hoping to get answers to some of these essential questions first, for example where to spend any money generated from assets, and whether to arrange a new bank account before contacting HSBC in particular.

Many thanks in advance.
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Lisa Thomas
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by Lisa Thomas » Fri Aug 17, 2018 9:05 am
simon609 wrote:
Hi, my wife and have contacted Stepchange who recommended an IVA. We are trying to work out if it's likely to be accepted, and what action we need to take. We have around £78K debt over 13 creditors, Stepchange looked at our budget and believe we can repay around £682 per month. We have around £6000 assets which we could sell and a fully paid-off car worth maybe £5000. The mortgage is in my wife's name and we have maybe £30k equity. We haven't yet missed any payments to creditors, and haven't yet contacted creditors (I've been working with Stepchange for 3 days). I'd love it if anyone can help with advice to questions

1, Based on the amount of debt (~£78K) and the calculated monthly repayment (~£682), is the IVA likely to be accepted by our creditors?

There is no guarantee, it will depend on how creditors vote but mainly how attractive the IVA is when compared to the alternative of Bankruptcy.

2, We have a priority to pay our electricity arrears. (~£3600). I was told this can be included in the IVA, with the electricity paid off before all other creditors. This would be our preferred solution, but is this arrangement likely to cause the creditors to refuse the IVA based on the fact they would receive less overall, over the life of the IVA? If this was the case, could we offer to extend the IVA a further 6 months, so the creditors still receive the full 60 / 72 payments even after the electric arrears were paid? Alternatively, could I attempt to sell assets to clear the electric arrears and remove it from the IVA to make it more palatable to the creditors?

I would normally include the arrears in the IVA in the normal way with other creditors.

3, If the IVA isn't accepted by our creditors, can we renegotiate another offer, or look at a Debt Management Plan as an alternative that might be accepted? Naturally, we want to avoid bankruptcy.

Yes

4, What would our options be if both IVA and DMP were rejected by our creditors?

It you can't reach an agreement with creditors Bankruptcy may be unavoidable.

5, We have a couple of very small debts (£30 to one creditor, £125 to another), is it there any point selling assets to pay these relatively small debts off and therefore involving fewer creditors in the IVA?

Strictly speaking you shouldn't, as it will be a preference and in addition you would be moving assets out of reach of the other creditors/IVA which could cause problems so I couldn't recommend it.


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Foggy
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by Foggy » Fri Aug 17, 2018 9:08 am
Phew ! Here goes:

1) We owed £65k and paid back £410 per month -- this was accepted. Difficult to second guess but the IP wouldnot put forward an obviously unacceptable offer.

2) Selling assets at this stage could be looked at as favouring one creditor over another, which is a "no-no" in the IVA world. If the creditors object they may well ask you to extend the term anyway, during the initial meeting.

3) If it isn't accepted ad drawn, the creditors themselves might suggest amendments at the time, or give reasons for rejection which you could counter with an amended proposal. If completely off the table you might be able to look at a DMP.

4) If both DMP and IVA were rejected you either continue struggling with repayments as per the loan contracts or submit to whatever enforcement creditors wish to use. You could sell assets then, to reduce the most onerous debt. As each debt it repaid you use that repayment amount towards the next most onerpous debt.. and so on. Or, you could pay off "rejectors" to even the playing field and try again in 6 months / a year.

5) As long as we are talking about small assets and not something all creditors would want a share of -- I would think it OK to clear the field a little.
6) HSBC are particularly anti-IVA. They will freeze your account as soon as they get a whiff of trouble. Open a new basic account with a non-creditor bank asap.

7) A modest vehicle should be OK -- and, after all, no car, no work, no IVA payment ! Stepchage should have already talked about this.

8 ) Inheritances are payable, in full, into the IVA up to the value of the total original debt, plus fees and also possible statutory interest at 8% per annum, simple, on the reducing balance. If that figure is met the IVA closes early, but still remains on your credit file for the 6 years from the start date. In my proposal statutory interest was specifically excluded .. so, in the event of an inheritance (as I had elderly parents) the amount required to fully settle was somewhat less. You could ask Stepchange it they could do the same (without putting reasons in the proposal).

9) Equity is looked at around month 54 and, assuming you have the usual clauses, is as you understand it. A few years ago it was practically guaranteed that a remortgage would be impossible. Now, sometimes, it is ... in the future .... who knows? Modern IVA's also have a secured loan option, rather than a full remortgage, if the provider uses the newer version (they do not all do so).

Bear in mind that I am not an IP -- just someone who has had an IVA. I would suggest you put these points to Stepchange as providers do differ in their views and interpretations. Do not let them "gloss over" things such as equity release. When you get the draft proposal, read it very carefully (which I am sure you will.)
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kallis3
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by kallis3 » Fri Aug 17, 2018 9:19 am
Definitely get a new account!

I was allowed to keep our car which was worth £8k at the time and was also free of finance.
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simon609
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by simon609 » Mon Aug 20, 2018 8:30 am
Hi all, thanks for the great advice. We have an appoointment with an IP this week.
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