Advice on offering settlement of IVA and related questions

unlucky13

Hi, this is my first post although I do read the forums for advice I wondered if anyone could help with my current problem/questions.

We are just about to enter the 3rd year of an IVA (was extended to 6 years due to a variation in circumstances) which renews on 1st April. We currently pay £250 a month and according to the original document we will have to release just under 12k of equity from our property in the 4th year.

So from April we would owe 48 * £250 + 12000 which is 24000

This year we have a had a terrible year, we had to have our house rewired, had to replace our bathroom pipes, floorboards and suite, our brakes failed while we were on the motorway and we had to have those fixed and just now we have been advised that our 30 year old back boiler is on its last legs and will need to be replaced costing upwards of £3500. My husbands work is also making redundancies. He works such a weird shift pattern that I cannot work although we do not claim benefits, and we also have 2 children, just 4 years old and 10 months old so night work etc is out of the question.

Anyway, my father in law has offered to lend us 20k as he has just got some money from shares and although this would be a loan he would be more flexible than our IP in terms of any major work that needed doing and taking breaks from the payments. I spoke to my IP about possible making a final settlement offer. We didn’t talk about numbers or circumstances, just about the process for doing so. We then received a letter telling us that their advice was to make an offer for the full 24k and also they had attached our annual review forms and would need these back to review our offer before it could be passed on to the creditors.

My questions therefore are:

1)As the IP’s fees are 800 + VAT a year and even if they charged for 2010/11 despite us only possibly making 1 payment surely we should take into account that out of that 24k, £2820 would be IP fees that would never reach the creditors anyway?

2)I have spoken to the estate agent we purchased our house from. When we originally did the IVA agreement they advised us the house was worth 220k, now they say 205k. Therefore there is 15k less equity in the house than they anticipated at present (25k estimated at time of agreement) Also, given that my youngest will not even be entitled to a free pre school place once they want us to re-mortgage I cannot see us being able to do so on just my husbands wage anyway. Can they fail the IVA if we cannot produce the 12k?

3)Can they force us to complete the annual renewal before they put the offer forward to the creditors? The only reason I ask is that they want documentary evidence of everything this year and because we review at the beginning of the financial year I will not have letters immediately until the end of the month from some places (such as tax credits) and we want to get a creditors meeting set up ASAP.

4)Finally, can anyone advise if 20k would be seen as a reasonable offer? He may be able to loan us 21k at a push and I want to make an offer that will be accepted? And does anyone know how I would word such an offer?

Sorry for so many questions and such a long post. This whole thing worrying about heating and other necessary things failing is making me sick with worry. Thanks in advance for any responses.

Charco_2

This is a long post so i will come back to it but i just thought i'd throw it out there that your offer should/could be considerably less than £24k and even considerable less than £20k - but you need to have your reasons right (a good sympathetic story)

As i said, I'll come back to this but i wouldn't go to quickly to your IP telling him you can get your hands on £20k to settle!

unlucky13

Thank you, I won't do anything until I've considered any advice given.

Charco_2

I know I've answered IVA F&F questions before on here so i was looking to see if i could find one of those posts coz it covers all the bases...

Basically though if you're looking to propose a F&F because you can't be bothered with your IVA anymore and you want out this sucks then you're probably going to have to stump up and pay for it - something close to the originally projected dividend or more

HOWEVER if the house is falling down around you and your husband lost his job and you have genuine concerns that the IVA will fail and you'll be left in a position where you cannot pay your debts and your dog is ill and your son is upset because Liverpool wont win the league this year... THEN your creditors are likely to accept much less! (Ok i lied, your creditors wont care about Liverpool!)

It's all about presentation!

Personally I think your creditors will take your hand and all if you offered to settle for £20k - but obviously you don't want them to, you want them to reluctantly accept £12k! (Enough to be accepted, not so much that they're over the moon!)

First thing I would do is address the equity situation... you have none! You might have had £12k three years ago but given the economic downturn there is simply no way you would be able to release that kind of money now. Get a valuation on the house (did any similar houses nearby sell recently? Are any up for sale now - go be nosey!) Check your paperwork and see what it says but you'll probably only be expected to release up to 85% of the value of your home (what is your mortgage currently?)

Next, approach your IP to say that there are rumblings at your husband's work that their jobs are not entirely secure (...would your husband be entitled to much redundancy pay?)
Tell the IP that with things looking so uncertain you would like to try to settle the IVA now - you have a number of things need fixed in the house as a priority (heating) and you'd like to try to concentrate on this before your husband might lose his job... Your father has indicated that he might be able to find as much as £12k to help settle this and you'd like to put this to your creditors as a F&F. (your creditors might come back and say no, or they might say it will take £15k but sure you've nothing to lose - if it's rejected then just keep paying your IVA!)


(Sorry if this is a bit rambly and incoherent)

unlucky13

Thanks so much for your response, it’s really helpful. Our outstanding mortgage is approx 194k as we have an interest only mortgage and can rarely make overpayments. I have just checked online and the last few houses that sold in our road went for between 185k and 200k, but that was in July 2009. Unfortunately we bought ours at the peak of the market.

My husband has currently been at his employer for 23 months so by the time of any redundancy I believe he would only be entitled to 2 weeks pay.

I know you’ve already answered loads of my question but do you happen to know if the IP can set the timescale of the offer – e.g. can they insist we complete our annual review prior to making the offer or can we ask them to put it forward immediately? We would still have to complete the annual review in the interim anyway.

Also, when you say offer 12k and they might come back and say 15k would do it, is this how it works? I assumed they would either say yes or no with no room for negotiation.

Charco_2

The whole thing is a negotiation!

The laws weren't put forward that way, but the way the creditors deal with it all now it's just a balancing act trying to make everyone reasonably happy or at least not unreasonably unhappy!

The IP should put forward your offer as soon as it is ready. It requires the IP to draft practically a new proposal (which the annual review would help as he'll need to check and verify various details), and a variation meeting will be called with your creditors - this is exactly like the first creditors meeting that agreed your IVA in the frst place.

That's handy that your hubby wouldn't be entitled to a huge pay out because you'd lose a lot of it to your IVA anyway and your creditors might think it would be worth rejecting the F&F in favour of another big pay out in redundancy.

Sounds good to me though. Husband's job isn't secure so your father is willing to offer some stability by offering £12k as a full and final to your IVA.
Listen to what your IP says about the offer (probably that it will need to be more) and simply say that you can't afford more. The IP cannot refuse to put forward any reasonable offer you try to make but he will be required to offer his opinions on it (I think this is a good/bad offer as it does/n't reflect the best return available from the client!)