What happens if an IVA fails? We're about to enter one

Daisy4567

Hi All,

Please could someone let me know what will happen if an IVA should fail?

I'm concerned that we have a high level of debt due to helping out a family member who then left us in the lurch (lesson learnt!) - we have been to the Local Council Money Advisor who was mega helpful and set up a meeting with us with Grant Thornton.

After much weighing up of pro's and con's of Bankruptcy v's IVA we decided to go for IVA due to the fact that we don't want to lose our home.

However, now the Proposal has come through with an IVA payment offer of £222.00 per month, we have just learnt that there is a chance my husbands wages could drop in the New Year by £250.00 a month.

So now I'm worried about signing this proposal and entering into the IVA before Christmas only to then have my husband's wages drop and us no longer being able to afford the IVA payment.

Would IVA payment likely to be able to be reduced? (I have a friend who had hers reduced when her husband had to cease work due to illness) or would it just fail?

If it fails, what happens?

Do your Creditors then make you bankrupt? I've been told it is better to Bankrupt yourself than to be made Bankrupt??

I'm so worried and stressed by all this that I cannot sleep and my nerves are shot to pieces.

Please can anyone offer advice?

Thank you in advance

Charco_2

How much equity do you have in your home?

Daisy4567

Well technically none.

Our 2 mortgages total £86,500 and Grant Thornton have detailed in the IVA it would be worth £83,500.

But my worry is that we did actually manage to sell our home (although it fell through) and absolutely nobody would touch us for renting even with rent up front.

We have a small dog and with our bad credit too - absolutely nobody would touch us.

We don't have any family or friends who would have room to put us plus a dog and a rabbit up so if they took our home we would literally have nowhere to go and that scares me beyond belief.

I'm on the verge of finding a corner to hide in:(

Charco_2

I understand... i think you've been badly advised (or at least inadequately advised) and i'll throw my tuppence in...

You're proposing an IVA for £222 a month (is this joint?) and your household income looks likely to drop by £250... after only two months! Have you advised GT that this is likely?

There's no two ways about it... if your income drops by that amount your IVA will fail! You'll have a surplus of minus £28.

However, regardless of all this, GT should have explained to you that you would not lose your home in Bankruptcy. You have little or no equity in the property so effectively you're renting from the bank and the bank own the property completely. It would not be included in your Bankruptcy!

For this reason i think you've been inadequately advised!

EDIT: Take your time to find out a bit more about Bankruptcy. Wait and see what happens your husband's wages. In the mean time contact your creditors to offer a token payment (or not) or even just an explanation that you are not in a position to pay and that you will be deciding in January whether to enter an IVA or go Bankrupt. Make sure your bank account is with a bank you do not owe money to! Save what you can in the meantime for Christmas and your bankruptcy fees...

Any questions, people on here are happy to help!

There are companies you can speak to who will help you draw up your bankruptcy papers (for a fee - although there are people on here who can talk you through it for free)... you might be able to talk to the companies for free too though to find out more!

Daisy4567

Dear Charco,

First of all, thank you so much for your considered response.

Charco wrote: »

I understand... i think you've been badly advised (or at least inadequately advised) and i'll throw my tuppence in...

You're proposing an IVA for £222 a month (is this joint? Yes it is joint) and your household income looks likely to drop by £250... after only two months! Have you advised GT that this is likely? No, do I have to? DH says he's willing to take a bar job too if necessary to make this short fall up? However he already works full time long and hard and from home too.

There's no two ways about it... if your income drops by that amount your IVA will fail! Then what will happen? Would the Creditors make us Bankrupt?You'll have a surplus of minus £28.

However, regardless of all this, GT should have explained to you that you would not lose your home in Bankruptcy. You have little or no equity in the property so effectively you're renting from the bank and the bank own the property completely. It would not be included in your Bankruptcy!

For this reason i think you've been inadequately advised!

EDIT: Take your time to find out a bit more about Bankruptcy. Wait and see what happens your husband's wages. In the mean time contact your creditors to offer a token payment (or not) I have written and offered a token payment and not one has accepted or even just an explanation that you are not in a position to pay and that you will be deciding in January whether to enter an IVA or go Bankrupt Is it safe to tell them this? Will it not stir up a hornets nest?. Make sure your bank account is with a bank you do not owe money to! Save what you can in the meantime for Christmas Should I delay this long? and your bankruptcy fees...

Any questions, people on here are happy to help!

There are companies you can speak to who will help you draw up your bankruptcy papers (for a fee - although there are people on here who can talk you through it for free)... you might be able to talk to the companies for free too though to find out more!

Thank you so much for your help, it is much appreciated

Charco_2

Well, if that's already your JOINT disposable income then there's even less room for manoeuvre.

Yes, definitely discuss with GT - I certainly wouldn't enter an IVA on terms that are likely to change so drastically as soon as two months in! You want a debt solution to last for the long haul. Seems an awful lot for your hubby to take on an extra job when already working so hard... For five years!!! (think very carefully about that)

Well if they won't take it, then give them nothing - or at least not 1 penny more than you can afford... You and the family are number one!

What are they gonna do if you tell them? They're going to know soon enough you're in difficulties and they can't take blood from a stone! You can control the hassle (with letters), just make sure your money is ringfenced in an account no-one you owe has access to. Tell them as much or AS LITTLE as you want, but aside from calling you there's little they can do.

If your IVA fails it is unlikely anyone will want to bankrupt you, they won't want you BR, they want to keep pursuing you for the debts!

Delay it long as you need to, you can write to them telling them not to call you, all correspondence in writing thanks! This will give you a quieter time - albeit it won't ease the pressure completely, only a debt solution will do that!!

If I was you, based on the info here, I would definitely have another look at bankruptcy - and that's from a guy who normally promotes IVAs. I couldn't advise that you definitely go BR - but definitely reconsider it! (it will really all hinge on your circumstances and changing circumstances)

FavDaughter1

Charco you give such sensible,calm advise,thankyou

i came to the board very recently after being hit with a huge ball of debit that my husband had been trying to "manage" in secret. we went to the CAB for help.

on advice i found here we opened basic bank accounts at the co op, to as Charco puts it"ring fence" our money/debts.it took 4 working days for my husbands new card to arrive with the new account and sort code numbers,so we're sorting out direct debits etc now.

we saw a money adviser at the CAB today, he told us that even if a IVA fails "they"(creditors) rarely force bankruptcy as it costs the creditors too much and BR can mean the creditors don't get their money if you've no or little equity. i wouldn't sign anything for now if you're not happy, get some more advice first.


from what we were told today a IVA has got to be realistic when it's set up or it will fail. it might be worth going to the CAB if you're not sure what to do. the CAB told us today they use 2 companies for IVA's Grant Thornton, not sure who the other 1 is.

as for not sleeping,i'm with you on that one,along with upset tummy,short tempered,jumpy if someone knocks at the door,feeling sick,tearful etc.

you're not alone,hang on in there.

Daisy4567

Charco,

Thanks for that - A HUGE HELP!!

I have been considering your words with great thought.

DH is having a meeting with his Manager today as we really need to know what's likely to happen with regards to his wages. Whether we continue with the IVA or reconsider BR is really pivotal on this vital piece of info.

Honestly I thought we were about to get everything sorted but talk about throwing a gigantic spanner in the works!

To hear that we definately wouldn't lose our home in BR instills me with more confidence that BR might now be the right option - if indeed the outcome is that DH's wages will drop.

You're right that it's a big commitment for him to take on another job and I really wasn't keen on him doing it either to be honest.

I was worried about letting Creditors know about going for IVA as I thought they'd force BR, so again your reply has been very helpful in saying they are unlikely to do this as they want their money.

I'll hold off letting GT know until tomorrow, when we know the outcome and likelyhood of DH losing this money - although I'm thinking it's looking pretty set to be honest.

I definately, as you say, do not want to enter into an IVA with these huge possible changes hanging over us which will make the IVA fail.

I have 2 further questions please...

1. I've been told that in order to go for BR you have to have least tried IVA first - is this true and if so, should we go for IVA even though it will fail? Does an IVA need to have failed in order for BR to be accepted?

2. I am worried about leaving all this until after Christmas even though it is only 38 days away - will it be ok? I have been paying them all a token payment of £1.00 to show willing.

What could the worst case scenario with Creditors be? Could they bang a load of CCJ's on us in this time frame and if this happens can it affect the IVA proposal if indeed it turns out they will not reduce DH's wages?

Sorry to keep picking your brains like this, I'm very grateful for all your valuable advice.

Thank you

Favdaughter, thank you also for your input and kind words, it helps to know we're not alone as it really does make you feel that way

Charco_2

1. No, of course you dont need to have tried an IVA before you can go for BR... i dont know where this Urban Legend (myth) has come from but it does pop up every so often!

When you go to the court for BR the judge will ask if you have taken advice... if you say no he'll recommend that you do go to take advice but you can say "no thanks" and go ahead with the bankruptcy (or more preferably go and find out more now BEFORE GOING TO COURT).

2. Will both you and your other half need to go BR?

Do you have about £600 each right now?

I imagine you'll have to save for that! maybe!

So what if it takes you until February! Make token payments if you must

(Dont sit back and do nothing but take your time to make sure you're doing the right thing, dont rush it! It will take a bit of time for your creditors to organise anything like a ccj against you and you'll hear about it in advance so dont panic too much about that but dont dilly dally either!)

FavDaughter1

I think there can be so much shame attached to having a debt problem. i've told my parents who were shocked but very supportive, they are both retired with a small amount of savings,my dad told me we're to get in touch if we can't manage the mortgage or the secured loan just while we get sorted out with a a plan of action,we'd have to pay it back in instalments at some point.

my husband can't even speak to them on the phone,he's so ashamed&embarrassed. it'll work out i'm sure. i haven't told my siblings and don't plan too.

the board is a huge help. you must act quickly if you get a CCJ,if that happens you need to talk to GT or the CAB right away,it can be delt with but don't ignore it.

wishing you well.

Charco_2

A stigma of long gone times. If only!

Everytime I hear "bankruptcy" (and i work in this sort of thing so that's A LOT) i think of some character in a Dickens novel shamed and talked about all over town... the reality is however that "cleverer" boys than all of us, with degrees and experience and everything in this sort of subject make such a c0ck-up of the whole thing (pardon my language) that the rest of us amateurs are just that... AMATEURS!

Think you've made a mess of your finances? What about the heads of Lehman Brothers, Northern Rock, Fred "the Shred" Goodwin? I could go on!

Come back Nick Leeson all is forgiven!

Amateurs - all of us!

I understand it's not easy to be glib about your situation. It's certainly a cause for concern, worry, sleepness nights, illness... but EVERY FINANCIAL PROBLEM HAS A FINANCIAL SOLUTION!

You're not going to go out the pub, have a couple of drinks, shout about your difficulties and sing Mick Hucknalls "money too tight to mention" on the karaoke... but neither should you be ashamed!

Its your own business and not for other's to judge you! Those that you do trust to know about it should be understanding enough to know that it was never your intention to run up unmanagable debts... it's happened bigger richer and "better" folk than you and probably will again!

Here's a comfort list!

Francis Ford Coppola (film maker - The Godfather)
Kim Basinger (Actress)
Barbara Bel Geddes (Actress - Miss Ellie in Dallas)
George Best (Football star)
Bjorn Borg (Tennis player)
Toni Braxton (Singer)
John DeLorean (Car maker - featured in Back to the Future films)
Walt Disney (Founded Disney)
Handel (Composer - messiah)
MC Hammer (Singer)
Ulysses S.Grant (18th President of the USA)
Charles Goodyear (Invented goodyear tyres)
Don Jonson (Actor - miami vice,nash bridges)
Al Jolson (Singer)
Jerry Lee Lewis (Singer)
Abraham Lincoln (16th President of the USA)
Meat Loaf (Singer)
Rembrandt (Painter)
Burt Reynolds (Actor)
Donald Trump (Businessman - bounced back quite well!)
and lots lots more like Mick Fleetwood, Tammy Wynette, Cyndi Lauper, LaToya Jackson,Marvin Gaye, Larry King, Buster Keaton, Mickey Rooney, Britney Spears' mum.......

Think any of them spent a lot of time being ashamed?