using redundancy to pay off an IVA

Redbriar15

Hi all,

I wonder if someone could advise please. I've been in an IVA for over 3 years and have 16 payments left. My original debt was about £58K, and I'm paying back £491 per month - I calculate I have £7856 left to pay. I may have the chance of voluntary redundancy in the new year but I'm not sure whether to take it as how much am I liable to pay into my IVA? If i were to get £30K would that mean I'd pay the £7856 (which I have no problem having to pay back) plus more to cover the debt which would be written off? Is there any rule of thumb as to how much you can reasonably keep? I'll obviously need some to live on while I look for another job, but I'd really like to invest in starting a business. I've seen on this and other forums people talking about full and final payments but it's not clear (to me!) whether this covers just the 5 year repayment figure (in this case £7856) or the full amount of the debt - £58K

When I contacted my management company to say there was a possibility of redundancy and how much I'd need to pay, all they could say was they needed something in writing to say how much I'd be getting before they decided how much if any I'd repay

any advice gratefully received

thanks

milliemonster

I think if you received this amount you would be expected to pay off the full amount plus interest charges, have you spoken to your IP?, having said that, as you would then be without job, I presume they would have to allow for you to keep some of the redundnacy money for you to live on until you could find new employment but i have no idea how they would work this out

Redbriar15

thanks for the reply,

i was worried i may lose it all, which makes me think it's not worth applying for the redundancy if I'm going to lose it all. Don't get me wrong, I accept the debt needs to be repaid, and I fully expected to have to repay a percentage towards the bit that would have been written off, I had just hoped it wouldn't have been all of it!!!

Charco_2

Your IP is right, it does depend on how much you get in redundancy... because you're going to have to pay back as much of your original debt as you can afford.

You've paid about £21/22k of an orignal £58k debt, leaving about £36k outstanding. You'll pay a further £8k or so over the next 17 months and the remainder will be written off (none of this includes IPs fees).

You don't only simply owe the outstanding £8k due to your IVA, if you won the lottery you would be expected to pay it all back in full - £58k, plus interest and charges, plus IPs fees... the total would be a hefty sum although obviously you've paid £22k already.

If you got £30k in redundancy, it is likely that your IP would demand the full amount - it up to you to negotiate... it's your IVA and if you only wanted to offer £1k then that's your prerogative (but your creditors would definitely reject that).

The negotiation then would be how much would you reasonably need to live on until you could find gainful employment again... or set up your own business. Usually this is somewhewre between 4 and 6 months of your current wage. So if you earn £1000 a month you could reasonably argue that you'll need to retain about £6k of the £30k you get in redundancy... you cant be expected to run up debts again after you IVA because you've given away all you had!

HOWEVER there may be another way!

Your creditors are expecting roughly £7,8oo over the next 16 months... you could try to negotiate BEFORE you get your redundancy!

Your creditors can expect the £8,ooo over 16 months OR if they are willing to accept it, you'll take voluntary redundancy and pay £12k much more quickly. If they rejct this you won't take the redundancy but if they do it's still a sweeter pot for them! (they might negotiate it up to £15k but it's all about your approach)

If your creditors demand an amount that you think is unreasonable and that isn't worthwhile for you then dont bother taking voluntary redundancy and simply see out the end of your IVA. If they are willing to play ball then you could negotiate a nice ending to the IVA and a decent chance at a fresh start for you!

Does that make sense... it does to me but I'm not sure if i've explained it well!

(the figures would obviously change if you have to release equity into your IVA)

Redbriar15

Wow! thank you so much for that, yes it does make sense absolutely

Having read lots of posts on lots of different forums I was getting really bogged down by it all to be honest. Also I can't get a straight answer out of my IP at all. I notice you said it's my IVA and up to me to decide - does that mean that I go back to my IP with what I consider to be a reasonable offer? I got the impression that THEY were in charge and THEY would decide how much I paid back?!

thanks again for your help and advice

sorry I don't know what you mean by releasing equity - is that if I'm a home owner as I'm not - I don't have any assets

Charco_2

Yes, that's what i meant by releasing equity... so much the better then that you're not a home owner!

Yes, it's your IVA, your IP (and his staff) are just the referees so to speak. (that's a bit simplistic - and an IP wouldn't like to be thought of that way - but their job involves making sure that both you AND your creditors get a fair deal). He's an "honest broker"!

Explain your situation and listen to input from your IP - even though it's been limited until now!

You can insist that any offer you think is reasonable is put forward. When the offer is put forward, your IP will have to indicate wheter he thinks it's a good offer or not. So think about how much you want to pay and put the offer forward (but even if the IP says he doesn't think its the best offer, your creditor might still accept it)

Because you're saying that the redundancy is voluntary then you can negotiate that you'll only take it if there's something in it for you... you're not giving up your job just to line your creditors pockets! If you draw down redundancy BEFORE negotiating and agreeing a deal, your bargaining hand will be greatly reduced, so start negotaiting now and hold off redundancy until agreed.

Just spoke to a colleague (who is admittedly a little bit better than I am) and he says offer the £8,000 plus costs (about £500 for your IP to do the variation)... maybe this rises to £10,000. This is still sweet for your creditors because it's their agreed money now instead of "jam tomorrow".

Think about the amount of money you're going to need to start your new business and live off until the business gets going etc (it might help to give an indication of the type of business and the expected costs you foresee to your IP.)

Redbriar15

thanks again for the great advice,

I'll start working on some figures now to put to my IP and let you know how I get on

Charco_2

Dont panic too much about the actual figures, guesstimates of various amounts, enough to justify holding onto the bulk of the money... what type of self employed work would you be doing?

I just want to stress again how important it is to have the deal agreed BEFORE you opt for redundancy.

Goodluck with your negotiations and keep us posted!

Redbriar15

Hi there,

just to let you know - I wrote a letter to my IP setting out the redundancy offer and my proposal - I worked out that I'd get between £35K and £40K, I said I needed £5K to repay my mum, £1900 pm (current income) for 6 months to 'live on', £10K to start a business. I said I'd have between £8.5K and £13.5K left so offered £10K as a final offer (i'd owe £6383)

My IP came back to me and said ok to the £5K and the money to live off, and when I got another job they'd look at how much of the redundancy I had left to see if I had to pay all or any of the money back.

I then went back to them and said what about starting the business? Was that ok'd also? They said there's no problem with starting a business as long as I keep paying my IVA and don't take out any more credit.

I'm not sure what to do now - I'm a bit concerned that they change their mind when I get the money and say that I have to then clear the IVA and end up paying more, however if I can just keep paying the money monthly out of the redundancy then that would be easier?!

They've not said anything about finishing the plan, just about keeping up payments. I'm a bit confused as I thought that if you got a lump sum you HAD to pay it back into your IVA?

Any advice?

Charco_2

I think you should go back to your IP and explain that you mean to make a FULL AND FINAL OFFER - I suspect you have not made this clear to your IP.... and don't take no for an answer. It's your proposal so you can offer anything you like, the IP is your go-between and its then up to your creditors to accept or reject.

You're not being made redundant to look for new work, you're considering voluntary redundancy it's very different. You're not going to take the redundancy if it doesn't mean the end of your IVA.

Go back and tell them what you want rather than listening to what they tell you.