IVA and lump sum offer

Rmeek

Hi

We are at the start of the process of filing for an IVA. After speaking with my IP's administrator it was decided this was the best option and to go for monthly payments over 5 years. However we never discussed the option of a lump sum payment and after talking with my mum and a very good friend this morning they have said they might be able to help us out with a lump sum payment.

My lady that deals with the IVA is not in this afternoon and so I won't be able to get a figure off of her until tomorrow. I just wondered if anyone would have an idea of how much would be a reasonable offer. We are doing an interlocking iva and our joint, unsecured debts total £26,000. Would we have to offer exactly what they would have got in payments over the 5 years (£200 per month) or would they accept a slightly lower figure as they will be getting a lump sum without waiting 5/6 years and avoiding administrative costs?

I have looked on a few older threads and there was someone on there with slightly more debt than us paying back £7,100 on a debt of £26,700. Would that be a reasonable figure?

Any advice greatly appreciated.

Charco_2

It will depend on your circumstances. The person paying back £7,100 may not have been able to afford the £12,000 over five years that you might be able to.

Yes, you will certainly be able to offer less than the £12,000 (60 x £200) calculated by your IP but you also have to consider why your creditors might accept that.

You creditors will want to know that what you offer is in or around your best offer! You really should offer as much as you feel you can afford.

However things you should consider are that:
1. Fees in a one off IVA are going to be less than a five year IVA
2. A one off IVA gives your creditors their return much quicker
3. You may need to repay your friend and mother

In the proposal, your IP is going to have to show that you currently can afford £200 a month but you're not offering that because you want to offer £x,ooo instead. So £x,ooo needs to be interesting enough to your creditors. Somewhere between £7k and £9k might do it but you have to make it look like your best offer!

Rmeek

Thanks for that Charco.

Basically I called Child tax credits yesterday to advise of our new bank details and they asked for an estimated annual earnings for my husband which is a few thousand more than last year as he has had a lot of overtime and now we owe them £1000. So basically the £200 in tax credits we usually get will be cut and next years will more than halved. So essentially we won't be able to afford the £200 a month payments but my mum and possibly friend could pay the lump sum and they are happy to wait for this back. I am trying to look for work as I have been on maternity leave but without a car and a little boy to sort childcare for I am quite limited. We think therefore that perhaps a lump sum offer might be more viable.

Would this situation we now find ourselves in be more attractive for the creditors as if we can't do an IVA we might seriously have to consider bankruptcy. I am told the minimum is 25p in the pound for a lump sum offer but not sure if that is true. We could probably manage 30p so £7,800 for our £26k debt.

Charco_2

Nope there is no minimum, and in fact experience has shown that a LOWER dividend has generally been acceptable in lump sum IVAs because the pay out is quicker...

Your reasoning here is perfect then, and everything you have written above should be included as part of your background story in the IVA. These are the reasons and factors you wish your creditors to consider when they come to a conclusion on your IVA.

OK so on paper you could feasibly afford £200 now and that would equate to £12,000 over five years... HOWEVER, that £200 is FAR from secure and infact looks likely to vanish in the near future as your circumstances change... your actual affordablilty is closer to zero, (which you're happy to offer your creditors obviously :rotfl:) OR they you can gather together £x,ooo as a one off, lump sum, full and final...

Rmeek

So if we were to make an offer of say £7500 and this was rejected, where would we stand?

plymouthpafc

We're new to the IVA process, 2 months into a £565 payt on a £70k debt. I enquired about a final settlement figure (which would have amounted to around £30K - redundancy) and the advice given by our IP (CCCSVA) was less than encouraging.

Seems you can make an offer but this would trigger a variation to the agreement and if the offer was rejected the creditors could still ask for the payment to be made and the IVA to continue albeit revised (possibly). IP advised that the intention is to secure up to 100% recovery wherever that becomes possible. With the banks being squeezed by new government levies you wonder whether creditors are as likely to go for early settlements as they might previously have been, preferring to get what they can up front and continuing to wring as much out of debtors as possible. CCCS said that the final offer might be accepted but there is no guarantee and you've revealed your hand so to speak.

We backed off the idea to be on the safe side, especially as one or our main creditors didn't bother voting at the creditor meeting at all (due to Christmas arrears!) and we wouldn't want to invite them back to the table to wreck things this time around.

Best of luck!:beer:

FoggyBrain_2

Plymouth -- it's a whole different ball game with redundancy payments, as the creditors are technically entitled to them anyway! Usually F&F settlements are funded from third party funds, which are offered (usually by kindly relatives) soley for that purpose. If the F&F is refused by the creditors then the money is no longer available and the creditors have no claim on it.

Rmeek

Plymouthpafc - The reason for making the lump sum offer instead of payments in our case is that we would not be able to sustain long-term payments since we have no tax credits and the tax credits we have lost are equivalent to the monthly payment. Therefore the next best option is bankruptcy whereby our creditors would receive nothing. This is the best offer that we can make in the circumstances as we don't forsee being able to make payments. We haven't even had our first meeting yet so there is no agreement in place.

Foggybrain - A friend is VERY kindly loaning us the money for which we are greatful and understands that we will not be able to make repayments for some time. We are very lucky.

We have put forward an offer of £7800 approx 30 pence in the pound which is more than the payment terms which would be 28 pence in the pound. Fingers crossed for us guys!

FoggyBrain_2

Rmeek, best of luck with the offer. That's a good dividend and the creditors would be stupid not to accept. Have everything crossed for you.

Rmeek

Thanks FoggyBrain...we have everything crossed! :j

FavDaughter1

Hope they accept your f&f offer, ours was accepted last week:T creditors got less than 20p in the £,thought that info. would give you hope x