IVA, bankruptcy or other solution?

Jwood275

Hi,

I have a hefty debt with a legal company who are threatening to make me bankrupt. They obtained a CCJ against already and I have been making regular payments but they without warning sent round a bailiff to collect on the debt.

I have since spoken with them and offered them as much as I can afford which they have said is not enough and they are demanding £500 more each month than I earn in total. I had always thought that bankruptcy would be my only option but I have spoken to a company about an IVA which they advised me would be the best course of action.

I've run through income and expenditure and it works out that the company would get what I offered already but have to wipe out the remaining debt in 5 years. This seems like a bad option for them so I can't see why they would accept that but not what I've offered.

My question is do they have to accept? What happens if they don't accept? Do I have any choice but bankruptcy?

Thanks,
Jason

Gimpsdad

An IVA is a very powerful legal solution to debt, and if it appeals then there is no harm in having a crack at it.

Couple of points though, find an IP firm who don't charge upfront fees. At least that way you can't lose. Also, in the voting process, it is rarely the creditors themselves that vote, but appointed representatives who generally take a decision based upon commercial best interests. As a rule of thumb, IP's will not put forward a proposal that they feel has no chance of success, so although a creditor may refuse it doesn't happen often.

It may help if you could give us a clue as to who it is that is demanding the money, and if there is any specific reason why you fear BR. In most cases, creditors who threaten BR usually don't follow it up as it costs a lot of money to make a debtor bankrupt.

Jwood275

Hi,

Thanks for the information. I contacted a company about the IVA today which I thought was free advise but now they are calling every 5 minutes wanting my bank details! I'll look for one which does not charge up-front fees.

The company is actually a legal firm so not an actual credit company which is why I think they will refuse it. I only have very minor debts elsewhere so it's just this one that's causing me the grief.

It's not so much the BR that I'm worried about, I have no cash, no assets and nothing to take but I do work for myself and I would like to avoid it if possible. I just feel there must be a better solution, I'm not trying to avoid the debt, just pay it at a reasonable rate but it seems I'm getting nowhere. I don't think they will hesitate to make me bankrupt and my main concern is having the bailiffs knocking on the door.

gizmo111

What was the payment agreement in court?
Baliffs don't usually come until you have missed an agreed payment.

Jwood275

No payment was agreed, I wrote to them offering a payment which they ignored so I made the payment anyway every month and now they have given me 5 days to pay a ridiculous amount or face bankruptcy.

Gimpsdad

Is the debt subject to a CCJ already? Bailiffs are usually only employed when a court order has been broken.

How was the debt run up? I have seen a lot of people think that legal firms are after them and it turns out they are DCA's with fancy titles.

Jwood275

Yes, it's subject to a CCJ, they obtained it a few months ago. The debt is for legal services so it's definitely a legal firm.

Gimpsdad

If they want to file a BR petition against you when you have little in the way of assets then they are not a very clever legal firm. Let them do it would be my initial reaction, however if you wish to look at IVA then do so. An IVA is an alternative to bankruptcy designed, amongst other things, to give creditors a better return than BR would. If you offer that and they subsequently reject it then at least you know you have done all you can from your end.

Jwood275

That's what I'm thinking. The only thing I don't understand is why they would refuse my offer but accept an IVA of the same amount over less time, surely they would lose out? I'm pretty sure they won't accept it but I'll give it a try.

Gimpsdad

An IVA is a legally binding contract, and as such may be attractive to them on the basis that there is more chance that you will comply with its terms than to take you at face value (from their perspective) but I am second guessing a little.

National_Debtline

Hello there,

If this organisation make up the lion's share of the debt you have they will have very significant voting power when it comes to the IVA. You will need 75% of your creditors by volume to agree to the IVA for it to go ahead. If you have very little in the way of assets your Insolvency Practitioner should ensure that your creditors are aware of this, thus increasing your chances of the IVA being accepted.

A useful excercise is to compare both the IVA and Bankruptcy options; the implications of both and also the potential costs of both. It is often the case that Bankruptcy is a cheaper option as any payment from your disposable income would usually last for three years - rather than the usual five years under an IVA.

We hope you found this information useful,

National Debtline.