IVA help

mamx3

My sister is in a lot of financial difficulty. I have been giving her about £600 a month to help her make her minimum payments, but I can't keep doing it, so we talked about it and she is now talking to payplan about an IVA.

I'm hoping somebody will be able to answer some questions:
1. She has a bit of a confusing situation with a car - she had a ten year old car which was costing a fortune in petrol, repairs and road tax. After discussing it with our dad, he suggested that he gets a new car, using her old car as part ex (got £500 for it) and then sister could use the new car for a while as long as she pays running costs (petrol, ins, tax), but he would pay for it and would then get the car after a little while. He is the registered owner of it. How will this be affected in the IVA?

2. Payplan has said the fuel costs are excessive about 50 miles a week for personal mileage - what is normal?

3. Payplan have said that she should consider bankruptcy as a better option - but she is really worried about her home. It doesn't have any equity in it, but its the only thing she has that is hers and she doesn't want to risk it. What are the advantages of bankruptcy and disadvantages?

4. How likely is it that her IVA will be approved? And it it isn't will they make her go bankrupt?

She has about £28k debt and has about £325 disposable income a month.

Thanks for your help.

UpToMyNeckInIt

Hi mamx3,

Sounds like your Sister's situation is not too different to how mine was 5 Months ago, prior to my IVA.

I would suggest she carefully considers all her expenditure etc (see '2' below), and possibly seeking another opinion from another Insolvency practinioner (IP) (some reviews etc. can be found at www . iva . com).

1) She will be able to 'own' a modest car (very sensible to get something that has a reasonable chance of surviving a 5-6 Year IVA if that's the route she chooses to take).

2) Regarding what is deemed 'reasonable' expenditure: All IPs make reference to the CCCS guidelines (If you want to refer to them, google:

'cccs budget guidelines report 2011'

...and there you have it - the full (and I believe, current) guidance document - free to download as a pdf. It covers every form of expenditure, right the way down to allowances for kid's school dinners if so required.

3). IVA -vs- Bankruptcy: This is where a couple more opinions are required. Like your Sister, I own my home, and thought bankruptcy was too much of a risk. If she is in neg. equity however, they may I guess not want to take the house, as the reveiver will make a net loss. But I'm no expert. Some reckon that if you don't own your home, consider BR over an IVA.

Your Sister must also ask her IP about the IVA equity release clause: Bear in mind that, however unlikely it is currently likely to happen, most IVA's require homeowners to (subject to a property valuation in Month 54 of the IVA), attempt to release equity via remortgage / secured loan up to 85% LTV to increase creditor dividend (subject to the resulting payment being max. 50% of you current IVA payment for affordability reasons).

My IP got the creditors to agree a higher fuel allowance, as I need my car for business.

4). Most IP's reckon on a 96-99% success rate. After all they don't want to go to the time/effort in putting together an IVA proposal, unless they are reasonably certain of creditor approval (they don't get paid otherwise).

...phew - hope that's useful!!!