Some advice about a possbile IVA

tony_cluedo

I'm hoping for some advice about IVAs and possible routes I need to take.

Some background info first. I was self-employed and worked with my brother and father in construction. Following the bust in the housing market they both went bankrupt having a lot more in the way of mortgaged debt than I. I was involved in one deal with them at the time which involved a business loan of about £200,000. This purchased a property and some land beside it. When the market crashed we couldn't pay back the loan and this forced the bank to go for repossession. My brother and father went BR at this point. I sat on my hands at the time and after they repossessed the house and sold it I have heard nothing further from the bank. I have credit card debt of about £10,000 from around that time which was used the keep the busines going for a while. I stopped paying those and ignored letters from debt collectors. I still get the occasional letter regarding these.

Fast forward to now, my brother will have been discharged from his BR for three years this February. I was working with him up until a month ago when I managed to get a job in my original field of scientific research. It is only a temporary contract for minimum wage at the moment, though there are supposed to be full time posts coming up in the Spring. These will pay about £18,000 a year.

My wife is in full time employment earning approx £30,000 a year including travel pay. She has a couple of grand on a credit card and about £200-300 on a Next account. These are all up to date as are rates, gas electric etc. She owns a car outright.

Now to my questions.

I have the bank debt which I have heard nothing about and the credit card debt. I could simply go bankrupt and clear the decks of this debt. That is the easist solution.

My problem is with my personal residence which I own with my wife. We are both on the mortgage which is interest only. We bought this house at the height of the market for £200,000. The house across the street is currently for sale for £53,000. It has been on the market for a few months without any viewings let alone offers. This is repeated across other streets in the area. So we have a problem of £150,000 negative equity.

If I just go BR, the OR will likely transfer their interest in the property back to me so I'd still be stuck with that debt after BR.

The monthly payments are £900 a month currently which we had been just about managing, it's easier now with me working again. To rent a house the same as ours in our street would now cost about £375 a month, a little more with rates included. We're ok now while interest rates remain low, our problem will come down the line when they rise. It mightn't happen for a while yet but it will at some point. That's when we are in diffs. So I'd like to try and address this problem now.

Second solution would be for both of us to go BR which is a problem as she is not keen on this. She has a very negative image in her of BR.

I had though then of possibly me going BR and clearing my debts. This would leave the house and negative equity. We would then post the keys back to mortgage company and let the house be repossessed and disposed of. At this point they would present a demand for the shortfall and we would then enter an IVA to clear this debt.

Would this be a feasible solution?

What are the things I need to know about IVAs? Are there any links to read up on them?

I will be going to see the solictor who handled my brother and father's cases but he's off til 7th January so I wanted to read up a little before I go.

I have other questions but hopefully someone will get thne ball rolling and I'll chime in then.

cheesedoffwithdebt

HI- after all this time I am surprised that the bank haven't taken more drastic action concerning your debt-they usually are quite prompt at securing their debts which makes me wonder whether the bank think the same about your debt?
You've jumped to possible solutions but I think the best place to start would be establishing just what you do owe, and where those debts stand. You can get an Experian report immediately online which would show your registered debts and their status, i.e. whether in default or not. But neither the bank or a credit card company would let debts of these amounts just drop- even debt collectors would be bouncing off the walls by now- so you're either just about to have legal action taken against you or it's too early in the process-your first paragraph implies these debts arose some time ago.
The second question is why are you seeing a solicitor and not an insolvency practitioner? Most solicitors will of course know something of the insolvency process but an IP or one of the debt charities eg National Debtline who have a specialist business debt department might be a good source of advice as well.
The issue on here is that there is much more information anyone needs before giving advice- and any comments made on here are only personal opinion as well, so I think you're better to get formal advice and get everything on the table,just what you owe, and the action you need to take -hope that makes sense!

tony_cluedo

The solicitor I am seeing handles all court work for the IP who did my relative's BR. I realise an IP will know exactly what's what but the solicitor will know enough to get me started. I'd prefer to go into an IP knowing where I stand with all documentation I'd need than going in blind and maybe getting railroaded into something.

Can anyone point me in the direction of further info on IVAs?

UpToMyNeckInIt

This is purely my opinion, speaking as an IVA customer:

I am pleased to see that you want to do your homework to ensure an IVA is for you.

I only went down the IVA route as I had no real option after an unexpected change in financial circumstances.

By all means seek advice from the ‘charity’ organisations, but don’t be afraid to approach a private firm if they don't think you are eligible for an IVA.

Go to www . iva . com, and contact a couple of well-reviewed Insolvency Practitioners. Many don't charge you anything, and their fees would be paid out of your monthly IVA payment (and agreed by your creditors).

I have a cynical view of the so-called 'independent' charities (Stepchange, National Debtline etc…) - they are all sponsored/funded by the banks/credit companies, and I can't help feeling that was who’s interests they were looking out for when they advised me. They tried pushing me towards a debt management plan (would have taken 10 years to pay off my debt + loads of interest).

Saying all that, I am sure that some private firms will ‘over-sell’ IVA’s to people for whom it may not be the best solution.

The following link to Stepchange, gives a brief ‘iva pros & cons’ guide though which is a useful starting point:

http://www.stepchange.org/Debtinform...osandcons.aspx

Below is a link to the Straightforward Consumer IVA protocol which the vast majority of new IVAs are compliant with, much of which will form the basis, word-for-word of you IVA agreement:

http://www.cleardebt.co.uk/media/303...20protocol.pdf

You will have to work out your income and expenditure. Whatever is left over is your IVA payment. Regarding what is deemed 'reasonable' expenditure: All IPs that I’ve come across make reference to the CCCS Budget Guidelines Report 2011.

Google 'CCCC Budget Guidelines 2011' to download the pdf.

I believe these were effective from October 2011, and used in my IVA implemented in August 2012. They may therefore still be current.

It is well worth a read, as it covers every form of expenditure, right the way down to allowances for hairdressing, kid's school dinners, meals at work, even hobbies etc if so required. Even if the figures are a little off, it gives you what you will be allowed to budget for.

If you are careful to correctly record your income and expenditure, your IVA payment should be set at quite an affordable level. I have come across people who underestimate their expenditure and subsequently have difficulty. As for stopping creditor payments: best take the advice of your IP.

Equity release (if applicable): 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 up to 100p in the £. (Subject to the resulting payment being max. 50% of you current IVA payment for affordability reasons). For most, equity release is not possible, so your IVA goes on for a 6th Year instead (which usually works out a lot cheaper). But who knows what the economic climate will be like in 4-5 Years time? Doubt it will improve much, but you never know.

Glad I went the IVA route in the end - can now sleep at night, Hope you get back on track financially soon as well.

I know of an excellent IVA forum - well worth joining and asking the same questions there, but not allowed to post the link here. Send me a PM if you want the details.

Just my opinion though.

Best of luck.