Redundancy and full and final settlement offer

kroeger

Hi,

I am about to be made redundant. May this year will be 4 years complete of a 5 year IVA with a monthly payment of £232. My redundancy lump sum will be £27500. Getting work with a similar salary will be very difficult and I have a big mortgage (approx £126000).

What would be a reasonable F & F settlement offer? Paid in approx £10000 so far.

The IVA agreement would have realised £13000 approx in monthly payments with £9950 to be raised from equity after the 5th year. So around £4000 of monthly payments to go.
Would it be reasonable to offer the balance of remaining monthly payments i.e. the £4000, as I would not be able to raise the equity anyway?

Also am I right that I should be able to retain 6 months net salary which would be approx £12,000 whilst looking for work?

Looking forward to your replies.

milliemonster

This is a difficult one, we are going through a similar thing with the possibility of redundancy, our ip told us that our creditors would not accept a f&f as they would want some of the redundancy.

I think in your case as you would be getting 27k they would want the lot excluding the 6 months salary equivalent as you have equity aswell, but have a chat with your ip.

UpToMyNeckInIt

Firstly, sorry to hear that you are being made redundant. A F&F offer would certainly seem sensible in your situation.

My only concern is that your £4K offer seems low. Some IP’s are less sympathetic than others in letting you keep a proportion of your redundancy payout.

Remember: We sign up to an IVA undertaking to repay as much of our original debt as we can afford to do. (+ IP's fees if we receive enough of a windfall).

Based on your figures (assuming your original debt was around £23,000). You have repaid £13k, so still owe 10k. Furthermore, you now find yourself in a position to pay it.

Your IP will most likely class your redundancy money as a windfall, and take the view that you are in a position to pay your creditors 100p in the £ + be able to pay his fees.

He may therefore demand a c£16,000 contribution by way of a F&F: The £10K you owe your creditors (less the 15% share of the 6K over and above your agreed min. original dividend that may be taken by your IP for 'additional realisations' - check your IVA for this clause) and including say, £4-5k in existing IP fees (check your agreement for an exact figure).

That still leaves you a good £11,500 to live on whilst you seek alternative employment. Also, you will be £232pcm better off, and debt free. Your details will also be removed from the Insolvency Register. (Credit file will still be poor for the full 6 Years though).

Double check the maths, but that seems about right I think.

Sorry if that is not the answer you were hoping for. By all means, start by offering the £4k, but be prepared to negotiate.

Good luck.

kroeger

Hi, total debt was £32,000. The IVA agreement was £13000 raised through the monthly payments with just under £10000 to be raised at the end of the term through remortgage.

So I can see that £13000 would give the creditors the balance of the total monthly payments plus the sum that would have been raised through remortgage. Does this sound right? this would leave me approx £14000 to get by on whilst looking for a job.

If the creditors received the same as they would have got in the IVA agreement, even though this is lower than my original debt is this likely to be accepted, bearing in mind that otherwise the agreement would be unlikely to run its course?

milliemonster

I calculate that you have so far paid in £10208 (44 x 232), against your original debt of £32k, what was agreed at the outset of the IVA was £23k thereabouts including equity release, as you are now getting £27k redundancy, they will most likely expect you to pay across all your redundancy apart from 6 months equivalent salary irrespective of what was originally agreed to be repaid at the start of your IVA.

Your agreement is unlikely to run it's course if you don't have a job clearly, but you are now in a position to pay back almost 100% of your original debt, whilst still leaving you with 6 months salary to enable you to find alternative employment.

I guess this all comes down to negotiation, only your IP can advise you what your creditors are likely to accept