father with iva advice

hellvelyn

Hi, I hope someone will be able to give some information regarding an iva.


long story.


my father is a self employed pub owner (and other businesses historically) he has been hit hard by the recession but managed to trade out of debt by selling off some businesses putting a charge on the house etc. currently he owns a single pub, its viable ticks over and pays the bills.


He is up to date on current hmrc bills but he has a historical vat bill of 35 k which he has been unable to pay.


My parents have been trying to sell their house in order to pay the debts and keep hmrc happy but they will not wait. Had a buyer and was proceeding etc but they will not wait and will be bankrupting him on the 10th sept.


To make matters worse the house sale hit a major glitch when it was found to have a couple walls on an old extension which had mundic blockwork and so is now potentially unsaleable!!!!!!!!!! but we are still waiting for the concrete analysis. although hmrc etc don't know this yet they still are aware that he is going through a sale but they will not wait.
we may still be able to sort the house sale etc but its going to take longer as this will need to be sorted before its mortgageable and therefore saleable. otherwise its only worth anything as a building site now!




the house is (was!) worth 750k

• outstanding mortgage being paid by my mother 140k
• charge on the house from the business 81k being paid up to date monthly by my father (coping).

these debts are on the house and are being met and no arrears.


he has some credit card debts (not sure how much guessing 5-10k but unsure of this. he is making minimum payments.


the pub is ticking over but has no inherent value and as any pub isn't worth selling, its a leasehold.


He is paying the ground rent and all the bills are as near to up to date. He has a rent arrears of I believe 30k that he is paying off and the landlord is fine with this (to be honest he should be happy that someone is renting it as he wont get anybody else, lots of empty units)




so he is coping but unable to pay off all the hmrc 35k debt, they wont accept payment over time and so are going for bankruptcy.


He has been advised to go for an IVA and is due to see the solicitor on Tuesday to go through things.


My question is, can he have an iva for specific debts as in just the hmrc debt or does all the unsecured debts have to be taken on board. It is really only the hmrc debt that is the problem. or is it better to lump all the debts credit cards, hmrc, rent arrears together and do an iva on the lot,


if he manages to sell the house and then pay all the debts surely the iva is gone at that point as they could all be paid in full


does the iva have an impact on the ability to trade as if he cant trade he is bankrupt or can he continue to work his way out of it.


I'm sure the solicitor will go through things properly but would like to know if anyone else has had a similar issue or be able to give some advice so we can work things out.




seems that he has worked so hard to trade out of it and nearly managed (he should have been a ltd company but that's another matter) but hmrc being the parasites that they are will not cut him any slack.


he is just about coping but is heading towards a meltdown and is probably going to go back on meds to help him through it.


the landlord is happy, the banks surprisingly are fine, but hmrc will end it. If he goes for a business IVA what will the banks end up doing could they shut him down even if other things are going ok and he is meeting ongoing debts?


sorry for the long post


It looks like an iva is the best option as bankruptcy means he has lost everything including the roof over his head.


thanks
c

Giggles_Fairy

All unsecured debts must go into an IVA, unless there is a specific reason that they cannot and this must be declared and justified in the IVA proposal so that the other creditors can agree to it. for example, the rent arrears - if these went into the IVA would this result in him loosing the pub? If so it can be explained he is paying the rent arrears back at £x per month instead of including so as not to jeopardise his source of income.

It will need to be declared that the property is being sold and what split the funds are (i.e. is the house 50/50 with his wife.). It will be expected and declared that any monies received from the sale will be introduced in full into the IVA (his proportion of the funds) up to 100p in the £, which is the total debt plus the IVA nominees and supervisor fees. This will protect your father as if the house takes a long time to sell or turns out to not be worth as much as anticipated then he is protected from further action by the IVA and if it turns out the house proceeds won't pay everything off he can continue with the IVA and still be debt free at the end. If his 50% (if it is split with his wife) will not pay 100p in the £ but his wife wants to use some of her funds to pay the remainder up to 100p in the £ then this can also be done, some people prefer to do this so that the IVA finishes. It may seem like the amount he is paying off is 'more than he owes' due to the fees and isn't fair but you must remember that interest and charges are frozen and of course he would be protected from being made bankrupt.

Your father should be able to continue in his self employment, as long as he is taking a reasonable wage. If he is taking little or no wage it may be discussed with him by the IP or even put as a modification that he should close the business and seek alternative employment, this is more usual when the wage is substantially lower then what someone would earn on minimum wage. Not a common modification but it is possible.

I hope that helps in someway

hellvelyn

thanks for that.
that's what I thought. I'm not sure how the landlord would be with the iva debt rather than paying as he is. but ultimately hopefully he will be able to pay it off with the house sale.


I think he would love to shut it all down and walk away but its the lease that's the problem, I think he has a break clause in 3 years, if he is up to date on the rent then he can break the agreement but if he is on the iva I don't think he would be able to shut it down for another 3 years as I think he will be chased for the rent for the next 3 years. Its all a bit complicated and a bit of a mess.


he should have been a ltd company as it wouldn't have been such an issue. 20 20 hindsight vision!


So on the 10th it looks like they will go to court, his solicitor will petition for an iva but if the sale side advances and it can be proven that it is going forwards then I would hope that time can be bought but who knows, hmrc just want blood. surely if they waited they would get payment in full very soon, if they jump now then an iva would potentially get them a much lower percentage of the amount over a very long time.


I just hope the house can be sold the debt paid off etc but I do worry about ongoing problems with the business. If it wasn't for the lease at that point he could shut it down and walk away but because of the lease he is stuck for another 3 years and hoping in that time that he doesn't build up more debt!

longtermplanner

The 35k VAT debt - how large a proportion is this of his unsecured debt? Because if it is a large proportion, HMRC may well reject his IVA proposal.

hellvelyn

hmrc 35k
outstanding rent arrears - 100k
loan from brewery - 20k
credit cards - 20k
overdraft -7k


rest is secured - mortgage (joint) 140k, and charge from business 81k


problem is if he cant trade he cant earn and so cant have an iva so hopefully they will allow him to trade until the house is sold or else its bankruptcy. will have to wait and see.
the house is going on the market, not sure with iva or bankruptcy how long they allow for the house to be sold. House occupied by my parents - joint mortgage, also shared with my wife, myself and our two children under 4. hopefully they will give time to sort ourselves out.


horrible to see him there last night listing his assets and debts and writing a letter to explain to the courts what has happened. The sad thing is that the business is starting to pick up.


thanks
c

longtermplanner

The house must be in joint names if there is a mortgage.

Say its worth 750 (optimistic) less 140k mortgage. That's 305k for your dad and 305k for your mum. Less the 81k charge form the business on your dad's half, less that pile of debt (I assume all in his name). Less costs of bankruptcy. Yopur dad will be left with nothing.

I can't imagine why his creditors would agree to an IVA.

After bankruptcy, your mum should be left with her half of the equity and you dad will realistically have nothing.

How much rent have you and your wife been paying?