iva, loss of income, redundancy and chances of full and final payment

in IVA & DRO
6 replies 1.6K views
Hi everyone

I am a little over a year into my IVA which I have had no problems with so far. However my circumstances are likely to change significantly over the coming months. :eek:

First of all I am on long term sick from work. I am still on full pay but potentially could drop to half pay in the next couple of months. However to add to this my work place has announced redundancies and my position is very likely to be affected.:(

Because I have been on the sick for some time it looks as though I have two possibilities.

1. Go on to half pay in April (wont be able to pay bills/iva/ living expenses fully) and IVA will need to go on hold pretty much straight away, then redundancy payout of estimated £11000 in Sept. I believe I may be allowed to keep 6 months take home pay?? Is this true of step change? I earn £2500 per month so I would be allowed to keep it all? However as I am very unlikely to find work of similar pay (long term sick / I have protected pay at work due to recent restructure where my management position became obsolete / I'm a teacher and mu subject is being reduced so not many teaching jobs available in that area / I am at the top of the pay scale and schools usually looking for newly qualified young teachers who are far cheaper). If I can only find supply work which doesn't pay during holiday and is lower pay, I will struggle to pay the IVA after redundancy. Perhaps a full and final payment offer could be made out of the remaining redundancy but unlikely to have anything left to live on. I have an estimated 46 payments of £212 plus and additional 12 months of £212 as I have equity in the house. Total of about £12296 remaining to be paid.

2. I could take a settlement deal from work where my contract could be ended as soon as the end of March with a payout of something in the region of £19000 to £21000 depending on the deal. I may struggle to get a deal done with creditors before this is finalised with work! Would they want a significant portion of this into the pot before I could consider making a full and final payment?

I know no-one can make such a tricky decision for me but any thoughts you have about either option (good and bad) would be greatly appreciated. At the end of the day I am going to be out of a very good paying job very soon and I'm very likely to fail on my IVA if I don't secure a full and final payment with the creditors as I'm not going to find another job with similar pay.

If I was to make a full and final payment offer what do you think would be reasonable with just over £12000 left in payments (original debt was close to £50K)? Some people suggest an offer of between half and 2/3rds of remaining payments as cash in the hand now is better than possible failure of IVA later. Would an offer of £8/9/10K be likely to be accepted?

Thanks for reading my long post!!


  • I went bankcrupt so perhaps I am biased but I feel 90% of IVA's are Miss sold and not always the best option for the individual at the time . They get pushed more cos they make a ton of fees, and bankcruptcy still had more of a stigma when in reality the impact on the credit file is almost as bad... both bad on credit file for 6 years for me the difference was negliable .
    My rule of thumb is if your single, low income, no assets, and it will take longer than 5/6 years to repay bankcruptcy can almost always be the better option.
    IVA can be worthwhile if you have something to protect - bankcruptcy is a clean slate (IPA for 3 years or not) it cannot fail - an IVA can fail 4 years in and you get made bankcrupt anyway .
    Can you get the debt under 20k via partner to do a DRO?
    Speak to step change and post up a SOA.
    Regarding the IVA, you can try and offer a F&F settlement of 9k but my understanding is only if you had this money free and had not started an IVA, now your already in one, they will likely take this money regardless (I think)
    If your going to be unemployed for 12 months you will avoid the 3 year IPA from bankcruptcy .
  • My reply to the previous post ... my only other thing to add would be if bankcruptcy could effect your job etc .
  • mwarbymwarby Forumite
    2K Posts
    Part of the Furniture 1,000 Posts Name Dropper
    The thing with F&F is you can't normally get away with offering money to which they'd already be entitled.

    However given your change in circumstances it is worth discussing with your IP, given your loss of earning and a redundancy payout that would still give the expected return, there is a good chance of a successful outcome. You may be able to negotiate keeping some back to live on, but maybe not around half as you suggest
  • Thank you both for your replies. At the time of taking the IVA it really did seem like the best option for us as going bankrupt would have put our home at risk. We have round about 40K equity in it. I was also in a permanent job I'd held for 15 years at the time which felt fairly secure (obviously you don't know what's just around the corner). Had we trundled along like we have in year 1 of our IVA we could have managed, everything felt so much more manageable now we were no longer cascading into a bigger and deeper hole of debt. My husband has been unable to work for several years due to severe anxiety and depression so there was no option of him having a lump sum or any other financial support to offer.

    I'm hoping that bearing in mind my circumstances (long term sick leave with work related stress / unlikely to be hired for similar wage due to this but also that I have been receiving protect additional salary due to restructure / potential failure of IVA if offer is not accepted) that maybe the creditors will consider these circumstances before ruling out the potential of a full and final offer.

    Even if they want a chunk of the redundancy wouldn't I be allowed to keep up to 6 months wages which would be £15000?? Then perhaps I could make an offer out of this money to end it and move on with my life.

    Thanks for the feedback. Even if it's just bouncing ideas around before I move forward it helps me think it through from different angels.

  • just for clarification the equity in the house is shared between my husband and myself as we are both on the mortgage, so that would half the available equity in the house to 20K
  • I have posted a reply on the other thread, that may give you some food for thought as well, far too long to reproduce here.
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