IVA advice please

retsbed

Hi fellow MSEers, I was wondering if you could help me with some valuable advice please....

Well where do I start!
My partner entered into an IVA in April '06. Her monthly replayment figure of £225 was calculated on both of our incomes and expenditures (even though the debt was in her name). We have now unfortunately broken up and I have moved out but being the softie that I am, I am continuing to contribute to the household expenses. We are trying to find a flatmate for her to at least subsidise the income that is being removed. But here is the spanner in the works at the moment.....
I asked her to contact the IVA company and ask them to renegotiate her monthly replayment because she has had a change in her circumstances and is now on a single income. They asked her to resubmit her income and expenses whiche she obligingly did the same day.
They have now come back to her saying that according to her resubmitted figures she can only afford to repay £39pm BUT they have somehow miscalculated her income using some formula that neither of us can understand and as a result their figures show she earns about £90 less every month. The funny thing is is that she is offering to repay them £120 which is the max she can genuinely afford. They now say that the minimum repayment figure they will consider is £200 or bankruptcy. I feel like tearing my hair out right now and am on the verge of tears and dont really know what to do now. We will contact the CAB on monday but any good MSE advice will be welcome right now.

Apologies if the above sounds longwinded!!

davey69_2

Hi!

What a situation to find yourself in and I commend you for helping your ex in her situation. Many a lesser person wouldnt. £200 is the minimum amount that is acceptable on any IVA and creditors will not accept a variation of anything less than this regardless of the level of debt. After missing 3 payments, your partners IVA will likely be failed by the insolvancy practioner. However, as I am assuming from your post that it is rented accommodation that your partner is in, it is unlikely that your partners creditors will petition for bankruptcy as she doesnt have any assets and it may be a possibility that your partner can enter into a debt management plan until her situation improves.

As for the calculating payments and taking into account both of your income & expenditure, this is normal practice in the IVA process simply to ensure that you and your partner are paying your fair share of all household expenses, not to include you in being responsable for the debts.

Would you be able to give us some more information regarding the level of debt that your partner has?

retsbed

Hi and thanks for your response.

Without looking at the paperwork (I am at work at the moment), her total debt was around £18k and that was in April '06 when she made her first payment. You are correct in assuming she lives in rented accomodation and has no assets.

Here are some of her figures just to put you in the picture:
Her take home pay: £1083
Rent frm flatmate that we dont have yet: £500
Total income £1583

Expenses utilities, food etc: £1460
IVA: 225
Total expenses:£1685

Therefore the max she can afford to pay into the iva is £120.

Are you suggesting she stops paying the iva and see what happens? I'm totally not in favour of that though and neither is she.

I've just had a thought...is it possible to change to another debt management company? It's just that very soon after she entered into her iva with Debt Free Direct we found out that there are charity debt management companies that pay off the whole installment on the total debt and keep no cut of it....any ideas?

CLAPTON

Are you absolutely sure she is in an IVA and not a DMP?
If its a IVA she can't change to a new company otherwise she can.

Without knowing the full details its unlikely that an IVA payement of 120 will be acceptable although it makes sense to check.
However, in her new circumstances its unlikely that an IVA is suitable... you say she can afford 120 per month assuming she has a flatmate... but of course a flatmate can leave at any time so she can find she can't pay the IVA. At the very least she should plan on a void month each year when working out what she can afford.... better to do this now than have to go back again in a few months time.

so her choices are :

-ask for the new amount to be put to the creditors and hope thay agree
-default on the IVA and see what happens. Maybe they will force bankruptcy but maybe not or they may accept a DMP instead.
- go bankrupt

retsbed

Yep 100% sure it's an IVA as I helped her through it.

She's offering them £120 but they are refusing it and want to issue a Notice of Breech (whatever that means) so we are both totally clueless now as what to do now....I'll keep contributing to the household expenses until the end of Nov so she wont default on the iva installment but after that I have no idea!!!

I've just tried calling the CAB and National Debt Line but cant get through on either

CLAPTON

And other thing she needs to consider (and I'm guessing a bit as I haven't seen her SOA) is her general financial situation even without debts.
Basically her income is rather low and I'm guessing but her expenses seem very high at almost her income... maybe that rent is very expensive. So even without an IVA payment she needs the income of a lodger just to survive...she needs to be realistic about her new situation and look for ways of increasing her income and maybe find a cheaper place to live..

retsbed

Well being an MSE convert I fervently attacked all of our expenses and cut back on all luxuries so that we could live within our means - which meant that neither of us have been on holiday on nearly two years, not even a weekend break. So I'm fairly confident that all expenses are well justified but being a retail worker she gets paid pittance.

CLAPTON

I dont think the issue is whether her expenses are justified or not but that her income is only 1083 and her outgoings are 1460 BEFORE any debt repayment.
So the income from a lodger is crucial as without it she will get 400 more in debt each month.
She must be brutally realistic about her situation. I've no idea whether 500 per month is right for your area but as i said before she must budget for void periods i.e. with no 500 per month coming in.
What does the flat cost? Could she return to live with parents?

misspoppy

Hi

It would be worth her concidering bankruptcy she really can't afford these debts and she can't afford to stay in a 2 bed home. At least with BR she will have an end date and will be able to live without depending on someone else supporting her financially.

I think she should contact one of the free debt services for advice but it would seem this is the most sensible option.

retsbed

misspoppy: I hear what you are saying and I will put it to her as an option - it seems the most sensible at the moment. We both have been trying to contact a free debt advice service today but to no avail - they seem overwhelmed with calls at the moment, have tried three already and emailed for advice.

clapton: it's impossible for her to return to live with her parents as they live too far away