Worrying about losing my car

mumof3kiddies

Hi just a question I am in the process of setting up an IVA with 18k of debt.  Have been told I will be able to keep my car which is worth just under 10k and was a gift from my parents a couple of years ago. I need the car to get to my job and also get my children to nursery and school etc.  Look forward to having some advice from you as this would be devastating if I lost my car.

thank you

mwarby

is the car currently on finance, or do you own it outright ? - edit sorry I can see it was a gift

mwarby

Given yiu own the car outright, I expect your creditors will expect to see some of the value of the car. I suspect what will end up happening is that you will be asked to sell the car, and use 1-3k of the proceeds to buy a car for your use, and to turn the remainder over to repay your debts

A bigger issue is that an IVA for 18k of debt might not be appropriate. IVAs are often sold by people with an interest in setting them up for their own gain, there's probably 2-3k of fees to be earned over the life of an IVA. Do you own your own home, or do you rent, if you rent why are you looking at an IVA ? if you own how much equity do you have ?

mwarby

in fact if you were to put 5k from car towards your debts would a £250 monthly repayment be affordable. if it is you could repay your debts in 5 years under a DMP. There are often cases where for a small IVA people end up paying back more than the original debt, due to the IVA fees, while the monthly payment can sound good value, it often increases as circumstances improve. An IVA would also get first dibs on any inhertance or windfalls you may receive

mumof3kiddies

I’m looking into an IVa as it freezes interest and will be debt free in 5 years.  I don’t want to have to sell my car as it was a gift from parents I’m not going to be changing it any time soon.  And my parents would be so disappointed if I was made to sell it. They don’t know I’m in debt

mumof3kiddies

I rent and I need to protect my car is why I’ve opted for Iva 

mumof3kiddies

my Iva is set at £227 a month for 5 years

mwarby

It might be helpful if you could post up an SoA (https://www.stoozing.com/soa.php)

While you and your IVA company can propose an IVA which would protect your car, the creditors are under no obligation to approve such an IVA. The fact that it would be taken during bankruptcy, would mean it would have to be a good deal for creditors

Other than a DMP which we can't yet tell would be affordable, there are no other forms of insolvency which would let you keep the car.

I would strongly suggest that the car while clearly of sentimental and reputational value to you, is not a good reason to tie yourself into an IVA

IVA cons

- you can repay more than your original debt

- you can fail the IVA should you be unable to continue to make repayments, this would put you back to square one

- any windfalls will be put towards IVA

- your credit history and ability to obtain credit will be poor for the next 6 years, it will also impact your choice of mortgage lenders for life

With bankruptcy, as long as you cooperate it will be a maximum of 3 years of repayments (which can also total more than the original debt) depending on your circumstances you may not pay anything other than the inital fee, you can't fail bankruptcy, the credit history impact will be much the same

Without the car a DRO mah also be an option, which if eligable would cost only £90 (although has same credit history downsides as IVA and bankruptcy)

If a DMP is affordable the long term impact on your credit history is much less, and with the right DMP your interest is frozen and you won't repay more than your inital debt

fatbelly

While you and your IVA company can propose an IVA which would protect your car, the creditors are under no obligation to approve such an IVA. The fact that it would be taken during bankruptcy, would mean it would have to be a good deal for creditors

That's the key. I thought it was generally OK to protect a car worth up to 8k in an IVA but these are individual arrangements and you cansee that creditors may not be happy with  you dealing with 18k of debt at a lowish percentage while having a 10k asset.

mumof3kiddies

if they reject it and want me to sell my car I can just not proceed with the Iva is that correct? 

mwarby

There are no fixed rules for an IVA (although there is an IVA protocol which aims to standardize the rules for simple cases), I'm not aware of an 8k rule (edit sorry fatbelly, I thought this was a post from OP, you may know better than me current IVA trends/rules)

If your creditors don't agree with your proposal (75% of creditors by value need to agree) they can do one of 2 things. They can vote to reject your proposal outright, or they can propose a modification. You can decline any modification which would likely result in your IVA being declined

It is worth bearing in mind that while you can walk away from a declined IVA, you have just laid bare to your creditors the fact that you are insolvent, many will not be keen to continue to do business with you, and they may chose to step up collections activity.