Thinking about an IVA for mum & have questions please

Tinker47

Personally, I think my mum has a psychological compulsion that requires her to spend money to try and buy happiness. She went from a very healthy bank balance in 2000 when my father died, to having £33k worth of debt now. How she kept getting finance at her age and when she was already in debt is beyond me, but that’s another story.

She owns her own home outright and we can’t afford to lose it. She has nowhere else to go and can’t come and live with me in Spain. I’ve been researching IVA’s and it does appear that this would be the best way forward, through StepChange. I have a few questions, if you don’t mind?

1. How are the repayment terms considered? She has a fixed income through her pension and nothing more. I appreciate they will review her incomings and outgoings but she is panicked that the process will leave her with nothing spare each month. Hard luck I say, but I know where she is coming from.
2. I know the payments are reviewed each year and I’ve read of cases where the amount to be repaid has gone up exponentially on review. With her fixed income, which is linked to inflation, that really isn’t going to change much each year. Are we risking them asking for more than she has?
3. What happens if she dies during the term of the IVA? We can’t risk the house because my sister, who is disabled, needs to move in for her own security, as she too has financial issues (I’m the only financially savvy one in my family!)

At the moment, we are managing each debt individually but it’s hard work and they are never going to be paid off. She can’t afford enough money each month to do this. Bankruptcy isn’t an option as they would take the house and she can’t have a DRO as her debts are too large and she is a homeowner. 

She is driving me mad and I want to tie this financial situation down into fixed payments and with an end date ASAP. Any comments or advice would be gratefully received. Thanks. 

sourcrates

Hi,
An IVA will last 6 years, possibly 7 in your mums case, as she is both on a limited income, and a homeowner.

In year 5 a homeowner must re-mortgage, or, if that is not possible, face at least another year of payments, maybe more.

Its a long time to keep up with payments, and yes, they can go up at review time, but normally only is your income increases.

How old are these debts, when did she last pay them, what type of debts are they, could enforceability be an issue with any of them ?

I`m just trying to see if there is an alternative here to the potentially 7 years on a very strict budget.

fatbelly

The standard term for an IVA is 5 years, with an extra year if the equity cannot be released by a mortgage or a secured loan. The debtor is required to make payments of her surplus income after reasonable expenditure.

If the debtor dies during the term, then the IVA terminates. Bear in mind that very little of the debts will have been paid off (less than if you used the surplus income for a dmp) and the creditors would know a lot of detail about the situation.

You already have payment plans in place and the work involved should decrease. It's important for the family not to risk the house. What about this for an alternative strategy?

1. You check the enforceability of each debt
2. Your mum continues to make small monthly payments to each enforceable debt
3. She saves her surplus into a fighting fund, that you and your sister can also contribute to
4. In years 3-5 your mum tries full&final settlement deals with whoever owns the enforceable debts at that stage

DCFC79

Whats the plan to prevent this happeneing again ?

fatbelly

Hopefully her credit record is now shot

Tinker47

Thanks for your responses. It sounds like an IVA may not be the best route to go down?
I’ve taken complete control of mum’s finances through being Lasting Power of Attorney and I have her full written permission to do as I see fit. She no longer has even a bank card to buy anything and has a certain amount of money moved into a Post Office account each week, so she has money to live on. It’s been a nightmare.

I will check the enforceability of each debt and had already planned to try and offer a fixed amount to pay off the biggest creditor (£15,000), with an annuity I’ve found she can cash in. It won’t pay much (about £2000), but paying £20 a month for 100 months would give them the same amount and who knows if she will be alive in 8+ years’ time. They may just accept it and anything is worth a try. 

Chris_English

Tinker47 said:

Thanks for your responses. It sounds like an IVA may not be the best route to go down?
I’ve taken complete control of mum’s finances through being Lasting Power of Attorney and I have her full written permission to do as I see fit. She no longer has even a bank card to buy anything and has a certain amount of money moved into a Post Office account each week, so she has money to live on. It’s been a nightmare.

I will check the enforceability of each debt and had already planned to try and offer a fixed amount to pay off the biggest creditor (£15,000), with an annuity I’ve found she can cash in. It won’t pay much (about £2000), but paying £20 a month for 100 months would give them the same amount and who knows if she will be alive in 8+ years’ time. They may just accept it and anything is worth a try. 

If she owns her house then this could well change how the lenders choose to view things. They will have a claim on her estate if there are still amounts outstanding.

fatbelly

Tinker47 said:

Thanks for your responses. It sounds like an IVA may not be the best route to go down?
I’ve taken complete control of mum’s finances through being Lasting Power of Attorney and I have her full written permission to do as I see fit. She no longer has even a bank card to buy anything and has a certain amount of money moved into a Post Office account each week, so she has money to live on. It’s been a nightmare.

I will check the enforceability of each debt and had already planned to try and offer a fixed amount to pay off the biggest creditor (£15,000), with an annuity I’ve found she can cash in. It won’t pay much (about £2000), but paying £20 a month for 100 months would give them the same amount and who knows if she will be alive in 8+ years’ time. They may just accept it and anything is worth a try. 

Sounds good.

As IVA/DRO is not on the agenda now, you might be better posing on debt-free wannabe, or even in the diaries section, and let us know how you get on.