IVA, Inheritance and Solicitor Advice

Cc_Storm

Hoping to get some advice, feeling really stuck and defeated about the whole thing. This is a bit of a strange one. 

So unfortunately I lost my job in the pandemic due to being severely unwell, leaving me with a chronic illness and no longer able to work. I already had some debt before I lost my job, and when I was super sick got into even more debt. I wasn’t able to cope any longer and looked online to see what options I had, unfortunately at the time my cognitive ability wasn’t very good due to severe fatigue and being bed bound. 

I was wrongly advised to take out an IVA, I was too sick to research any other options and I felt desperate because I had very limited resources, my initial debt was around £9,000. I have been in my IVA for nearly 3 years now, I’ve been paying £100 per month and it is due to finish in 2027. 

Two months ago I receive a call from a solicitor my Dad used to handle his estate as he was diagnosed with terminal cancer, he died 10 years ago to the day they rang me. They told me there had been a mistake and money that I was actually entitled to has been on hold in an account for 10 years. I’ve been through a complaints process with them, and with a small amount of compensation and interest they are offering me £8,000 they want to transfer it over to me and close the account. I am still back and forth with them at the moment and, I am contacting the financial ombudsman. 

At this point because of the extortionate amount  the IVA company charges in fees they will take the full amount once this is sorted with the financial ombudsman and solicitor.  The financial ombudsman might say I should receive more compensation, or say they would offer less, who knows at the minute. They have pretty long wait times, and can be a lengthy process depending on the outcome. 

In the meantime, a family member completely unrelated to my Dad has offered to gift money as a third party to get rid of this IVA, the payment I would need to settle would be £2,700 as,  that is what’s currently scheduled to pay . Would this be illegal if I agree to accept the money ? Or could they then chase me for the money after an early settlement completion. Theres nothing to say they would in the windfall agreement. 

Any advice would be helpful, this has caused me a lot of stress and upset. 

fatbelly

I think you misunderstand the way an IVA works if you think that you set up an agreement for say 60 x £100 and then can immediately settle with a lump sum of £6000.

As things stand your IP will take sufficient from the windfall to pay creditors in full and their fees in full. Anything left over comes back to you.

Is there a way to get out of the IVA ahead of the windfall? Maybe. Do you own property?

Cc_Storm

Thank you for your reply. What I meant was in my current arrangement and affordability I have £2,700 left to pay. I have contacted the IVA company about an early settlement and said it was due to ill health. I wanted to see if there was any way of getting out of this IVA before this windfall, I haven’t told them about this windfall. They said they would recommend a third party payment of £2700 under my current circumstances, and they would take that offer to a creditors meeting. No I don’t own any property or cars. 

Cc_Storm

When I said the IVA company would take the full £8,000, what I meant was because the fees they add one, there would nothing left to come back to me, and wouldn't necessarily mean that my IVA would be shortened. 

RAS

That unfortunately is what you signed up for. It's one of the downsides we explain to people considering an IVA. 

Junior crisis after going a bit daft financially and an IVA sounds great, reducing your debt by 75% etc, etc. Three years later with a good job, the same person is faced with repaying 100% of the debt and £8-9k in fees. 

Given how badly IVAs are sold, the fees could be as much as they owed in the first place. 

The same happens with redundancies and other windfalls. 

Cc_Storm

@RAS I don’t think going daft financially is the same as being too sick to work. None of what you said is helpful to the question I’ve asked. 

RAS

I'm not suggesting you were daft with money. There are far more people on here who struggle with their own, children's or partner's health issues. 

But I don't think I or others quite understand what your question is?

Sadly, because of the legal rules, some people end up paying everything back plus fees and not shortening their IVA if the windfall arrives close to the end of the IVA. It's not what people expect but the insolvency practitioner is obliged to do it.

sourcrates

If you can get the creditors to agree to a full and final settlement of £2700, then bingo, snap their hand off.

Hopefully you can get this resolved before you get the 8k, what they don`t know, won`t hurt them, but you must get this agreed before you get the compensation money.

Once they agree, you are freed from your obligations.