Questions before IVA
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Sorry, bit of a long one, but I want to start taking action on my problems ASAP but need to get clarification on some answers first.
I've been in contact with Stepchange for the last 3 days who recommend an IVA for my wife and I. I am waiting to hear from their IVA team, I haven't yet informed creditors of our financial difficulty because of some of the questions below, we haven't yet missed any payments but I want to get the ball rolling ASAP really, so looking for advice. We owe around £79K, Stepchange came up with a monthly repayment of £682, I think we have maybe £6k of assets, a paid-off car worth maybe £5k, and my wife is approx 8 years into a 25 year mortgage with maybe £30k equity.
1, Based on the amount of debt (~£79K) and the calculated monthly repayment (~£682), is the IVA likely to be accepted by our creditors?
2, We have a priority to pay our electricity arrears. (~£3600). I was told this can be included in the IVA, with the electricity paid off before all other creditors. This would be our preferred solution, but is this arrangement likely to cause the creditors to refuse the IVA based on the fact they would receive less overall, over the life of the IVA? If this was the case, could we offer to extend the IVA a further 6 months, so the creditors still receive the full 60 / 72 payments even after the electric arrears were paid? Alternatively, could I attempt to sell assets to clear the electric arrears and remove it from the IVA to make it more palatable to the creditors?
3, If the IVA isn't accepted by our creditors, can we renegotiate another offer, or look at a Debt Management Plan as an alternative that might be accepted? Naturally, we want to avoid bankruptcy.
4, What would our options be if both IVA and DMP were rejected by our creditors?
5, We have a couple of very small debts (£30 to one creditor, £125 to another), is it there any point selling assets to pay these relatively small debts off and therefore involving fewer creditors in the IVA?
6, We have our joint bank account with HSBC. My wife has a credit card with HSBC which we are including in the IVA (~£2000). Would this affect the bank account? It currently has a £300 overdraft facility. If the overdraft facility is withdrawn we could potentially sell an asset to cover that shortfall. However if the account is likely to be frozen or closed, I'd want to move Direct Debits over to a new account before informing HSBC of our situation. Would you advise attempting to sell assets to clear the HSBC debt before the IVA meeting, or should I look into opening a new basic bank account now, to be on the safe side?
7, Are we likely to be able to keep our car? It's fully paid off and I estimate worth around £5,000. I need a car for my job as public transport cannot get me to my workplace early enough for some shifts.
8, Although I do not expect any substantial change in finances in the near future, I have Grandparents in their 90's, If I received an inheritance in the event of their death during the life of the IVA, and it was large enough to clear the entire debt, could I settle the debt at that point and end the IVA?
9, We understand that we'd be required to attempt to release equity in the house in the 4th year of IVA. At this point I think my wife would be at least 12 years into her original mortgage which I think is a 25-year loan (I'd have to confirm exact figures with her). Am I correct in understanding the repayment period of any remortgage could not exceed the original end date of the current mortgage, and that the monthly repayments of the new mortgage can not be more than 50% higher than the repayments of the current mortgage? And that our credit ratings would both be poor at the time of the re-mortgage application, meaning that we would be unlikely to be granted a re-mortgage for a 13-year loan, and if we were granted, it the monthly payments would be higher than 150% of the previous payments?
I'm sorry for the avalanche of questions but naturally we want the best possible chance of the IVA being accepted so we can move forward with the best resolution for all parties. I have not yet informed any creditors we are in financial difficulty as I was hoping to get answers to some of these essential questions first, for example where to spend any money generated from assets, and whether to arrange a new bank account before contacting HSBC in particular.
Many thanks for your help everyone.
I've been in contact with Stepchange for the last 3 days who recommend an IVA for my wife and I. I am waiting to hear from their IVA team, I haven't yet informed creditors of our financial difficulty because of some of the questions below, we haven't yet missed any payments but I want to get the ball rolling ASAP really, so looking for advice. We owe around £79K, Stepchange came up with a monthly repayment of £682, I think we have maybe £6k of assets, a paid-off car worth maybe £5k, and my wife is approx 8 years into a 25 year mortgage with maybe £30k equity.
1, Based on the amount of debt (~£79K) and the calculated monthly repayment (~£682), is the IVA likely to be accepted by our creditors?
2, We have a priority to pay our electricity arrears. (~£3600). I was told this can be included in the IVA, with the electricity paid off before all other creditors. This would be our preferred solution, but is this arrangement likely to cause the creditors to refuse the IVA based on the fact they would receive less overall, over the life of the IVA? If this was the case, could we offer to extend the IVA a further 6 months, so the creditors still receive the full 60 / 72 payments even after the electric arrears were paid? Alternatively, could I attempt to sell assets to clear the electric arrears and remove it from the IVA to make it more palatable to the creditors?
3, If the IVA isn't accepted by our creditors, can we renegotiate another offer, or look at a Debt Management Plan as an alternative that might be accepted? Naturally, we want to avoid bankruptcy.
4, What would our options be if both IVA and DMP were rejected by our creditors?
5, We have a couple of very small debts (£30 to one creditor, £125 to another), is it there any point selling assets to pay these relatively small debts off and therefore involving fewer creditors in the IVA?
6, We have our joint bank account with HSBC. My wife has a credit card with HSBC which we are including in the IVA (~£2000). Would this affect the bank account? It currently has a £300 overdraft facility. If the overdraft facility is withdrawn we could potentially sell an asset to cover that shortfall. However if the account is likely to be frozen or closed, I'd want to move Direct Debits over to a new account before informing HSBC of our situation. Would you advise attempting to sell assets to clear the HSBC debt before the IVA meeting, or should I look into opening a new basic bank account now, to be on the safe side?
7, Are we likely to be able to keep our car? It's fully paid off and I estimate worth around £5,000. I need a car for my job as public transport cannot get me to my workplace early enough for some shifts.
8, Although I do not expect any substantial change in finances in the near future, I have Grandparents in their 90's, If I received an inheritance in the event of their death during the life of the IVA, and it was large enough to clear the entire debt, could I settle the debt at that point and end the IVA?
9, We understand that we'd be required to attempt to release equity in the house in the 4th year of IVA. At this point I think my wife would be at least 12 years into her original mortgage which I think is a 25-year loan (I'd have to confirm exact figures with her). Am I correct in understanding the repayment period of any remortgage could not exceed the original end date of the current mortgage, and that the monthly repayments of the new mortgage can not be more than 50% higher than the repayments of the current mortgage? And that our credit ratings would both be poor at the time of the re-mortgage application, meaning that we would be unlikely to be granted a re-mortgage for a 13-year loan, and if we were granted, it the monthly payments would be higher than 150% of the previous payments?
I'm sorry for the avalanche of questions but naturally we want the best possible chance of the IVA being accepted so we can move forward with the best resolution for all parties. I have not yet informed any creditors we are in financial difficulty as I was hoping to get answers to some of these essential questions first, for example where to spend any money generated from assets, and whether to arrange a new bank account before contacting HSBC in particular.
Many thanks for your help everyone.
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Comments
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Sorry, bit of a long one, but I want to start taking action on my problems ASAP but need to get clarification on some answers first.
I've been in contact with Stepchange for the last 3 days who recommend an IVA for my wife and I. I am waiting to hear from their IVA team, I haven't yet informed creditors of our financial difficulty because of some of the questions below, we haven't yet missed any payments but I want to get the ball rolling ASAP really, so looking for advice. We owe around £79K, Stepchange came up with a monthly repayment of £682, I think we have maybe £6k of assets, a paid-off car worth maybe £5k, and my wife is approx 8 years into a 25 year mortgage with maybe £30k equity.
1, Based on the amount of debt (~£79K) and the calculated monthly repayment (~£682), is the IVA likely to be accepted by our creditors?
2, We have a priority to pay our electricity arrears. (~£3600). I was told this can be included in the IVA, with the electricity paid off before all other creditors. This would be our preferred solution, but is this arrangement likely to cause the creditors to refuse the IVA based on the fact they would receive less overall, over the life of the IVA? If this was the case, could we offer to extend the IVA a further 6 months, so the creditors still receive the full 60 / 72 payments even after the electric arrears were paid? Alternatively, could I attempt to sell assets to clear the electric arrears and remove it from the IVA to make it more palatable to the creditors?
3, If the IVA isn't accepted by our creditors, can we renegotiate another offer, or look at a Debt Management Plan as an alternative that might be accepted? Naturally, we want to avoid bankruptcy.
4, What would our options be if both IVA and DMP were rejected by our creditors?
5, We have a couple of very small debts (£30 to one creditor, £125 to another), is it there any point selling assets to pay these relatively small debts off and therefore involving fewer creditors in the IVA?
6, We have our joint bank account with HSBC. My wife has a credit card with HSBC which we are including in the IVA (~£2000). Would this affect the bank account? It currently has a £300 overdraft facility. If the overdraft facility is withdrawn we could potentially sell an asset to cover that shortfall. However if the account is likely to be frozen or closed, I'd want to move Direct Debits over to a new account before informing HSBC of our situation. Would you advise attempting to sell assets to clear the HSBC debt before the IVA meeting, or should I look into opening a new basic bank account now, to be on the safe side?
7, Are we likely to be able to keep our car? It's fully paid off and I estimate worth around £5,000. I need a car for my job as public transport cannot get me to my workplace early enough for some shifts.
8, Although I do not expect any substantial change in finances in the near future, I have Grandparents in their 90's, If I received an inheritance in the event of their death during the life of the IVA, and it was large enough to clear the entire debt, could I settle the debt at that point and end the IVA?
9, We understand that we'd be required to attempt to release equity in the house in the 4th year of IVA. At this point I think my wife would be at least 12 years into her original mortgage which I think is a 25-year loan (I'd have to confirm exact figures with her). Am I correct in understanding the repayment period of any remortgage could not exceed the original end date of the current mortgage, and that the monthly repayments of the new mortgage can not be more than 50% higher than the repayments of the current mortgage? And that our credit ratings would both be poor at the time of the re-mortgage application, meaning that we would be unlikely to be granted a re-mortgage for a 13-year loan, and if we were granted, it the monthly payments would be higher than 150% of the previous payments?
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Hi,
Been through an IVA myself, so i will attempt to answer your questions.
(1) All depends on your budget, and how much you budget for certain things, if they see something excessive, they may ask you to cut back in that area, to increase your payments, there is no way of predicting what they will find acceptable, or not unfortunately.
(2) Maybe best to settle this one first by selling assets, the assets rules do not apply to an IVA like they do in bankruptcy or DRO you must declare them, but you can sell them to repay creditors, but get advice from stepchange first.
(3) Debt management plan is an option, although it would take a very long time to complete.
(4) DMP even if rejected, (most are not) is still viable, and can still be paid, no creditor will reject an offer if its all you can afford, eventually they would accept, or the debt would just be sold on to debt purchasers or collectors, who will willingly take your cash.
(5) Pay off the smaller debts if you wish, but be aware of the rules regarding preferential payments.
(6) First rule of debt management, never bank where you have debts, always open a new basic bank account, with a bank with whom you have no debt, this is essential.
(7) You can keep your car as long as its worth a reasonable amount, and not an expensive model which was worth a lot of money.
(8) Yes, if you came into money the windfall clause would be applied, if there were sufficient capital to pay off the full debt, then that would most likely be accepted by the creditors, and the IVA would end, if the amount was less than what was owed, you could ask them to accept that on the basis of A full and final settlement of the IVA.
(9) Usually its in year 5 you would be expected to remortgage, that did not apply to me as i was not, at the time, a homeowner, you are normally expected to get 3 quotes i believe, and if that is not possible, due to the IVA, an extension on the arrangement of up to 12 months would be applied.
Hope that helps.I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter0 -
Thanks for the answers! Really appreciate the input.0
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Hi simon7461 and welcome to MSE,
I wanted to add some further points to the answers above.
1, Based on the amount of debt (~£79K) and the calculated monthly repayment (~£682), is the IVA likely to be accepted by our creditors? This would be at the creditors discretion. 75% of the value of your debt must agree, and then everyone would be legally locked in (so even if a few small debts refuse, it may not matter).
2, We have a priority to pay our electricity arrears. (~£3600). I was told this can be included in the IVA, with the electricity paid off before all other creditors. This would be our preferred solution, but is this arrangement likely to cause the creditors to refuse the IVA based on the fact they would receive less overall, over the life of the IVA? If this was the case, could we offer to extend the IVA a further 6 months, so the creditors still receive the full 60 / 72 payments even after the electric arrears were paid? Alternatively, could I attempt to sell assets to clear the electric arrears and remove it from the IVA to make it more palatable to the creditors? If you wish to try and settle this by selling assets, then you should do this before the IVA starts (as sourcrates says). Extending an IVA because of one debt is not very common. You cannot remove it from the IVA once it begins.
3, If the IVA isn't accepted by our creditors, can we renegotiate another offer, or look at a Debt Management Plan as an alternative that might be accepted? Naturally, we want to avoid bankruptcy. If the IVA is rejected you would need to consider other options. A DMP at the same rate would take approximately 9.5 years to clear in full. Your wife would certainly have to avoid bankruptcy due to the property and equity. If she was to go bankrupt then the property would be at risk.
As an extra point, if you are doing a joint/ interlocking IVA, this is something you need to bear in mind, because if you are unable to keep up with the repayments there is a risk of the IVA failing and your creditors/ IVA company declaring you both bankrupt. If they did this, your wife could lose the property and your car would be at risk as well.
4, What would our options be if both IVA and DMP were rejected by our creditors? A DMP or self-negotiation would be appear to be possible options.
5, We have a couple of very small debts (£30 to one creditor, £125 to another), is it there any point selling assets to pay these relatively small debts off and therefore involving fewer creditors in the IVA? Be careful about showing preference. Debts are a priority or a non-priority based on who the money is owed to, as opposed to how much. If you pay off some non-priority debts, and the other!!!8217;s don!!!8217;t receive a proportioned payment, they may be less inclined to negotiate. Put them in the IVA.
6, We have our joint bank account with HSBC. My wife has a credit card with HSBC which we are including in the IVA (~£2000). Would this affect the bank account? It currently has a £300 overdraft facility. If the overdraft facility is withdrawn we could potentially sell an asset to cover that shortfall. However if the account is likely to be frozen or closed, I'd want to move Direct Debits over to a new account before informing HSBC of our situation. Would you advise attempting to sell assets to clear the HSBC debt before the IVA meeting, or should I look into opening a new basic bank account now, to be on the safe side? Same issue as above with regard to preference. And again, I would echo what sourcrates has said, and open a new basic bank account, with a bank you owe no other money to before the IVA starts and include the HSBC debts in the IVA.
7, Are we likely to be able to keep our car? It's fully paid off and I estimate worth around £5,000. I need a car for my job as public transport cannot get me to my workplace early enough for some shifts. It shouldn!!!8217;t be an issue to keep this car as part of the IVA, but if the IVA fails and bankruptcy is pursued, it would be at risk then.
8, Although I do not expect any substantial change in finances in the near future, I have Grandparents in their 90's, If I received an inheritance in the event of their death during the life of the IVA, and it was large enough to clear the entire debt, could I settle the debt at that point and end the IVA? Sourcrates is right in what he has said, but I will also add, that it is possible for the inheritance to be taken under the windfall clause, and the payments in the IVA needing to continue. Check the terms and conditions carefully. If this is a possibility, is it worth starting the IVA at all? Would it be better to do a DMP and then do full and final offers later?
9, We understand that we'd be required to attempt to release equity in the house in the 4th year of IVA. At this point I think my wife would be at least 12 years into her original mortgage which I think is a 25-year loan (I'd have to confirm exact figures with her). Am I correct in understanding the repayment period of any remortgage could not exceed the original end date of the current mortgage, and that the monthly repayments of the new mortgage can not be more than 50% higher than the repayments of the current mortgage? And that our credit ratings would both be poor at the time of the re-mortgage application, meaning that we would be unlikely to be granted a re-mortgage for a 13-year loan, and if we were granted, it the monthly payments would be higher than 150% of the previous payments? Under the IVA protocol, the equity release should not be for more than 85% of the value of the equity and no more than 50% of the monthly payments on the mortgage. The term is not specified.
Best of luck,
Laura
@natdebtlineWe work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps0 -
Thankyou very much for the advice. Got an appointment with an IP on Thursday.0
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Have you done the PPI reclaim thing on your pass loans/credit cards yet?0
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Hello
I have had my IVA since August 2015, currently paying £927.69 a month (this goes up every time you get a pay rise or come into some money) and it is hard work but you get used to it. I always think I got myself into this mess so I need to work hard to get myself out of it.
Your life is going to change. You will have to budget hard to make it work. They will look at your expenditure and make sure you have no extravagances
I was still paying off my car at the time and I got to add that into my budget and keep the car. You have to cancel the bank account you have especially if you owe them money as they can withdraw funds if you have money in the account.
I found redoing my mortgage rate easily with the bank when my fix rate ended and got another 5 year fixed rate as they said it would help me at the end of the IVA
Also be aware that although you read all these stories of debt being written off that is not always the case. The amount I was in debt will in theory be paid off in the next 12 months but I will still have a year after that left on my IVA to carry on paying. A the end of the 5 years they will then look at whether I need to release any equity from my house and if there isn't any the IVA could then continue into a 6th year depending on when your creditors are happy the debt is resolved
I have to say though that so far it is all worth it. No more phone calls, letters chasing money, the worry, the dread is all gone0 -
I didnt think they can could continue the IVA when you would of paid back 100% of the debt - unless that didnt include the IP fees, I would look into that one.0
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Your electricity arrears, depending upon who they are with, should go into the IVA like any other debt. You will get a new account number, and may have to accept a meter to pay in advance for usage from then.
No allowance should be made to pay those as a priority separate to the needs of other creditors. As I say, it does depend on who you are with, but 5 of the so-called "big six" providers operate like this. If you put such an allowance in your I&E then I would say it is very likely that other creditors would either vote against, or insist on a modification that the debt is included and the money set aside to pay it is introduced into the IVA instead.0
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