Endowment Policies

[Sunshine Somewhere Ahead]

Hi,

I am currently considering an IVA - debts of £108500 so things not looking pretty.

One of the issues that I can't get my head around is the situation with my 2 current endowment policies.

If I sell (not surrender) them now I would realise circa £40K. One is due to mature in 3 1/2 years time the other in 5 1/2 years time to cover £50K of my £180K mortgage (the remainder being a repayment mortgage)

Would this be enough for a full and final settlement to my creditors now?

Or am I going to have to sell them anyway and still have to look at a monthly contribution plus losing equity in 5 years and no vehicle to cover £50K of mortgage debt.

For clarity - these polices do mature earlier than my current mortgage end date in 20 years time. (post divorce situation when I took on the house)

Thankyou - and for all the info I have read over the past couple of days that has at least given me confidence to progress vs. denial. [:)]

[MelanieGiles]

Hi Sunshine and Welcome to the forum

It is possible that the policies might be sufficient to fund a full and final settlement, but what other assets do you have? What equity is there in your property, and also do you have any disposable income.

Creditors will be unlikely to accept an offer based on just the policies, if you also have other assets or the ability to pay contributions - and if you are going to sell the policies, the saving on endowment premiums needs to be taken into account in your disposabl income calculation.

If you are thinking of putting together an IVA, the policies will definately have to be included alongside the other items I refer to above.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[Sunshine Somewhere Ahead]

Hi and thankyou for a prompt reply.

I currently have £24K equity in my property but do not want to sell at this stage. My daughter and I have been through enough with the divorce and although I put my hands in the air for where I am some stability would be useful over the next couple of years.

Current view on available contributions are £400 per month

If I sell the polices I will need to change my mortgage to 100% repayment/ buy another endowment to cover the shortfall so I assume that there is unlikely to be an upside in terms of monthly outgoings in that area especially given issues in the sub-prime market which will undoubtably increase my mortgage payment.

What is the likely percentage at month 54 that the creditors will expect me to release? It makes sense to me that continuing with the remaining term on the current endowment policies would give a better rate of return to the creditors anyway?

Thanks

[MelanieGiles]

So an IVA is likely to be structured as follows:-

60 x monthly payments of £400 = £24,000
Sale of endowment policies = £40,000

Giving contributions of £64,000 over a five year period. Your creditors will also wish you to agree to release equity from your property during the final year of the IVA. This will be based upon a new mortgage of 85% loan to value, so if your property increases in value over the next five years, and your mortgage balance reduces, this may well produce additional funding for creditors.

I do not feel that creditors will be happy for you to continue with the endowment payments, and there is no benefit for you in doing so.


Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk