final settlement offer of around 50% debt ?

[hayley.c]

Hello, We have been transferred over to Grant Thornton from Debtmatters, we have £9600 left to pay. We are considering asking a family member to take out a loan so we can leave the IVA early. We have done some research and have found info that states you can make an offer for a final settlement of around 50% of what you owe. Does anyone know if this is true? What figure would you recommend we offer to finish our IVA?
Any advice would be gratefully appreciated!

[ianmillington]

There is no prescribed amount really - depends on a number of factors for example how long there is to go. IF you have simply got fed up of the IVA and want to finish it early then you can't expect much of a discount on your contributions. You will only get a meaningful discount if the F&F is a substitute for failure of the VA. In that respect, creditors will expect to see an I&E indicating that you can't really afford the contributions any more.

[hayley.c]

Thanks, We dont finish the IVA till march 2012 so we have quite a long time to go.The reason we want to try and finish the IVA is because my husband is in the forces and he is leaving in 2011. When he leaves we will no longer have his income and on top of that will need to find somewhere to live- we are currently in forces housing.
I'm a stay at home mum so i'm not earning. Ideally we would like to get out of the IVA so we can get a mortgage when my husband leaves the forces. We want to try and build up out credit rating before applying for a mortgage hence the reason we want to get out!
So we were to make an offer do you think it would have to be for the full amount? and is there a possibility they can refuse? Thanks

[ianmillington]

I'm afraid I can't see any upside for you at this stage.

I should point out I think that the stain on your credit rating will last for 6 years from the date of approval (assumed March last year?). I'm not a credit rating expert but don't think it will be just a case of building up a credit rating - that will be extremely difficult within the 6 year term I think, so any mortgage you can get throughout that period is likely to be sub-prime.

On the assumption that your total contributions are less than your total debts, you are already in effect in a scheme that is tantamount to an interest free loan. Given that the amount you would need to raise at this stage would be not far short of the total, I doubt the wisdom of doing this, particularly as your family member would have to borrow the money, with its inevitable interest. Presumably you would have to pay the money back. I wouldn't be surprised to see the monthly repayments exceed the IVA contributions or, if not, to outlive the IVA term.

Arguably that money might be put to better use in helping you buy somewhere after your husband leaves the army. However even then you would be borrowing the deposit. If you combine that with the possibility that your husbands earnings will reduce in the short term when he leaves the Army, there is the potential for overcommitting yourself from day 1.

Frankly, if you can afford the contributions and you are discounting your debts with it, currently I think your best thing is to remain in the IVA. Maybe look at it again when your husband leaves the army, or is about to do so, but bear in mind the points I make in the preceding paragraph.

Sorry it's probably not what you wanted to hear.

Ian

[MelanieGiles]

Is your husband leaving the Army at the end of a maximum length of service - ie the 22 year point - and if so is he entitled to receive a gratuity settlement?