getting to the bottom of my mum's debt problems

[aib]

I'm trying to get to the bottom of my mum's debt problems principally caused by my overpowering dad. In short she and my dad took out an iva in 2006 to cover c.£220k of debt over 31 creditors. The iva was for £1k per month for 60 months and a lump sum of £100k owing from a debtor. After making 3 payments my dad died (Dec 2006) and no more payments have been made. From a review of my mums finances she can no longer maintain the iva payments and is now falling into arrears on the mortgage. A report has been received from the nominee stating that no reasonable payment plan can be afforded over a now reduced debt of £77k (due to the death of my dad rather than payments made) and bankruptcy is now an option and is calling a creditors meeting late Jan 08. My mum is 68, lives on her own and works full time to make ends meet - it won't be long before she has to stop working and relies on a state pension.

A few questions from this:
1. for those debts my dad was solely responsible for, are they now all written off?
2. If monies were paid by the previously stated debtor would these go against the debts my dad owed or the reduced debts my mum owes?
3. based on an existing defaulted iva is bankruptcy the only course of events?
4. will the creditors and courts make a woman such as this homeless?

Many thanks in anticipation

aib@sky.com

[Soulgrowth]

Hi aib ... I'm not one of the experts here but I just wanted to say welcome to the Forum. Someone will be along shortly to give you some more specific and professional answers to your questions but I just wanted to say that all my good wishes lie with your mum and i am sure that you will all find a suitable solution that will help to well and truly put your mum's mind at rest and set out a good future for her [:)]

Debbie

www.familyceremonies.co.uk

www.soulgrowth.co.uk

[catullus]

Hello AIB. I'm sorry to hear of your mother's woes. In answer to your qustions in the same order.

1 Your fathers estate is insolvent and if he owned assets, such as a joint ownership in property,probate will need to be obtained.The provisions of any will will no longer apply and the estate will need to be wound up by his legal representatives under the Insolvent Estates of Deceased Persons Order 1986 and section 421 Insolvency Act.Basically that means that it follows bankruptcy law relating to the order in which the estate is distributed.

2 Assuming that your father and mother had an interlocking joint IVA it's likely that the money will be held on trust for all creditors equally, making no distinction for whether they are your father's debts or your mother's.Assuming that to be the case,if the IVA fails the money held by the supervisor would be distributed to creditors on that basis.

3 From what you say I fear that bankruptcy may now be the only realistic option but one thing that affects this is whether there is a property involved and I see from your post that you make no mention of it other than the mortgage is falling in to arrears.Is there any equity in the property?

4 The age of a debtor is, I am afraid, little defence to a bankruptcy petition. Most banks and lenders rarely persue debtors to bankruptcy simply because of the costs involved but, given the amount of debt involved in the IVA, and remembering that your father and mother's financial details are well known by creditors (given the IVA proposal) it might be that a particular creditor in the IVA may wish to persue your mother in to bankruptcy if they perceived that there were assets to realise.

A lot of assumptions have been made in this answer but it does not sound as though the Supervisor sees any alternative to failing the IVA and the key issue is likely to be the property.

If there is no equity in it bankruptcy may well be the best solution for your mother.

I hope that helps.

[MelanieGiles]

On a technicality, I don't agree with Catallus on point 2 - I feel that the IVAs should now be separated in proportion to the payments already paid in and a splitting of costs. So that your mother's IVA will be awarded her share of the contributions they made jointly. Just my opinion, and the way I would (and have) deal with this issue.

Your mother's supervisor may also be bound to make her bankrupt under the terms of the IVA, but could always seek a resolution not to from the creditors. If you could post the level of equity in the property, and detail any other assets belonging to your mother, we can probably advise you a little further.

Did they have any joint debts, and if so are they included in their entirity in the £77k total? And is the debt of £100k payable to your father's estate, or your mother or both. Why has this not yet been collected?

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

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[catullus]

Unusual for us to disagree Melanie!

I'll have to get Lawson out tomorrow!

[MelanieGiles]

I agree that we rarely disagree - and I don't know if I am right, but just that that is what I would do!

And it is always fun to run a lively discussion point with you - I actually thought that you had run away with Santa and the reindeer as it has been a while since you were on-line. Glad to see you back!!

Stephen Lawson is definately the expert and do let me know what you find. I also know him quite well, so he will be flattered to see his name in lights (again!!!) Thankfully we do not have to face these issues too often.

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

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[Adam Davies]

Hi
So who is Stephen Lawson ?
Regards

Andy Davie
IVA.co.uk Spokesperson and Website Manager

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[MelanieGiles]

A very respected lawyer and District Judge based in Exeter who is generally known as the leading personal insolvency lawyer when it comes to IVA's. He has written the bible relating to IVA's indeed you sat next to it when having a cuppa in my reception area Andy!

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

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[Adam Davies]

Hi
Looked a big book to me !!
Ask him to join !!! Can just see his avatar now,wig and gavel
Regards

Andy Davie
IVA.co.uk Spokesperson and Website Manager

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[aib]

Thanks for the responses.
I'm sure every case is individual but there are a few oddities here!
There is a property involved. It was originally left mortgage free to my mum by her parents but it turns out that there is now a mortgage on the property in the joint names of my mum and my sister - until about 2 years ago she lived at home with my parents. At the time of the iva in July 2006 the mortgage o/s was stated as c. £90k on an asset worth c. £290k. In recent communications with the nominee since my dads death it transpires the mortgage o/s is c.£190k and the property value c. £230k. This is a substantial difference to what was declared in the iva - I have a concern about this and am amazed the nominee didn't obtain 3rd party evidence for these amounts! Based on current values there is relatively little equity left in the property.
The original debtor position is very peculiar and one which I can't begin to understand and again find it hard to understand how the nominee could have taken this into account in the iva without evidence - there is no written contract between the parties. As of today I'm not sure if any of these monies will be realised though my mum seems to be more hopeful.
With regards my dads estate I don't believe there were any assets - my mum would have dealt with all this though I haven't asked about the details - maybe I should.
I believe there were seperate ivas, one in my mums name and the other in my dads though they both were for the same amount - would this be correct if as seems to have subsequently happened my mums debts have decreased? I guessed that the decrease in the amount owing was due to a number of the debts held in joint names and the remainder in just my dads name - like I say I'm guessing here. In the reply from Catallus there is reference to an interlocking iva - could you explain what is meant by this please.

Thanks again for the advice.

[MelanieGiles]

An interlocking IVA is one which is mutually reliant upon the success of the other, and usually where husband and wife make just one payment to their Supervisor's which is shared equally amongst both sets of creditors.

Which IP firm is involved here, and I strongly recommend that your Mum now takes expert legal advice from a solicitor with experience of personal insolvency. If you can tell me what part of the country she lives in, I may be able to recommend someone.

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

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[catullus]

I think that you'll have gathered from the subsequent comments aib, that this is a complex area that even insolvency practitioners have different views about.

The reference to an interlocking IVA refers to a practice that has grown uo where two people with linked financial difficulties propose a single IVA where both their financial abilty to make contributions in to an IVA and their debts are merged.

very sensible you might say. Problem is that the law doesn't recognise such a procedure and only allows each person to have a separate IVA.Notwithstanding that, custom has recognised these type of interlocking IVA's for quite a while.

This is where Melanie and I disagree. She takes the view that if the IVA fails each IVA separates out and will fall to be dealt with individually.I take the opposite view that the terms of the agreed joint IVA prevail. Frankly neither of us know the answer and the legal response is likely to be that it will hinge on the particular circumstances of the case.

There are a lot of anomolies with the earlier IVA, as you describe, that don't make this case any easier to understand but, if the financial position is now that there is equity of £40k which is owned jointly between your mother and her sister, then bankruptcy may well be the better solution provided that ther is someone who could buy out your motheres interest in the property which would be unlikely to cost £20k.

[aib]

This is all far more complex than I first believed. The IP is TONY FREEMAN & COMPANY, not a local company to my mum who lives in Norwich - I believe my dad chose this company based on a newspaper ad !
Their iva did involve a single monthly payment based on their joint income and expenditure analysis. Re the interlocking iva discussion, could it be that the IP involved here has it got it wrong and my mum is in fact facing the full original amount of creditors?
I'm not clear on the buying out of my mums interest in the property - could you explain how this works and how it could help.
Many thanks.

[MelanieGiles]

I think that this is the same firm as Andy used - am I correct Andy?

It is difficult for both Cathullus and I to advise fully, given that we only have brief details of your parents case (an our own interpretations!) and I can only reiterate my advice to take independent legal advice now as a matter of urgency.

If your Mum has a £20k interest in the property, you can avoid a subsequent sale of the property under bankruptcy proceedings if someone could find a similar sum of money and do a deal to acquire the equity from the Trustee.

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

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[Adam Davies]

Hi
Yes it was
Looks like this one needs alot of unravelling !!
Regards

Andy Davie
IVA.co.uk Spokesperson and Website Manager

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp