had to agree to a budget that is too tight

[pjw]

Hi. We are about 15 months into our iva. We had debts of 47,000. I have managed to pay 5500 off in the first twelve months. Our monthly payment is quite low, at 267 per month. The problem we are having is that to get the iva agreed we really had to agree to a budget that is too tight. we have 3 kids and things are basically falling to pieces. Our house is worth around 290k, with a 191k mortgage on it. The original proposal only wanted 8k as a remortgage in year 4, but was vetoed to not have a figure put on it.

In light of the fact we are probably going to pay the full amount of the debt back anyway, do you think we should make an offer now? And how much should I think about offering. We just cannot continue the way we're going, and will probably rent a place until we get things going. The house just needs so much doing to it.

[MelanieGiles]

Hi pjw and welcome to the forum

As one of the forum experts, and a practicing IP, I continue to be saddened by the number of posters who come on here commenting that they accepted payments that were too high? Why does this happen???

When you say that you had to agree to a budget - who was dictating this to you, and did you really feel at that time that you would be able to sustain payments in the long-term? From my extensive experience in this marketplace, those debtors with monthly repayments of less than £300 per month are more likely to fail than those paying higher contributions. With three growing children, you have little room for manouvreand your family life is now being affected. It is such a shame.

I also question how you ever got an IVA in the first place with equity of £100k and debts of £47K. Was your property properly valued by the IP at the time? Yes I do think that you should make an offer of settlement now, before mortgage interest rates go up any higher. You will need to pay the debts in full, plus the outstanding costs of the arrangement, so you should ask your IP for a settlement figure.

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

[iva_squirrel]

Hello pjw,welcome to the forum.

I am surprised to hear that your debt was £47K and the equity is £100K??

You can certainly ask your creditors to let you pay a lump sum which is less than the full amount of your debt. This is called a Full and Final Settlement. In return for this payment your creditors agree to write off the rest of what you owe.

As a rule, people are in a position to make such an offer because they’ve come in to some money or have some savings they can use. Alternatively, a friend or relative may be able to provide the sum required.

In your situation, you would release equity. You will neeed to speak to your IP regarding the amount you shoul be offering. If you really have £100K equity, they could ask you to pay as much as you can release.


Kind regards,



Julia Simavi

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[flashingblade]

This is what happened to us too.
We agreed a budget that was too tight for us, we were so desperate at the time that we just had to. I even remember arguing with someone on the phone saying it was too tight, and it was OUR proposal, but they said it would fail if it was less and it wouldnt be worth them putting through. I told them to forget it, but stupidly, as we had been sorting it out for months and were in such a mess, my husband rang back and said we would agree to it.

Now 5 months down the line we are facing bankruptcy, i just wish we had 100k equity!

Good luck![8)]

[MelanieGiles]

It would have been better in the long run if you had not entered into the agreement. Other forum members should beware going down the same route.

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

[ray_a]

I have to say that it is important to look at what you can really afford and to stay rigid.

I think it is crucial to look at your expenses and place some contingicies in place to meet for unexpected expenses.

As for using the house to clear the IVA debt do be careful in looking at what you can readily pay in your new mortgage costs especially as interest rates are rising.

If I was doing this look at what you can afford and then offer to the creditors to see what you can make in a final offer. Do remember that your supervisor fees will need to be met as well. Depending on how well you get on with your supervisor have a chat about the situation.

Regards

Ray

[louisa.s]

Hi there,

We too had to agree to a budget that realistically was about £100 more than we could live. I think it is out of sheer desparation to get the problem solved and to relieve the stress that people accept budgets that are unrealistic without fully being aware of how to live within a budget. Even at 29 years old we naively accepted the budget although we did mention to our IVA company that the monthly payment was too high but they said that the payment they put forward was the minimum that would be accepted and although bankruptcy was an option I think we were too afraid of the unknown. Hindsight is a wonderful thing as too is this forum as it is reassuring to know that we aren't the only people with debts and we won't be the last unless the way loans & credit cards are dished out are changed.

Louisa - still struggling but remaining happy!

[pjw]

When the house was valued, it was stuck at 250k because of the stamp duty thresh hold. Once it went above that figure it shot up to its current value.
Two further things - When you say i will have to meet the ip costs, do you mean on top of the original full debt? How can i end up owing more money than when I started?
And how do i actually go about getting a re-mortgage? With my current lenders or someone new?
The problem with the budget was that all was ok, but there is no contigency money for repairs to anything, and no money for school trips, etc for the kids. Not to mention no money for xmas, birthday gifts. Also where our money management was so bad before, we couldn't accurately determine what we were spending on what.
I would be willing to take extra work to give us the money required, but of course would lose 50% of that to the iva - which is annoying because its clear we will pay it all back in year 4 anyway.
I fully recognise that I got myself into this mess, I now just want to know if I can get out of it and how much it will cost me.

[MelanieGiles]

To answer your first question, the IP fees for acting on your behalf will need to be paid. They are not creditors, but costs for the professional assistance you have received along the way, and agreed by you and your creditors at the time of the IVA.

I would personally recommend that you try your existing lenders for the re-mortgage, as if you are accepted this may avoid broker fees and other associated costs.

Get your IP to provide you with a settlement figure, so you know how much you need to raise and the nature of his/her costs.

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