I have posted a few times over the past few weeks as I am trying to find the best way forward for us.
We (Husband and I) are currently in a DMP we do not have any joint debts. He would technically be able to afford his debt if it wasn't for my debt.
Our house is currently on the market and we are hoping to downsize. My question is if we sold our house and therefore released an amount of equity that covered his debt could we pay that off and then I go for an IVA as I have more of the debt? Would this be frowned upon as none of the released equity would pay my debt?
Also I do not work at present but have "income" from my previous partner for 3 of our children, child tax credit and child benefit. Would I be eligible for an IVA? My husband has said that as he will have no debts he would be able to pay for my IVA, would this be allowed?
I am unable to work at the present time due to having a small baby and we have also lost a child in August (born prematurely) and because of this I want to spend as much time with my little girl as possible and also my 3 older children. I am not trying to avoid getting work or paying my debts but don't feel mentally ready to place her in a nursery at the moment. Do you think that this would be understood by creditors? Of course in the duration of the IVA I would be seeking work.
Hi Mel.
If your husband can meet his debts he is not insolvent and would not qualify for an IVA. If the property is sold the equity should be split among your creditors but there may be a couple of options.
You could use your share of the equity to offer a full and final to your creditors and your husband could use his equity for the deposit on the new property as he has sufficient income to repay his debts.
Your creditors will understand that you are not returning to work particularly given the cost of childcare. It may be worth reconsidering your options.
We had to enter the DMP together because I wasn't working.
Our deposit for new house would be at least 60K due to not being able to get anything over 75% LTV because of our/my damaged credit rating. That would leave us around 20K after all fees for moving are taken into consideration, which would cover his debt easily. So we wouldn't be allowed to use this to pay his debts? I know it has to be shared fairly pro rata for all creditors but I am just trying to work out the best way forward.
I know he would not be eligible for an IVA on his own, we are just able to do one jointly I have been told but would not see the point of him doing it as really its my debt that is the largest.
This is all fairly new to us as prior to August I was working and we were fine. Also in September he took a 3% pay cut so things have just snowballed from there.
If your husband was able to repay his credit commitments it seems strange that he was advised to enter a DMP. Surely it would have made more sense for him to maintain the payments and thus retain his credit rating. Once your current property was sold he could have purchased the new property in his sole name which would have reduced the deposit and the rate charged. You could used your share of the equity to offer a one off full and final IVA to your creditors with your £40k.
I cannot see how creditors would consider a five year IVA when effectively you had £40k from the sale of a property but now have no cash at all.
Last edited by Michael Peoples on Wed Dec 09, 2009 10:42 am, edited 1 time in total.
I was told that because I wasn't working the household income is a shared pot and we had to enter it together? Is this not correct? Because I had no effective way to pay monthly for my debts?
I am so confused as to what to do. Will just have to stay on the DMP for the next 27 years because there doesn't seem to be an answer apart from having no where to live not an easy task with 4 children. Maybe I am wrong to still want to own a property? I wish there was an answer, I seem to be sinking further and further into a foggy mist of despair and confusion.
Each person has to be dealt with on an individual basis to determine first and foremost if either or both are insolvent. If your husband was able to pay his creditors he should have continued to do so. This may have left you with little or no surplus but that is all that could be offered to your creditors. It is wrong for your husband's creditors not to be paid in preference to yours when he is the main earner.
Ok thanks. That's what I thought but I have spoken to various IVA companies and of course our DMP company and they all say different things.
I want to be honest and straight down the line. Just want to get things sorted and know where we stand, conflicting advice to a laymen is extremely confusing and currently making me very confused.
I realise Mel that you are trying your best and I do not have all the facts so I cannot comment for sure concerning any advice you were given. However I would say that you do have income whether child maintenance, tax credits or child benefits and your husband has his wages. You are both expected to pay your fair share of the household bills and afterwards the surplus is divided on a pro rata basis i.e if you have 30% pf the household income then you have 30% of the household surplus.
Once this has been done the IP/DMP firm should calculate the minimum contractual payments for each of you. If either of you has a surplus sufficient to maintain the payments you should do so and as such require no formal or informal arrangement. There may be ways to reduce the payments but that would require a financial advisor or a bank to assist. If either or both cannot meet the minimum payments then you are insolvent and need to look at consolidation, sale of assets, IVA, DMP, bankruptcy etc.
Creditors are not heartless people and you do have four children to look after. Renting is difficult at the best of times and with an impaired credit file, a large family and possibly pets your options are strictly limited.
If your property has not sold it may be possible to keep it and put forward an IVA in your sole name whereby you would introduce your share of the equity in year 4/5 or earlier if the remortgage products are available. Your husband can continue to repay his creditors and could even offer to help your IVA once his debts have been cleared. If the equity cannot be raised in year 4/5 by a refinance you could sell the property at this time and use your husband's share to relocate. His credit file would have been repaired by this time and the property and mortgage market may be much better.
It would be helpful to know the level of your debts in total and also individually to see if this is a viable option and also how much are you paying between you to the DMP company?
Thanks for your reply. My personal debt is 29K my husbands is 18K. We are currently paying £169 per month jointly into a DMP. We were never offered advice as to only me doing a DMP or IVA. I understand that at present we do have equity in our property, so therefore not insolvent but are unable to remortgage due to a very high income multiple used when we took the mortgage out, also with my then wage taken into consideration.
Our current mortgage lender has been very helpful and will lend us 75% LTV on a much cheaper property therefore releasing equity but in doing this we would still be classed as solvent? Is this correct? I guess if you look at it on paper jointly then yes we are but me as an individual with 50% share of the equity I am not. Sorry if that doesn't make sense!
Hi Mel. It does make sense and I can understand possibly why the advice was given. If your husband has £18,000 of debt in his own name he could not maintain the minimum payments even if he used the full £169 so therefore is insolvent on an asset basis.
I assume that when you do move the mortgage will be cheaper and there are other savings otherwise I see no point in downsizing. If that is the case it may be better to offer the £20k to your creditors which would equate to roughly 69% of their money back. This could be done informally and may well be acceptable to creditors rather than chasing you or accepting a very small and long debt management programme. This would have the benefit of leaving your husband with the £18k of his debt which he could then repay with the current surplus and savings made from the move. He should then be debt clear in a few years.
May not be a perfect solution but certainly one worth considering.
At last someone can see where I am coming from. Maybe it's the way I say/write it! That's the answer that I had in my head but I didn't know if I could approach my creditors with a full and final and not my husbands? Can he just stop the DMP at this point?
Yes new house much cheaper. New mortgage would save us at least £400 per month as mortgage lender has agreed to interest only for 5 years intially. Also council tax is cheaper by about £50 per month, petrol costs cheaper due to being closer to work and as its a much smaller house we have in mind then obviously overall utility bills would be cheaper.
Write to your creditors and offer the money. Explain you are in a DMP and selling your house and can pay 69p in the £ as full and final settlement on completion. Given that they are in a 27 year DMP it sounds like a good offer to me!
Your DMP company could do it for you if you prefer or you could contact other firms who can negotiate settlements. Do not stop the DMP payments until creditors have agreed and been paid.
Glad things are looking clearer for you mel.73, you can always trust the forum for good advice from the professionals and lots of support from all of us. x
IVA final payment left the bank on the 26th January 2013...looking forward to a debt free future.
