Newbie considering IVA

[Evilmoo]

Hi all

Hubby and I have unsecured debts of almost £60k due to our business failing last year in the recession.

We are seriously considering an IVA and I have been speaking to DFD. Hubby is only working part time and I am housewife so our DI is only £143 which DFD said is acceptable to offer.

My concern is my son has just left school and if he doesn't get the required GCSE's he won't be going to college in September which will mean a big drop in tax credits for us.

What happened if our income suddenly drops? As far as I understand it can be renegotiated? Our working tax credit is going to drop by £50 a week April next year anyway because of income changes but DFD said we would worry about that when we get to it.

I have an advisor coming later this evening to talk more and look at paperwork

Also we had a debt with HSBC years ago but they haven't contacted us for 3 years and there is still about £4k outstanding. What should I do about this? I don't even know who has the debt now.

Any advice gladly taken

Thanks

Amanda

[Adam Davies]

Hi and welcome

Include all debt just to be safe.

I think you need to consider the drop in income now rather than one year into a potential IVA.

Do you own your property or rent ? have you considered bankruptcy as an option ?

Regards

[Evilmoo]

Thanks for the reply

We rent our house

We had thought about bankruptcy but I don't want to go that way - the IVA seems to have less implications e.g renting a property, having a debit card etc

[Adam Davies]

Hi

That is true, however the IVA must be affordable for the term otherwise you may be back to square one.

Regards

[kat68]

hi evilmoo,
i think you should insist DFD consider what would happen, if these changes to your income take place, because even if your son does go to college this year in two years time he will finish college and you will then loose your tax credits etc, and you will still be in your IVA for 3 years following that. I think better to get it sorted now than to be worrying and back to square one in two years time.

[Broke of London]

Hi and welcome! I'm sorry to hear about your business - its been a long hard recession for many of us!!! I agree that DFD need to consider the drop in income now and write it into the payment schedule if necessary. If it isn't in the iva then you may need a creditors meeting to agree the reductions and they could say no! You could take advice from Cleardebt too..they can propose ivas at lower monthly repayment levels than many other firms...so wouldn't be so averse to your payment going down to circa £100 in a year's time. x

[MelanieGiles]

The problem with proposing an IVA with such low disposable income and high debts is that it generates a very low return to creditors, once the IP's fees and costs have been taken account of - not always a problem - but you have already highlighted the potential for a reduction in income which could reduced your disponsable income down to nil.

I would personally give some serious thought to the merits of bankruptcy proceedings if you have no assets to protect, as you could just be delaying the inevitable unfortunately.

[Struzzo39]

HI and welcome to the forum. I hope you get on the right track for you to becomming debt free soon. Good luck x

[Tina Shortland]

Hi Evilmoo (love the forum name by the way),

"Worrying about it when you get to it" is no way to go into an IVA when you are looking at losing £216.50 income and only have a DI of £143?? I agree with Kat68 - work the numbers through with DFD now to see how the IVA funding will be projected, otherwise you could be looking at a future failure and ending up back a square 1.

Explore this fully with DFD and if there is no clear way forward that makes sense and does not leave you struggling then explore bankrupty further. There is no benefit for you at all to go into an IVA for a limited period with a risk of failure on the horizon.

Let us know how your chat goes.

[Evilmoo]

Thanks for the advice

Part of our debt was a business loan from Barclays for £21000 which they put £10000 interest and charges on over the course of a year while ignoring our requests to make lower payments

I have just found the loan agreement and it seems there may have been ppi put on. The borrowed amount was £21000 at 16.3% apr (14.99% pa interest rate) this was over 117 months and the total amount payable was £42,963.73. I don't know how to work out if the total payable matches up with the apr!

I have a letter saying there was ppi put on to cover life and insolvency (we were self employed obviously) but Barclays knew we were technically insolvent when we borrowed the money because we had no assets and they lent us extra to keep us afloat. (we had originally borrowed £3000 then another £6000 then another £6000 then another £6000 over the course of 4 years which led to the total £21000)

Am referring it to DFD but would love to know if it looks like they have slipped ppi in there!

[Evilmoo]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Evilmoo

Thanks for the advice

Part of our debt was a business loan from Barclays for £21000 which they put £10000 interest and charges on over the course of a year while ignoring our requests to make lower payments

I have just found the loan agreement and it seems there may have been ppi put on. The borrowed amount was £21000 at 16.3% apr (14.99% pa interest rate) this was over 117 months and the total amount payable was £42,963.73. I don't know how to work out if the total payable matches up with the apr!

I have a letter saying there was ppi put on to cover life and insolvency (we were self employed obviously) but Barclays knew we were technically insolvent when we borrowed the money because we had no assets and they lent us extra to keep us afloat. (we had originally borrowed £3000 then another £6000 then another £6000 then another £6000 over the course of 4 years which led to the total £21000) they kept refinancing the loans and we were desperate enough to let them

Am referring it to DFD but would love to know if it looks like they have slipped ppi in there!

[Broke of London]

Hi Evilmoo! If they have put PPI on it will be recoverable under an iva and BR for the benefit of creditors. The PPI wouldn't prevent your disposable income falling and possibly making an iva unsustainable - the creditors would just get a better return. It may be worth reclaiming PPI before proposing an insolvency and then offering the funds in full and final settlement if the claims are significant? Worth chatting through all the options with DFD. X

[Evilmoo]

I have just spoken to the financial ombudsman and they advised me to make a complaint regarding irresponsible lending and will also investigate the ppi.

I'm not going to do anything regarding the IVA until I know where we stand with the loan

Thanks again

[MelanieGiles]

From the limited information posted, and the high cost of that borrowing, I would definately pursue a claim if a product was sold to you which was not required or not relevant. The sale of PPI to people who are self-employed is good grounds to lodge a complaint.