www.iva.co.uk

Hi there,

I am considering an IVA as I have large debts and am struggling, but I have some complicating factors.

Firstly, I am self employed, I run a business under a partnership with my partner (in business and life), and have earned a similar income each year for the past three years which is currently stable, so I'm hoping this won't be a problem.

I owe c. £35K in loans and credit cards, and also I owe £20K to family.

I have an apartment in my name which is now on the market, and I'm hoping to get enough from the sale to pay back the £20K to family, it is important to me to pay this back as the family members in question are struggling themselves. Should I wait until this is sold and paid back before taking steps towards an IVA?

This will leave me with the house I live in with my partner, my mum and my two children. I am on a joint interest only mortgage with my mum, the term of which will finish in two years, at which point we will need to get a new mortgage. I am aware that I won't be able to get a mortgage if I have an IVA. Ideally, my partner will renew the mortgage on his own, effectively buying out me and my mum. My concern is that when we bought the house, my mum paid the entire deposit and therefore any equity in the house is hers. There is evidence that she paid the deposit. Is this enough to prevent the IVA from having a claim on the equity from the house?

Advice would be very much appreciated.

Hi Ruthie

An IVA may be an appropriate route, but as you say you have a complicated set of facts which would be hard to give precise advice on this forum.

Just a word of caution, paying your family back before other creditors is a potential "preference" which could cause you, and them, problems if you were to later go bankrupt (or even an IVA).

Before you do anything you should speak to an IP, most will give you some initial advice for free.

Hope this helps and good luck.

As advised I would urge you to chat to a couple of IP's before doing anything with the properties. Choose the small to medium firms who will give your particular circumstances due care and attention, rather than the "IVA factories" who will use a "one size fits all approach".

Favouring family over commercial creditors will be looked on badly and family are often asked to step aside until after the IVA has concluded. Divesting yourself of assets prior to the IVA could result in a creditor taking umbrage and instituting a bankruptcy claim, which could see such transactions reversed or other sanctions applied. You do need to tread a very careful and well considered path. Likewise with the residencial property equity question, this is no way cut and dried. I am assumimg that the deposit contribution is not referred to in the title and, on paper, you are simply a joint (50/50) owner. Unless you can convince the creditors otherwise, that is what they will work on.

With work and a sympathetic IP and creditors all sorts of variances can be negotiated into an arrangement, but, of course, all parties also have to reach agreement and it would not be the usual "run of the mill" standardised arrangement.

Hi

You cannot prefer your family members over ordinary creditors I'm afraid. This can come back to bite you and them and they may have to repay the monies.

Also, it will mean that the IVA cannot go ahead as this transaction can be pursued and overturned by a Trustee in Bankruptcy so any IVA Nominee will have to state that the IVA may not be the best option due to this illegal preference.

Maybe a better option is to put a lump sum IVA proposal together to pay ALL of your creditors from the sale proceeds.This might be viable/attractive enough for your unconnected creditors to vote in favour of it. Alternatively they may also want you to top any dividend up from your income for a few years. If some of your family members forgo their claims this will also make the IVA more attractive to the unconnected creditors.

Feel free to call me if you want to discuss your position in more detail.