could someone give me some advice

[chriscar]

Hi

I wondered if someone could give me some advice please.

I am writing on behalf of my parents who have some debt issues.

They have accumulated a lot of money on credit cards over a very long period of time.

My Mum has around £80,000 & my dad £60,000 - i.e. total £140,000. I only looked at my mums cards but they average an APR rate of 19%. I would imagine my fathers are similar.

The interest charges have had a really bad effect on them both and as they are pretty much paying minimum payments on all, nothing has improved.

Basically my parents have a business in my fathers name as a sole trader & my mum draws a salary. She earns around £2500 a month after tax & my fathers is slightly more.

They own a mortgaged property with roughly £150-175,000 equity & their mortgage payment is £1050.

Basically, after everything they still seem to be forced to use a credit card in the month to keep themselves afloat. They dont want to go down the bankruptcy route due to the stigma & losing everything & ultimately they want to pay the creditors.

The Bank who they use for their business banking has been supportive & potentially have offered some form of a loan if needed - a figure of around £60-80,000 was suggested and fixed against the house.

I was wondering if the following may be possible for them?

1. Either my mum solely or both of my parents take out an IVA
2. Negotiate a settlement figure for the IVA
3. Loan offered from bank to pay off the IVA directly so they know its settled

I am a little bit concerned if my dad also enters into an IVA that the limitations on his credit will prove a problem with his business, so would you think it would be best if my mum just applied for this?

Also, realistically, what do you think they could get the £140,000 down to or just my mums £80,000?

Any advice would be really appreciated!

Thanks

[flumpy dog]

hey chris welcome to the forum.


hopefully one of the pros will be along soon

in the meantime if your parents would like more info or if you would like to look for them have a look at www.iva.com-its not just about getting an iva but theres loads of useful info on there
keep posting and the pros will pick up on this soon [:)]

[Julie]

Hi Chris,

Is there any way they could release the equity in their house and repay the creditors in full?

[Michael Peoples]

Hi Chris and welcome from me too.
Your parents should seek some free advice from at least one firm of IPs. Being self employed they should make sure they speak with the IP or an experienced member of staff as there are implications concerning tax, trade creditors, leases etc.

Your parents are borderline solvent or insolvent on an asset basis as they possible could sell their property and repay creditors in full. However, how realistic is the valuation and would the sale price be achieved? Are there other trade creditors for your father? Is he up to date with his PAYE, VAT etc ?

Ultimately, each of your parents would be looked at as an individual and advised accordingly. An IVA may be an option for one, both or neither and all options would be discussed by an IP firm. This would take into account things like the credit facilities needed for the running of your father's business.

[kallis3]

Hello Chris and welcome from me as well.

I agree that your parents need to seek some professional advice and the companies on iva.com come highly recommended. The advice is free and they can hopefully find a solution to suit them both.

Any advice you need, or support, we are here for you.

[chriscar]

Hi Guys

Firstly, thanks a lot for your friendly response.

Your parents are borderline solvent or insolvent on an asset basis as they possible could sell their property and repay creditors in full. However, how realistic is the valuation and would the sale price be achieved? Are there other trade creditors for your father? Is he up to date with his PAYE, VAT etc ?

From what I gather, my dad fell behind on both PAYE and VAT this year, however has some sort of arrangement in place. I have a feeling he may well have paid the VAT off and to be honest, if it came to it, I could pay his PAYE if need be.

Im not totally sure about trade creditors - I believe he has a couple of trade accounts but these are generally cleared monthly.

Their property should sell for £500,000-525,000 without too much of an issue (mortgage is about £350,000) - they had it valued last month realistically at £525,000. Its a really popular small village with limited property for sale, so would be easy I think. Their mortgage company gave an over the phone valuation of £350,000 which was laughable (they paid £450,000 for it in 2006 and did quite a bit of work) hence why they had it revalued anyway.

Obviously, I think they would ideally like to hold onto the property but its not the be all and end all - i think they just want everything cleared up and out of their hair, because all they seem to do is work to pay crazy credit card interest rates in my view...and now their starting to struggle.

As I said, the bank has actually been really supportive and have offered my dad a potential loan. They went and spoke to them and they were told they had 3 options looking at their assets and liabilities - an IVA, Bankruptcy or to remortgage/take a loan against/sell their house.

[MelanieGiles]

I think that your Mum and Dad should get a professional valuation of their property - perhaps on a forced sale basis - which might be disappointing in contrast to what they paid for the property, but will provide a very reaslistic current view of their solvency/insolvency.

The taking of further credit, to make an offer of reduced settlement to existing creditors is not necessarily a bad idea, but the bank making the offer are likely to be very concerned if their money is to be used to fund old unsecured creditor repayments.

I personally would advise that your parents seek professional advice as soon as possible. This will cost nothing, and there are a lot of firms who specialise in both personal and corporate insolvency who can look at your parents' personal and business trading position.

An IVA would not necessarily mean that they would lose their home, in fact this would probably be quite unlikely, and they may well be far better off by looking at an IVA based on them making monthly contributions for a five year period which has a definate end point, than an expensive loan which may well be susceptible to rising interest rates in the future and is likely to take far longer to pay off.

It is great to see their bank being so supportive - at a time when most of my business clients tell me that theirs is being very unhelpful. Presumably Mum and Dad have banked there for some time and built up a lot of good will there?

[chriscar]

Hi Melanie

Thanks a lot for your detailed response.

They have actually only banked with them for 2 years but it has to be said that by moving over was a very good move indeed. Excellent bank and very supportive.

I think my dad is concerned that people will be able to see he has an IVA against his name and this worries him - i.e. the competition in his business environment might get wind and start telling customers. Ultimately, the interest rates are crippling his business/life anyway so I think he needs to just review this himself.

In my view, on the surface considering an IVA would be their best route. They could have a fixed repayment and offer to settle the amount by sale of their house in the future or I could look at releasing equity from my home/business potentially.

One question...(sorry if its a bit like teaching granny to suck eggs!) but if you take an IVA is the interest just frozen or a new amount put in place to repay in addition?

Do you think, on the surface, the likelyhood of them obtaining an IVA would be possible? likewise, from your professional experience, what sort of an amount to repay is normally realistic/agreed for £140,000 worth of debt? I appreciate that it would depend on several factors but a ball park would be interesting.

Thanks again!

[MelanieGiles]

Interest is automatically frozen once an IVA has been accepted by creditors.

It is very hard for me to assess based on the brief details you have provided, as to what solutions are open to Mum and Dad - but at present it would appear that there are a number of options, and as ever I would always recommend them seeking direct professional advice as a matter of priority - so that they can begin to plan for their future.

[Needout]

chriscar

Take Melanies advise.
My advise, would be make sure that Melanie was one of the IP's that your parents spoke too. To give you an idea Melanie is still providing me with help and support via email at midnight. I travelled circa 300 miles each way to meet with her and everything you read on here about her methods and her ability to re-assure you that she is very fair and knowledgeable is true.

[Michael Peoples]

It is impossible to give a figure for how much your parents would have to pay without donig a full income and expenditure account and projections. However, it would be advisable to add up the monthly minimum payments including overdraft charges that your parents have to pay. At an average of 2.5% per month this would equate to £3,500 per month and unless your parents have this amount free, their debts are increasing by the difference each month.

They will need to sit down and list their personal expenses using your mother's salary and your father's profits[ after allowing for tax] and see what they have left after paying all the bills. It may well be that further secured borrowings is the answer but there may be the option of an IVA whereby creditors are repaid in a structured manor and interest and charges are frozen. They should certainly seek advice as Melanie says.