Who is behind this ...

[Cybus]

I have seen a number of letters recently all in the same type face and all with the same content and all from debtors suggesting they have intentionally defaulted on the terms of their arrangements and are opting to go bankrupt ...

Date xx/xx/xxxx

Dear Sir / Madam,

You will note that payments to my Individual Voluntary Arrangement (IVA) have not been made recently.

Under the conditions of the initial proposal, the IVA is now in default. In view of this and after much consideration, I have decided that bankruptcy is a more appropriate form of insolvency for my circumstances.

I fully understand the implications of my actions and respectfully request that you forward to me, by return, a letter or certificate of default, for me to present to the District Judge with my debtor petition.

I thank you in anticipation of your prompt attention to the matter.

Yours sincerely

Debtor Name
Debtor Address

Have these debtors spoken to someone who has more than likely coerced them in to making such a decision?

Have these debtors been told that they don't have to feel any responsibility for their debts and should just walk away?

In none of the instances, that I am aware of, has the debtor made or attempted to make contact with the IP to explain what they are doing or why they are doing it.

To those people who are considering sending such a letter to their IP, I would ask you to seriously think about what you are doing and why you are doing it. Are you doing it because someone who wants to make money out of you has suggested that because you have no assets, you should automatically feel no obligation to repay your creditors and should therefore go bankrupt? I'll bet a shiny pound that those very same people would also be wishing to charge you a fee for the privilege of filling in some forms on your behalf to assist in petitioning for your bankruptcy?

All I would say is that if you are determined to go bankrupt, you would be far better off doing everything yourself as you can do it at a fraction of the price you will be quoted.

Have they also convinced the debtor that they will no longer have to pay a voluntary contribution to an IVA, that they will have that money to keep themselves and not advised of the possibility they would have to pay Income Payments to the Trustee in Bankruptcy?

When the OR makes their initial enquiries, I wonder how many would be met with something along the lines of 'Yes I acted as Supervisor of an IVA for this debtor, who had been compliant with the terms, but suddenly, out of the blue they stopped making contributions and made themselves bankrupt.'

I would be very interested to hear what advice anyone (Considering sending such a letter) has been given and by whom.

[size5]

The list of possible suspects isn't a very long one and I suspect that someone IS making money along the lines you have indicated.

[ianmillington]

Indeed

More and more people are being taken in by these outfits. It is irksome but, in the long term, given that these outfits exist, it's now down to us I think to make sure that there is effective communication between us and the people for whom we are doing IVAs. I think we are potentially going to be our own best defence to this threat.

I note you are being asked to write a letter for presentation to the District Judge. If a debtors conduct has been exemplary thus far, you could say so. It would be very interesting if a few district judges started asking a few questions at the petition stage.

FYI I believe this cost is £1k plus the petition fee plus the OR deposit. Great value!

Ian

[Reviva UK]

The reason that these letters are starting to pop up is that in some courts the bankruptcy clerl is refusing to put forward the debtors proposal UNLESS there is clear evidence that the IVA has failed. Thus the requirement for a termination letter.

If you would like to give me the geographic area I would probably be able to let you know the originators

[ianmillington]

That's a very valid point Paul. I have always had doubts about the ability of a debtor who is in an IVA to present a petition before it has failed/terminated. Is the debtor insolvent, given that the debts have been compromised? Cybus I would see this as an opportunity to contact the debtors and find out just what is going on, I think.

Ian

[Cybus]

I have seen one for a debtor who is two years in to their IVA and has never missed a payment and has in fact sent in their letter a wee bit too early for them to be in breach.

It would be most interesting to hear a District Judge's thoughts when he is presented with a petition from a debtor who has been in an IVA and has in fact complied with the terms up to the point of receiving a letter , no doubt suggesting that they have either been mis-sold an IVA or that they had been given poor advice because they should have gone bankrupt instead.

Perhaps those advising them are not considering the proposals and chairman's report ... possibly because they cannot get such information from the EIIR.

I wonder also, have we entered a time in which we will see a rise in the number of 'Bankruptcy Factories'?

I have asked the IVA Council, via their forum, why they feel that a debtor with no assets should go bankrupt as opposed to entering in to an IVA? They have not responded, but unless you are posting something anti IVA on their site, they are either unable or unwilling to answer what at the end of a day is a very simple question. They seem intent in imposing their view on debtors but provide no explantion why. Is that possibly because they have become a front for such a 'Bankruptcy Factory' and as such are earning a fee from this.

All their wonderful claims about QC's compiling a comprehensive case against mis-selling ... complete trash?

More likely, the enquiries they have received as a result of their correspondence are now being passed on, for a fee, to an equally shady outfit providing assistance to complete some very simple forms that any debtor with an ounce of common sense and with a desire to do so, could do for themselves at a fraction of the price.

I forgot to mention the whole credit record ... that's going to start another 6 year period from the date of the Bankruptcy Order, unless I am mistaken

[Emily]

So is the IVA council responsible????

[Skippy]

I went BR before my IVA had been officially terminated. I made my last payment in January last year and it was well over 3 months before my IP sent out the letter of termination, despite the fact he knew I was going BR and had advised me to do so!

Does the fact that some judges want proof of termination mean that I would have been left in limbo until I received the letter?

[ianmillington]

I recently took a call, out of the blue, from a client of another firm who was about to scupper an 2 year old IVA with which he had hitherto been quite happy. He called me just before pulling the trigger. He had been contacted by IVAC who- quite frankly, only promoted the bad side of IVAs and the good side of Bankruptcy. He knew nothing about BROs for example.

If an IVA is 2 years old, the additional costs may well make any savings in contributions marginal. They had also "overlooked" telling this chap that the 6 year blight on his credit rating would start again from day 1.

Ian

[MelanieGiles]

I don't see why the IVA has to fail before a debtor can apply for bankruptcy - surely that is a matter of choice for the debtor at the time? Of course I do not condone the position of certain "bankruptcy assist" firms who are in this to make a quick buck.

[ianmillington]

The only reason I ask the question is that because all the creditors claims have been compromised, which itself supports an application for annulment of a bankruptcy order, there is logically an argument that until the compromise has come to an end the debtor has no enforceable debt - only the obligations towards the IVA. I've seen no reported cases though.

I can only recall one instance, several years ago, where a debtor applied for a BO without telling me first. In that case the Court refused to make the Order in the absence of my opinion.

Life is interesting, isn't it?

[MelanieGiles]

Our brain cells are definately being tested this week Ian, that's for sure! I take the view that the debts are still debts throughout the IVA and forgiveness is not reached until the final IVA payment has been made by the debtor, so there are still good grounds for bankruptcy - but I am glad that the Courts may be taking a more robust stance as I have had one or two surprises in my mailbag over the years!