Help!
So there you are, living life with your family. You have a good job and wage, the wife works as well, kids in a good school, two nice cars, a beautiful modest home in an area you really like. This is as good as it gets. Of course over the years you and the spouse, (I’ll drop the male perspective from this point forward), have accumulated a few debts, credit cards, overdraft, a personal loan for some work on the house, etc. But you are servicing the debts just fine, but a change is in the air.
That change could be an increase in your mortgage payment, one of you is made redundant or has to have a decrease in their wage, you decide to have another child, or worse there is an illness that forces a financial change. Then what to do??
There are options, there are always options, but with a property and a family, bankruptcy should be a last resort.
If you experience a financial change for the worse, and the odds are most of us will, and it has decreased your household income to where you cannot service your current debts, but still have something to offer, you can look at the Individual Voluntary Arrangement (IVA) option. There are other options, but I want to concentrate on the IVA option at this time. The reason for this is that an IVA is a 5 year venture, not a quick fix, but it does allow a light at the end of the tunnel to be seen. Also, an IVA is a good way to preserve property, repay the debts in a manner you can afford, and is a formal way to do this.
IVA’s are set up and handled by an Insolvency Practitioner (IP); they are Chartered Accountants who specialise in insolvency. The IP puts together a detailed income and expenditure form to show to your creditors what you can realistically afford each month towards the debts. This is then sent to all your creditors in the form of a proposal and your creditors are allowed a time frame in which to vote to accept or decline the offer. As long as the majority of the creditors agree to the IVA, it is then binding to all and you begin making your payments. Sounds simple enough, and it is but of course this is just an overview.
There are a few points that do need to be addressed, one is about payments. There is a minimum level of payment creditors will accept based upon the level of debt you have. And IVA’s are only for unsecured debt. So if you cannot show a surplus of income that meets or exceeds the minimum a creditor will consider, then an IVA will not work for you. Again, an IVA is about affordability, so if you show a surplus each month that exceeds the minimum payment a creditor may accept, you are expected to pay that amount. This is due to the fact your creditors are making the huge concessions they are by freezing interest, etc they want to maximise their return. Fair enough.
Another point is what if you own property and it has equity in it. If you were to go bankrupt the property would be in peril, however an IVA is a way to preserve the property. In an IVA you are expected to release 75% of any equity in the property in the 5th and final year of the IVA. This valuation of equity is based upon today’s valuation, not in the 5 years later. The release can be done in a variety of ways, usually through a re-mortgage.
Also, what are the fees involved. There are companies that do charge fees up front to set up an IVA, Myvesta does not, but every IVA has some fees involved in it. These are the fees paid to the IP for setting up and handling the IVA. The fees are paid out of the agreed amount you are to pay back to your creditors, and the creditors agree to these fees. So to simplify, you make your payments for 5 years, some of this goes to the fees, and at the end of the 5 years, you are debt free.
Now an IVA is not for everyone, but if you are working and earning a wage, and maybe own property, and want to avoid bankruptcy, it is one of the better options out to accomplish this.
That change could be an increase in your mortgage payment, one of you is made redundant or has to have a decrease in their wage, you decide to have another child, or worse there is an illness that forces a financial change. Then what to do??
There are options, there are always options, but with a property and a family, bankruptcy should be a last resort.
If you experience a financial change for the worse, and the odds are most of us will, and it has decreased your household income to where you cannot service your current debts, but still have something to offer, you can look at the Individual Voluntary Arrangement (IVA) option. There are other options, but I want to concentrate on the IVA option at this time. The reason for this is that an IVA is a 5 year venture, not a quick fix, but it does allow a light at the end of the tunnel to be seen. Also, an IVA is a good way to preserve property, repay the debts in a manner you can afford, and is a formal way to do this.
IVA’s are set up and handled by an Insolvency Practitioner (IP); they are Chartered Accountants who specialise in insolvency. The IP puts together a detailed income and expenditure form to show to your creditors what you can realistically afford each month towards the debts. This is then sent to all your creditors in the form of a proposal and your creditors are allowed a time frame in which to vote to accept or decline the offer. As long as the majority of the creditors agree to the IVA, it is then binding to all and you begin making your payments. Sounds simple enough, and it is but of course this is just an overview.
There are a few points that do need to be addressed, one is about payments. There is a minimum level of payment creditors will accept based upon the level of debt you have. And IVA’s are only for unsecured debt. So if you cannot show a surplus of income that meets or exceeds the minimum a creditor will consider, then an IVA will not work for you. Again, an IVA is about affordability, so if you show a surplus each month that exceeds the minimum payment a creditor may accept, you are expected to pay that amount. This is due to the fact your creditors are making the huge concessions they are by freezing interest, etc they want to maximise their return. Fair enough.
Another point is what if you own property and it has equity in it. If you were to go bankrupt the property would be in peril, however an IVA is a way to preserve the property. In an IVA you are expected to release 75% of any equity in the property in the 5th and final year of the IVA. This valuation of equity is based upon today’s valuation, not in the 5 years later. The release can be done in a variety of ways, usually through a re-mortgage.
Also, what are the fees involved. There are companies that do charge fees up front to set up an IVA, Myvesta does not, but every IVA has some fees involved in it. These are the fees paid to the IP for setting up and handling the IVA. The fees are paid out of the agreed amount you are to pay back to your creditors, and the creditors agree to these fees. So to simplify, you make your payments for 5 years, some of this goes to the fees, and at the end of the 5 years, you are debt free.
Now an IVA is not for everyone, but if you are working and earning a wage, and maybe own property, and want to avoid bankruptcy, it is one of the better options out to accomplish this.
