another IVA / BR quandry

[gord1963]

Hi all

 

Myself and my partner entered an IVA 2 years back - we had about 90K joint debt ( 30K was NR together loan )

 

Our payments were £870 over 6 years ( extra year because of NR )

 

It was tough but we both earned good money so went with it - Last year I got made redundant and got 20K . The IP agreed that we could use the redundancy to pay our bills and keep up with the IVA.

 

The long and short of it was that in 8 months I didnt find work ( I work in an industry that is shrinking ) after 8.5 months I got a full time job but at about 30% less income than before. It more or less makes the IVA impossible as I cant see me increasiung ny salary in the short term.

 

Now the IP is going to apply to the cfreditors for a change in circumstances - but it is doubtfull this will go through - but you never know We are thinking now that is it worth it - another 4 years of fighting on little disposable as the budget never works- petrol has gone through the roof, as has leccy and food- but the budget never changes to that extent.

 

We are looking at ending the battlle and going BR - we still must owe about 70K .

 

My only big concern is the house. Our morgage is now 270 000 ( we paid £295 ) and we reckon that the house is probably worth around the 270/ 280 - ( bought at the peak in 2007 )

 

we can still service the mortgage but would the OR want our property on such a marginal call on the equity . NR is the biggest creditor by far - with HSBC the next .

 

Got a lot of thinking to do and would welcome any feednback

 

[Wintry]

Hi all

 

Myself and my partner entered an IVA 2 years back - we had about 90K joint debt ( 30K was NR together loan )

 

Our payments were £870 over 6 years ( extra year because of NR )

 

It was tough but we both earned good money so went with it - Last year I got made redundant and got 20K . The IP agreed that we could use the redundancy to pay our bills and keep up with the IVA.

 

The long and short of it was that in 8 months I didnt find work ( I work in an industry that is shrinking ) after 8.5 months I got a full time job but at about 30% less income than before. It more or less makes the IVA impossible as I cant see me increasiung ny salary in the short term.

 

Now the IP is going to apply to the cfreditors for a change in circumstances - but it is doubtfull this will go through - but you never know We are thinking now that is it worth it - another 4 years of fighting on little disposable as the budget never works- petrol has gone through the roof, as has leccy and food- but the budget never changes to that extent.

 

We are looking at ending the battlle and going BR - we still must owe about 70K .

 

My only big concern is the house. Our morgage is now 270 000 ( we paid £295 ) and we reckon that the house is probably worth around the 270/ 280 - ( bought at the peak in 2007 )

 

we can still service the mortgage but would the OR want our property on such a marginal call on the equity . NR is the biggest creditor by far - with HSBC the next .

 

Got a lot of thinking to do and would welcome any feednback

 

 

Hi gord

 

Might be a good idea to get an up to date valuation on your property

 

Have a look through these links to the I/S manuals to start with, might give you some insight into what you are asking.

 

http://www.insolvency.gov.uk/freedomofinformation/technical/TechnicalManual/Ch25-36/Chapter33/Introduction/Introduction.htm#$33345

 

http://www.insolvency.gov.uk/freedomofinformation/technical/TechnicalManual/Ch25-36/Chapter31/part7/part4/part_4.htm#31.7.82

Edited June 14, 2011 by Wintry

[gord1963]

Thanks wintry

 

At first glance ( these gov reports are sooo complicated ) the rules have now changed , The OR will now wait for 2 years 3 months and then decide what to do with the house ?

 

Reading the report it only takes about £1000 of perceived equiitu and then they will look to sell the Benificial Interest to eitjher my creditors or other party

 

This doesnt look good as even after BR you have 21/2 years of worryto wait and see if you are going to be turfed out if the market recovers a bit and you slip into a little equity - But the value of your house is only what someone will pay anyway

 

Is that how people here interpret it ?

[sequenci]

You've got it spot on.

[gord1963]

well I am rightly donald ducked then - as in 3 years time there is bound to be a bit of an increase in prices from 2007 - Makes one wonder if it ois worth paying a mortgage for 2 years of £1500 ( interest only ) only to be turfed out - might as well just stop paying and hold out till repo and then use the money to try and get a rental - I wouldnt worry so much if it werer just me but have a 5 year old and its her home

[Wintry]

well I am rightly donald ducked then - as in 3 years time there is bound to be a bit of an increase in prices from 2007 - Makes one wonder if it ois worth paying a mortgage for 2 years of £1500 ( interest only ) only to be turfed out - might as well just stop paying and hold out till repo and then use the money to try and get a rental - I wouldnt worry so much if it werer just me but have a 5 year old and its her home

 

Hi gord

 

A point worth noting reading what you have put here -

 

-If you do eventually decide to go B/R and end up renting, your disposable income for IPA / IPO purposes may be much higher due to the difference between your current mortgage and presumably lower rent payments.

 

New rules came in for IPAs / IPOs around December 1st 2010

 

PS - I am also hearing that some of the expenditure figures suggested for food / housekeeping in relation to bankruptcy & IPAs are rather interesting compared the CFS 'and that'.

 

Interesting times ahead in the bankruptcy world, and perhaps a few 'challenges here and there' me thinks

Edited June 15, 2011 by Wintry

[gord1963]

yes wintry I get the sense that the powers that be have looked at the rise of BR and have decided to make things a little tougher - though I cant for the life of me think why.

 

I mean why kick people when they are really down - deciding to go BR is hard enough but to have the shadow of loosing your house after 3 years over you is tough.

 

In my own situation keeping the house is my no 1 priority - I know its just bricks and all that , but it is a home and I have put a lot of work in it the past 4 years,

 

My own situatioin is that we cannot contiinue with two IVA's on current income levels . But I am looking into just failing 1 ( me ) as our IVA's were seperate, That way even if I go BR my other half could continue with her IVA and her interest in the house would protect us from loosing the property - I think -

 

Got a lot of thinking and playing with numbers over the weekend.

 

In a years time we come of 6.4% fixed rate and go onto NR standard varialble - so that would release about £400 of income - not sure ihow NR treat people who have defaulted when they are off fixed rates. Knowing my luck they will have a special rate just for us !!

[sequenci]

yes wintry I get the sense that the powers that be have looked at the rise of BR and have decided to make things a little tougher - though I cant for the life of me think why.

I can see the logic completely, however I don't feel that the changes were executed very well - but that's typical of the Insolvency Service.

 

Bankruptcy is supposed to be THE last-resort, and as such I personally feel that the changes are fair and reasonable. People may disagree with that but I think their is a duty to try and meet a fair balance between the individual, the creditors and (to a lesser extent) the trustee/OR

 

I mean why kick people when they are really down - deciding to go BR is hard enough but to have the shadow of loosing your house after 3 years over you is tough.

 

You may be able to keep the property providing someone buys your 'beneficial interest'

 

My own situatioin is that we cannot contiinue with two IVA's on current income levels . But I am looking into just failing 1 ( me ) as our IVA's were seperate, That way even if I go BR my other half could continue with her IVA and her interest in the house would protect us from loosing the property - I think -

That's not the case. You could be held under the 2+3 rule if just one of you petitions

 

In a years time we come of 6.4% fixed rate and go onto NR standard varialble - so that would release about £400 of income - not sure ihow NR treat people who have defaulted when they are off fixed rates. Knowing my luck they will have a special rate just for us !!

 

That's encouraging. If the IVA doesn't work out you may be in a position to informally negotiate a much reduced payment with a view to increasing it next year?

[gord1963]

I can see the logic completely, however I don't feel that the changes were executed very well - but that's typical of the Insolvency Service.

 

Bankruptcy is supposed to be THE last-resort, and as such I personally feel that the changes are fair and reasonable. People may disagree with that but I think their is a duty to try and meet a fair balance between the individual, the creditors and (to a lesser extent) the trustee/OR

 

 

 

You may be able to keep the property providing someone buys your 'beneficial interest'

 

 

That's not the case. You could be held under the 2+3 rule if just one of you petitions

 

 

 

That's encouraging. If the IVA doesn't work out you may be in a position to informally negotiate a much reduced payment with a view to increasing it next year?

 

 

 

 

 

what do you mean by the 2 + 3 rule

 

Just to recap our IVA's were both seperate and individual - sure some of the debts were joint but our IVA's were not linked -

[sequenci]

what do you mean by the 2 + 3 rule

 

Just to recap our IVA's were both seperate and individual - sure some of the debts were joint but our IVA's were not linked -

 

Sorry. I mean if one person is declared bankrupt and the house is jointly owned the official receiver could still wish to have the house sold. 2+3 rule is the whole two years and three months thing.

 

Who sold you the IVA by the way?

[gord1963]

ok I see - the whole beneficial interest is confusing if my partner was still paying her IVA and we werer up to date with the mortgage could the OR still force a sell against her will - I need some good advice on what is the best way to go here - s

 

Phillip Gill sold the IVA - they have a BR divison as well so will see what they say -

[sequenci]

if my partner was still paying her IVA and we werer up to date with the mortgage could the OR still force a sell against her will

 

They could, yes.

 

Obviosuly *if* the house is sold your partner would be given their share of the equity from the sale proceeds.

[Wintry]

I can see the logic completely, however I don't feel that the changes were executed very well - but that's typical of the Insolvency Service.

 

Bankruptcy is supposed to be THE last-resort, and as such I personally feel that the changes are fair and reasonable. People may disagree with that but I think their is a duty to try and meet a fair balance between the individual, the creditors and (to a lesser extent) the trustee/OR

 

Hi sequenci, how are you?

 

Last resort', well I suppose the interpretation could be open to some debate.

 

Bankruptcy is a formal solution for dealing with your debts and you would like to think it also gives people a fresh start.

 

If it does not then what is the point?

 

How many issues do we see and hear about with IVAs (another formal solution) and what good does it do anyone where the debtors problems are lets say prolonged and seemingly with no fresh start whatever the solution.

 

The new rules are here and we all rightly have our opinions.

 

The interesting debate may well turn out to be what expenditure figures are being allowed / quoted as far as IPAs are concerned?

 

What set of figures are the O/R actually using as guidelines -

 

As mentioned in my previous post I am hearing of some interesting ones and the challenges will come if these are correct and in the end the DJ may well have to decide.

 

What good will it do anybody if people struggle with IPAs and maybe then fall behind with priority expenditure such as mortgage, rent, council tax & other essentials etc (as I have seen with IVAs)

 

Last resort, new rules, ok then, but as I say, I thought the idea was also to give people a genuine fresh start.

 

Interesting times

Edited June 17, 2011 by Wintry

[debtinfo]

Its interesting that you only pick up on 1 point of bankruptcy (the fresh start)

 

there are 2 others

 

one is that a full investigation into your affairs can be conducted

 

secondly is that as much money is recovered to pay the fees and creditors whilst providing enough to the bankrupt to cover reasonable expenses, no more than that

 

The OR has to balance those competing interests wheras the bankrupt only realy thinks about one of them

[Wintry]

Its interesting that you only pick up on 1 point of bankruptcy (the fresh start)

 

there are 2 others

 

one is that a full investigation into your affairs can be conducted

 

secondly is that as much money is recovered to pay the fees and creditors whilst providing enough to the bankrupt to cover reasonable expenses, no more than that

 

The OR has to balance those competing interests wheras the bankrupt only realy thinks about one of them

 

 

Hello debtinfo

 

Yes, I am familiar with the bankruptcy procedure.

 

Well, as I have already said I think the debate since the changes were brought in will be around IPAs & IPOs which to the bankrupts and their family will no doubt be of particular interest and importance.

 

As I have also said I am hearing (and seeing for that matter) some interesting figures mentioned with regard to IPAs and it has made me wonder what set of expenditure figures they are based on as they seem a little low to me in certain areas so to speak.

 

Interesting para's from the tech manual below debtinfo -

 

 

31.7.23 Ensuring expenditure claimed is sufficient to meet reasonable domestic needs

It may be necessary when examining the figures provided by the bankrupt to consider other areas of expenditure which the bankrupt may not have included, but which are necessary for meeting their reasonable domestic needs. Some bankrupts may find it difficult to assess the outgoings of themselves/and or their family where the expenditure is sporadic rather than monthly, or prior to bankruptcy they have not been in a position to meet their reasonable domestic needs as a result of other pressing debt repayments. In these circumstances it may be necessary for the official receiver/trustee to refer to average expenditure figures (such as those provided in the Household Expenditure Survey (HES) see also paragraph 31.7.26) in order to calculate the realistic outgoings required to meet the reasonable domestic needs of the bankrupt and his/her family. It is important to remember that it is the reasonable domestic needs of the bankrupt and his/her family that need to be considered, [Note 1] not just their basic domestic needs [Note 2]. See also Part 1 Section 3 of this chapter regarding reasonable domestic need and Part 4 of this chapter regarding expenditure.

 

31.7.24 “Fresh start” not to be compromised by level of IPA/IPO contribution

Whilst the assessment of income and expenditure with regard to obtaining an IPA/IPO is intended to provide a return to the creditors where possible, it must also be remembered that the bankruptcy legislation is intended to provide the individual with an opportunity to start afresh and remain solvent in the future, so his/her expenditure should not be cut to a level where he/she will have difficulty funding his/her reasonable domestic needs .

 

Now, this is where I am coming from debtinfo -

 

If the expenditure figures do not appear to high enough then I believe it right and proper that they may be challenged (and they are being)

 

I think the letters to the O/R may go something like this -

 

"We write in response to your letter addressed to our client concerning his proposed Income Payment Agreement under section 310A of the Insolvency Act 1986.

 

I see from your letters that you have prepared an IPA based on their disposable income (£xxx for Mr X)

 

We are a little concerned that some of the allowances mentioned (housekeeping and utilities for example) are on the low side with regard to Mr X and his families reasonable needs.

 

Taking the above into account we would request that you furnish us with a breakdown of the actual figures you have used to assess our clients income and expenditure with regard to the proposed IPA so that we can advise him further."

 

"Recorded delivery"

 

 

debtinfo, the word is they do not want to be hanging around the courts much.

 

What do you say debtinfo?

Edited June 18, 2011 by Wintry

[debtinfo]

it has made me wonder what set of expenditure figures they are based on

 

You ask the above the question and then you answer it

 

In these circumstances it may be necessary for the official receiver/trustee to refer to average expenditure figures (such as those provided in the Household Expenditure Survey (HES) see also paragraph 31.7.26) in order to calculate the realistic outgoings required to meet the reasonable domestic needs of the bankrupt and his/her family

 

 

So what are you actually asking, you seem to have answered your own question

[debtinfo]

I should add that the OR is nearly always happy to provide a copy of their calculations if requested to do so, it is an agreement after all.

 

The OR is also quite happy to take the matter to court too if they think the bankrupt is taking the ****

[Wintry]

it has made me wonder what set of expenditure figures they are based on

 

You ask the above the question and then you answer it

 

In these circumstances it may be necessary for the official receiver/trustee to refer to average expenditure figures (such as those provided in the Household Expenditure Survey (HES) see also paragraph 31.7.26) in order to calculate the realistic outgoings required to meet the reasonable domestic needs of the bankrupt and his/her family

 

 

So what are you actually asking, you seem to have answered your own question

 

Hi

 

Read the post properly debtinfo

 

And then show me where I actually answer it (not a quote from the tech manual)

 

The HES is not the law either - also some of the figures are also interesting compared to the CFS

 

I believe the CFS is used for Debt Relief Orders & the Mortgage Rescue Scheme (MRS) by the way.

 

Taking the pxxx can work both ways as can script reading and is pointless and a waste of everybodys time.

 

Yes, I know a few people who are looking forward to browsing through the calculations especially the housekeeping and utilities sections.

 

I suppose it can also basically come down to who is actually dealing with what so to speak.

 

The court issue, well I will be surprised if any of the ones I have seen will end up at court which may beg some rather interesting questions - and I agree with the happy bit about going to court if people think someone is taking the pxxx or even trying to pull the wool over the eyes so to speak if you get the drift (it wont work)

 

Will let you know how it goes the best I can.

 

And as I have said this area is likely to become the subject of some debate in the coming months.

 

debtinfo, as in my opinion you did not seem to address / answer many of my points - heres a question for you -

 

Do you agree that it is right and proper than an IPA should be challenged if a number of the expenditure figures do not appear to be high enough etc?

 

PS -

 

I always maintain that it is also important to take an independent view on these things.

Edited June 18, 2011 by Wintry

[debtinfo]

no you ask Where do they get there figures from and the IS quite clearly say where they get their figures from, im not sure how you dont understand where they get there figures from, they even post it on their website for people like you to read it.

 

Could it be that you understand quite clearly where they get their figures from and that you simply dont agree with it, or are you saying that they are not getting their figures from the HES as they say they are.

 

 

I believe that the bankrupt should engage in calm and effective discussions with the OR to make sure that all reasonable costs are accounted for. As you can see from the above quote that is what the IS thinks as well.

 

You always seem to go at it like a bull in a china store Wintry.

 

also when you say the ones that i have seen, is that in an official capacity, ones on here at CAG or just others in general.

 

I have a question for you.

Do you believe that the bankrupt should make every effort to pay into the bankruptcy every penny that they do not require to live a reasonable lifestyle

[Wintry]

no you ask Where do they get there figures from and the IS quite clearly say where they get their figures from, im not sure how you dont understand where they get there figures from, they even post it on their website for people like you to read it.

 

Could it be that you understand quite clearly where they get their figures from and that you simply dont agree with it, or are you saying that they are not getting their figures from the HES as they say they are.

 

 

I believe that the bankrupt should engage in calm and effective discussions with the OR to make sure that all reasonable costs are accounted for. As you can see from the above quote that is what the IS thinks as well.

 

You always seem to go at it like a bull in a china store Wintry.

 

also when you say the ones that i have seen, is that in an official capacity, ones on here at CAG or just others in general.

 

I have a question for you.

Do you believe that the bankrupt should make every effort to pay into the bankruptcy every penny that they do not require to live a reasonable lifestyle

 

Hi debtinfo

 

No, calm down, take your time and again please read the post properly.

 

"It has made me wonder" is what I have put and I have not answered my own question (you have used a quote from the tech manual)

 

It seems that when you are struggling with the debate you would like to put words in my mouth but I am afraid it does not work with me.

 

I am talking about cases that I am involved in and responsible for, nothing to do with the ones on CAG or in general whatever that means.

 

As I have already said I will let you know the best I can.

 

I am of the opinion that there needs to be much more clarity as to the expenditure figures allowed in bankruptcy as advisers, people considering bankruptcy and actual bankrupts need to know where they stand both before and after they go bankrupt. How can you use one set of figures for other formal solutions (DROs) and remedies and have a different set for bankruptcy.

 

Once a bankrupt has agreed an IPA then of course they should make every effort to pay - please debtinfo calm down on the toytown questions this is a very serious issue for bankrupts and their families and has to be dealt with in a professional non - judgemental manner.

 

Once again debtinfo, in my opinion you have not addresed the important points I have raised or even answered the simpliest of questions.

Edited June 18, 2011 by Wintry

[gord1963]

I think the important point is that the IPA cannot be too brutal that the debtor starts to struggle and then misses other paymentys such as utilities and council tax - they back to the beginning. The problem a lot of people have is that job market is a nightmare - salarys are at rock bottom so if you do have to switch jobs then it can cause problems.

 

That was the problem with the IVA we- went with a fairly tough budget - and as soon as my circumstances changed after two years - then boom the IVA became untenable. It cetainly is not a very adaptable product,

 

However in all cases like mine and people who are in difficulty all we can do is cross each bridge when it comes with enough knowledge to get across . Thats where places like this help -

 

My chief concern now is how to avoid loosing our house . so need to get my head round beneficial interest - how it works and what is the best option.

 

Getting an valuation done soon on property to see where we are . As a family we can probably keep one half of the IVA going - just got to decide if that makes sense ,

[Wintry]

Hi

 

Taking into account that I have mentioned the Common Financial Statement (CFS) a few times on this and other threads here is link for those who may not be too familiar -

 

http://www.cfs.moneyadvicetrust.org/

 

PS - hope things eventually turn out ok for you gord and let us know how you go on if you can.

[debtinfo]

although the CFS is not that much use in bankruptcy because it is not used or required to be used in bankruptcy and IPA's, although it can give an idea of the sorts of things to be included

 

The main thing in an IPA is to communicate well with the examiner and explain what you need and why, every case is differnt and the Examiner is allowed to include anything that fits the description of being required for a reasonable standard of living.

 

So dont just let someone else tell you what to put down, put down everything that you think you need, It is best to put too much down and prepare for the odd thing to be knocked back or reduced rather than to not ask the question beacuse you think that it wont be allowed

[Wintry]

Hi debtinfo

 

"although the CFS is not that much use in bankruptcy because it is not used or required to be used in bankruptcy and IPA's, although it can give an idea of the sorts of things to be included"

 

A slight contradiction here and just your opinion - please tell us what is to be used in bankruptcy and IPAs as I believe you have already mentioned negotiation - is there any excact figures set in stone?

 

Also do you actually know what the Common Financial Statement trigger figures are?

 

There are many people who cannot handle bankruptcy by themselves and that is why there are independent, impartial debt advice agencies who can fully advise them on all their options and assist, support them before, during and after bankruptcy.

 

There are many people who choose to obtain advice from free independent agencies and indeed the fee charging sector - the first thing the court usually ask someone who is petitioning for bankruptcy is " have you had proper advice and who from?

 

As far as I am aware examiners are not debt advisers and therefore I assume that they cannot really officiially give advice on debt or bankruptcy for that matter and they are certainly not the law (if i am mistaken then someone please correct me)

 

Indeed do the Insolvency Service not recommend independent impartial advice agencies.

 

I certainly agree with debtinfo on one thing though, and it is this - "so dont just let someone else tell you what to put down"

 

If necessary there are agencies / advisers that can & will independently advise and assist you with the O/R and it would be utter nonsense if someone suggested otherwise. If in doubt get proper independent, impartial, non-judgemental advice - it is your right.

Edited July 2, 2011 by Wintry

[debtinfo]

is there any excact figures set in stone?

 

No there are not, there is only one sentence set down in law as to how the IPA/IPO should be worked out and it is as follows

 

The court shall not make an income payments order the effect of which would be to reduce the income of the bankrupt [F3when taken together with any payments to which subsection (8) applies] below what appears to the court to be necessary for meeting the reasonable domestic needs of the bankrupt and his family.

 

 

That is it, no recomended way of working out, no saying how much for food or rent oranything else just that one sentence which the OR is to interpret themselves.

 

 

When the judge asks if the person has taken advice it is solely so that they understand how bankruptcy works not for that advisor to work out every last detail of the case. The Advisor is not to tell the bankrupt how much they should put down for each expenditure item, there are no allowances that people can or cant have as such, every case is dealt with on its merit as each is different and so the figures that go down should come from the bankrupt, what they need and they should be able to communicate why they need that amount to the examiner. What the advisor can do is point out areas where the bankrupt may not have thought to have put anything down, for example they may have petrol and insurance down but the advisor may point out that the car may need repairs etc in the future.

 

Examiners strictly do not give advice as they are not on the bankrupts side as such, but they do make decisions about the case. All exainers as a minimum have a years training and complete a certificate in Insolvency practitionership.

 

All those decisions fall under the responsibility of the Official receiver who is an officer of the court so "they are sort of the law" although as always in the law they are subject to appeal further up the chain directly to the judge at the local court

 

The Official Receivers are required and appoited by the court in each case in their juristiction, whereas the advisor is not