Coming out of an IVA

[tgm1974]

I am currently going through an IVA at the moment and have probably been paying into it for the past 4 months.

I am currently under redundancy and due to finish work in June 2009. My question at the moment is what effect it would have on me if I came out of the IVA early? I believe that for the first few payments you make the majority of this money goes to pay the Companies fees you are having handle the IVA ..... this would therefore mean that my creditors have not received any monies on my behalf towards my debts. One particular debt I was paying was �400.00 - this was a loan I had with RBS. Would this therefore mean that I would be 3 months in arrears with them if I came out of the IVA and decided to handle the debt myself.

My main reason for questioning about withdrawing from the IVA is the risk that I may also be pregnant. In this case the �13k redundancy I am looking to receive would be there for me as a safety net whilst I look for another job after my maternity entitlement ... instead of paying �12k to the IVA that I agreed to do to pay off all my debts within 12 months!

Any advice????

[Ethel]

So you want to keep your redundancy for yourself instead of paying your creditors.

The only way you can finish your IVA early is to pay your creditors in full; or go bankrupt.

If you go bankrupt all monies you have coming in will go through the trustees in bankruptcy and they will use your redundancy to pay off your creditors.

There is a standard clause in your IVA that says you must pay off as much debt as possible with any lump sum payment you receive, from any source.

[tgm1974]

Thought as much .... Im just thinking outside the box at the moment as Id prefer to keep my redundancy to myself now. Circumstances arising!!

I was also told by another financial company, at the weekend, that when I look to re-mortgage in November it could be difficult!!

[Ethel]

It will be very difficult for you to remortgage - you have debt problems and will be seen as a risk.

Use your redundancy to pay off your debts. Companies go bust and people lose their jobs because people don't pay them what they owe.

At least then you will b starting with a clean slate.

[themas]

Without reading all the terms of your IVA it is not possible to say with certainty what would happen if you fail it. I doubt whether there is anything in it which means you HAVE to pay them your redundancy money, but there will -as Ethel says - very likely be something saying in effect that if you don't pay any lump sum you receive the IVA has failed.

What happens if it does fail is that your debt position is back to square 1 - you still have all the debts you had when you started the IVA (minus any money the creditors actually received), with interest etc. added on to them. Also, some IVAs include a clause requiring the IP to bankrupt you if the IVA fails.

If you are bankrupted (or go bankrupt yourself) then - again as Ethel says - you will lose the redundancy money, although not necessarily all of it as you might have an argument for keeping some of it to live on if you are pregnant & unable to work. This would be for the OR to decide.

If you fail the IVA & do not become bankrupt you will have to make your own arrangements with your creditors.

If you are going to have to claim means tested benefits (income support; housing benefit etc.) which is possible if you have a baby then you need to be careful to make absolutely certain that any payments you make out of the redundancy money are for debts payment of which has already been demanded, otherwise the DWP may treat you as still having the capital & reduce your benefits. I imagine you will be able to prove this as I assume all the debts will have been demanded before they went into the IVA, but you do need to be certain about it.

If you need to talk all this through it would be worth a visit to your loal CAB.