If you have a debt problem, you may also owe money to a family member or friend. We consider whether you can keep up the payments to family debts while carrying out an IVA with all your other creditors.
One of the general rules if you are considering an individual voluntary arrangement (IVA) is that all of your unsecured creditors should be treated in the same way.
This means that all unsecured debts should be included in the arrangement so that none are paid over and above any others.
You can therefore include in your IVA private debts to either family members or friends who have lent you money as long as you can prove they exist.
Including family debts
Of course including private debts in your IVA will mean that the person you owe money to will find out that you are proposing an IVA. All the creditors you list will be officially informed by the insolvency practitioner (IP).
A major advantage of including these private debts is that your friend or family member will be eligible to vote on the IVA proposal. Given that they want to help you, their acceptance of the agreement could override other creditors who would otherwise have said no.
Once your IVA is in place, depending on the circumstances, your friend or family member may not be able to share in the proceeds of the IVA if your other commercial creditors specifically request this.
However, as an included creditor, they will then be prevented from taking any further legal action against you to try and collect the money you owe them.
Excluding family debts
It is possible that you may not want to include the debt you owe to your family member in your IVA. Perhaps you do not want them to find out about your situation or you feel you cannot stop paying them.
You do have the option to leave out your friends and family debt. However you cannot then include a budget for continuing to repay it in your living expenses.
Including a budget to pay the loan would reduce the amount available for your IVA payment and ultimately reduce the return to your other creditors. This would be seen as a preferential payment and the other creditors would be unlikely agree to it meaning that your IVA would not be accepted.
Having said that, once your living expenditure budget and monthly IVA payment is agreed, there is nothing then to stop you using some of your agreed living expenses budget to continue to make payments to friends or family.
It is your agreed budget and you can spend it in any way that you like.
However, you should only plan to do this if you can afford to maintain all of your essential living expenses plus your agreed IVA payment.
Resuming payments after your IVA
You should not try and maintain a private loan payment if this puts your IVA payment at risk.
If trying to continue paying your family loan debt means that you struggle in other areas and ultimately start to miss your IVA payments, this could put you in a very serious position.
Doing so could put your IVA at risk of failure and you could face being forced into bankruptcy.
Remember, once your IVA has finished, you can always restart your payments towards your private debt and even significantly increase what you have been paying each month as you will no longer have any other unsecured debt payments to worry about.
Whether or not you decide to include private debts to family or friends in an IVA will ultimately depend on your circumstances and the relationship you have with the family member in question.
As such, there are advantages and disadvantages to including such debts depending on your perspective.
However, if you are concerned that your friend or family member is relying on you to keep up your payments to them in full so that they can in turn pay for a loan which they have taken on your behalf, it is important to understand that you may not be able to do this if you start an IVA.
It is therefore important to think very carefully and get the right advice before starting an IVA solution.
If you are struggling with debt, visit www.beatmydebt.com
Our vibrant debt forum gives free access to industry experts and others who have suffered with debt problems.
Useful guides, calculators and information are also available designed to help you understand how to manage and resolve debt problems.
Article Source: http://EzineArticles.com/?expert=James_Falla
One of the general rules if you are considering an individual voluntary arrangement (IVA) is that all of your unsecured creditors should be treated in the same way.
This means that all unsecured debts should be included in the arrangement so that none are paid over and above any others.
You can therefore include in your IVA private debts to either family members or friends who have lent you money as long as you can prove they exist.
Including family debts
Of course including private debts in your IVA will mean that the person you owe money to will find out that you are proposing an IVA. All the creditors you list will be officially informed by the insolvency practitioner (IP).
A major advantage of including these private debts is that your friend or family member will be eligible to vote on the IVA proposal. Given that they want to help you, their acceptance of the agreement could override other creditors who would otherwise have said no.
Once your IVA is in place, depending on the circumstances, your friend or family member may not be able to share in the proceeds of the IVA if your other commercial creditors specifically request this.
However, as an included creditor, they will then be prevented from taking any further legal action against you to try and collect the money you owe them.
Excluding family debts
It is possible that you may not want to include the debt you owe to your family member in your IVA. Perhaps you do not want them to find out about your situation or you feel you cannot stop paying them.
You do have the option to leave out your friends and family debt. However you cannot then include a budget for continuing to repay it in your living expenses.
Including a budget to pay the loan would reduce the amount available for your IVA payment and ultimately reduce the return to your other creditors. This would be seen as a preferential payment and the other creditors would be unlikely agree to it meaning that your IVA would not be accepted.
Having said that, once your living expenditure budget and monthly IVA payment is agreed, there is nothing then to stop you using some of your agreed living expenses budget to continue to make payments to friends or family.
It is your agreed budget and you can spend it in any way that you like.
However, you should only plan to do this if you can afford to maintain all of your essential living expenses plus your agreed IVA payment.
Resuming payments after your IVA
You should not try and maintain a private loan payment if this puts your IVA payment at risk.
If trying to continue paying your family loan debt means that you struggle in other areas and ultimately start to miss your IVA payments, this could put you in a very serious position.
Doing so could put your IVA at risk of failure and you could face being forced into bankruptcy.
Remember, once your IVA has finished, you can always restart your payments towards your private debt and even significantly increase what you have been paying each month as you will no longer have any other unsecured debt payments to worry about.
Whether or not you decide to include private debts to family or friends in an IVA will ultimately depend on your circumstances and the relationship you have with the family member in question.
As such, there are advantages and disadvantages to including such debts depending on your perspective.
However, if you are concerned that your friend or family member is relying on you to keep up your payments to them in full so that they can in turn pay for a loan which they have taken on your behalf, it is important to understand that you may not be able to do this if you start an IVA.
It is therefore important to think very carefully and get the right advice before starting an IVA solution.
If you are struggling with debt, visit www.beatmydebt.com
Our vibrant debt forum gives free access to industry experts and others who have suffered with debt problems.
Useful guides, calculators and information are also available designed to help you understand how to manage and resolve debt problems.
Article Source: http://EzineArticles.com/?expert=James_Falla
No comments:
Post a Comment