# More clients now suitable for UK IVA's



## Steve Thatcher (29 Oct 2014)

I am getting many more of my UK bankruptcy enquiries who would be suitable for an IVA. It is in effect a shot to nothing. They have money available, that would have to go to the Trustee or OR anyway, so they might as well have a go at the IVA after three months. It could mean a done and dusted solution so much quicker.

Steve Thatcher


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## Brendan Burgess (29 Oct 2014)

Hi Steve

What are the advantages for an Irish resident going for a UK IVA? 

Do they not last a set  number of years? Are people not better off going bankrupt and getting out of it with a fresh start after one year? 

I presume that with an IVA, one can keep one's home and mortgage?


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## javanaise (6 Nov 2014)

A normal IVA can result in payments lasting up to 5/6 years. However, a lump sum IVA, if accepted by creditors, releases the debtor immediately. The advantages are
1. No court appearance. This seems to be important to many Irish people seeking a UK solution.
2.You only have to prove COMI to your insolvency practitioner, not to a judge.
3. There is no 'year of bankruptcy.
4. Establishing your COMI takes less time.

Another advantage is that if it's turned down, preparing for an IVA is similar to preparing for bankruptcy, so you're ready to go with the bankruptcy route if the IVA doesn't work.

Anyone with cash who can move to the UK and offer it as a lump sum IVA should definitely go for it. The benefits, particularly the immediate freedom, are enormous.


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## Jim Stafford (6 Nov 2014)

A major difference between the Irish bankruptcy regime and the UK bankruptcy regime is the involvement of the court system. In Ireland, there is a constant interface with the Court system, which is costly in terms of solicitor and counsel fees. The best way to illustrate the differences between the Irish and U.K. systems is to show a comparison of an estimated outcome on a typical case. If you assume a Mr. Murphy who has five investment properties with a market value of €1 million and mortgages of €3 million, and an unencumbered property with a market value of €500,000, then a comparison of the different outcomes (on the basis of a “lump sum” IVA or PIA) is shown in the accompanying table. For ease of comparison purposes, the exchange rate is assumed to be €1 to £1.

*PS I ATTEMPTED TO "CUT AND PASTE "AN ILLUSTRATIVE  TABLE HERE BUT IT BECAME GARBLED.  IF YOU WISH TO SEE THE TABLE PLEASE USE THE LINK WHICH I HAVE POSTED IN THE NEXT POSTING.*

The table clearly shows that the creditors receive more either under the proposed Irish PIA or the U.K. IVA. The reasons for the differences are apparent from the table. Firstly, the unencumbered property would realise more in an orderly sale (particularly if the property is located in a different jurisdiction) as opposed to a distressed sale, and secondly the Court Duty/Secretary of State fees (which can get as high as 15% of realisations) would be significant in both types of bankruptcies. The reason for the differences in the cost of the professional fees under the PIA and the IVA is that VAT is no longer charged by insolvency practitioners in the UK following the Paymex Limited case.

Prior to the Irish PIA regime coming into place we were obliged to advise clients to go to the UK to do IVA's. However, given that Irish PIA's are now in place, it may not be necessary to go to the UK any more. In many cases it is now possible to achieve informal settlements with the banks without a PIA or IVA.


Jim Stafford


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## Jim Stafford (6 Nov 2014)

Further to my previous post I set out below the link to our website page which contains the illustrative table referred to



Jim Stafford


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## javanaise (6 Nov 2014)

Jim, I've heard that some IVAs are being rejected, which seems curious to me, especially since those creditors might get nothing if the debtor goes bankrupt. Are certain institutions less likely to go along with an IVA, or why do they get turned down?


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## Steve Thatcher (7 Nov 2014)

javanaise said:


> A normal IVA can result in payments lasting up to 5/6 years. However, a lump sum IVA, if accepted by creditors, releases the debtor immediately. The advantages are
> 1. No court appearance. This seems to be important to many Irish people seeking a UK solution.
> 2.You only have to prove COMI to your insolvency practitioner, not to a judge.
> 3. There is no 'year of bankruptcy.
> ...



Precisely

Steve


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## Jim Stafford (7 Nov 2014)

javanaise said:


> Jim, I've heard that some IVAs are being rejected, which seems curious to me, especially since those creditors might get nothing if the debtor goes bankrupt. Are certain institutions less likely to go along with an IVA, or why do they get turned down?


 
Some banks /creditors have a stated policy of not doing any level of debt forgiveness, and will vote against any PIA/DSA/IVA. The practitioners who operate in this area know which banks/creditors will support a PIA and which ones will not. I am unable to name such banks/creditors in a public forum such as this. 

Any IVA/PIA/DSA proposal should clearly show that the creditors will receive more money from the proposal than a bankruptcy. If the proposal does not show more money, then creditors will vote against it. The easiest PIAs to get over the line is where a family member offers a lump sum: as such a lump sum would not be available in a bankruptcy.

I have seen numerous cases where the banks/creditors have lost significant sums of money by not accepting proposals and the debtor has gone bankrupt. However, I have also seen cases where the debtor has not gone into bankruptcy, and the banks/creditors will recover more money in the longer run. Each case is different.

One reason why some banks might vote against a PIA/IVA is because the debtor might not have co-operated with the bank in terms of selling charged assets etc.

A big advantage of Irish PIA's and DSA's over UK IVA's is that you only need 65% of the creditors to vote in favour, as opposed to 75% in the UK. As a result, we have effectively stopped advising clients to go to the UK to do an IVA if we consider that an informal scheme or PIA will be successful.

Jim Stafford


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## 44brendan (7 Nov 2014)

> A big advantage of Irish PIA's and DSA's over UK IVA's is that you only need 65% of the creditors to vote in favour, as opposed to 75% in the UK. As a result, we have effectively stopped advising clients to go to the UK to do an IVA if we consider that an informal scheme or PIA will be successful.


Interesting Jim. While I am working in the banking sector I am occasionally called upon to give advice to people in financial difficulties. The difficulties I saw with PIA's are as follows:
1. Insolvency living expenses guidelines are reasonably severe. When I discussed exactly what was allowable, they have invariably involved a severe restriction in existing spending levels. Most people could go through the pain of this for 2/3 years but 7 years seems like an eternity to them and generally results in a response that it would kill their relationship and be similar to a prison sentence. UK option of 1 year bankruptcy always appears preferable.
2. Banks still appear to be anti aceptance of PIA's. Particularly where the main creditor is the mortgage holder. They will demand the lions share of the repayment fund and say that other creditirs should be broadly ignored.


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## Jim Stafford (10 Nov 2014)

Insolvency living expenses are severe, which is why the easiest PIAs to get over the line is where a family member offers a lump sum: as such a lump sum would not be available in a bankruptcy. A "lump sum" PIA means that the creditors accept the lump sum, and do not seek any contributions from income over an extended period.

PIA's/DSA's can work very well when a debtor is multi-banked, and a large creditor, with a 65% + vote, can effectively dictate what the other creditors will get (provided the other creditors cannot prove that they would get more in a bankruptcy.)

Jim Stafford


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## Steve Thatcher (10 Nov 2014)

Jim Stafford said:


> Insolvency living expenses are severe, which is why the easiest PIAs to get over the line is where a family member offers a lump sum: as such a lump sum would not be available in a bankruptcy. A "lump sum" PIA means that the creditors accept the lump sum, and do not seek any contributions from income over an extended period.
> 
> PIA's/DSA's can work very well when a debtor is multi-banked, and a large creditor, with a 65% + vote, can effectively dictate what the other creditors will get (provided the other creditors cannot prove that they would get more in a bankruptcy.)
> 
> Jim Stafford



Of course the same large creditor can simply say no and block any settlement as well

Steve Thatcher


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## Matthew Moore (10 Nov 2014)

Steve,

In practice, do secured creditors usually go with IVA's in the UK? 
It was my understanding that they have to opt in so this effectively gives them a veto. There would be no point proceeding with an IVA if one would have debts still remaining.


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## Steve Thatcher (10 Nov 2014)

pat2 said:


> Steve,
> 
> In practice, do secured creditors usually go with IVA's in the UK?
> It was my understanding that they have to opt in so this effectively gives them a veto. There would be no point proceeding with an IVA if one would have debts still remaining.



Correct Pat, that's why it only really works for crystallised debt (unsecured only)

Steve


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## madeabadcall (20 Nov 2014)

Hi Steve, I was in contact with you via this platform some weeks ago and was waiting to hear from the bank. Well, I did, and it looks like they don't want to play ball with me, so I believe I will be availing of your services and heading to London soon. The lump sum IVA debt process sounds very interesting and I'm sure I could get family members to put together the lump sum.

However am I correct in saying that I could only do this if I have sold the properties and therefore just have a residual (unsecured) debt left? It'll be €600k or so I'd imagine. There is one property which I think I could find difficult to sell, and I'd be concerned that this would ruin my chances to try the lump sum IVA route.

I spoke to a PIP and the PIA option could take 6yrs which doesn't appeal to me, as my family and I will be living on not much more than a pittance for all that time as most of my monthly salary will go to the bank. I didn't ask them about a lump sum settlement option, but in any case I don't think it will be as straightforward as the UK. And bankruptcy in Ireland is 3yrs of course, plus I have to complete the PIA process for 6 months first I believe.

As well as the bankruptcy route, are you now advising and bringing people through the process of lump sum IVA Steve? At this stage it might be a good idea to speak with you I think...my wife is completely on board with me going down the UK route which is great.

Thank you.


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## Steve Thatcher (21 Nov 2014)

madeabadcall said:


> Hi Steve, I was in contact with you via this platform some weeks ago and was waiting to hear from the bank. Well, I did, and it looks like they don't want to play ball with me, so I believe I will be availing of your services and heading to London soon. The lump sum IVA debt process sounds very interesting and I'm sure I could get family members to put together the lump sum.
> 
> However am I correct in saying that I could only do this if I have sold the properties and therefore just have a residual (unsecured) debt left? It'll be €600k or so I'd imagine. There is one property which I think I could find difficult to sell, and I'd be concerned that this would ruin my chances to try the lump sum IVA route.
> 
> ...



You would benefit from a chat no doubt. I don't think I'm allowed to post contact details, but I'm sure you can find me. One fly in the ointment with the IVA route is the blocking creditor.
Who are your main creditors? How much do you owe each.
The iVA works if you have a ready lump sum. It is a shot to nothing which is followed by bankruptcy if the IVA is rejected by creditors.
It does need unsecured debt. If you can't sell the property you can surrender it.
There is much to consider, it is by no means straight forward.

Steve Thatcher
www.helpwithdebtuk.com


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## madeabadcall (21 Nov 2014)

Thanks Steve, I'll give you a call. Creditor is one of the larger banks and I have all the mortgages with them. Outstanding mortgages are close to €2m, and negative equity would be about €550k to €600k so I'd have at least that debt to contend with if they were all sold off. 

I have a credit card debt of €7k from where I had to do major repairs and renovation to a property early this year before I hit the rocky patch with the bank, and I'm paying that off each month. The credit card is with another bank.

Apart from that I have no other creditors, although I will have to pay €4500 for some apartment management fees in early 2015, and I'm not sure how I'll manage that, so they may end up being creditors too..

I understand what you say about the IVA option not being straightforward. Apologies, I meant the whole process of insolvency/bankruptcy and its possible options incl IVA seem more straightforward in the UK than in Ireland. 

Maybe it seems more straightforward due to your regularly enlightening posts here in fairness!

I'll give you a call.

Thanks again.


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## rtc (20 Jan 2015)

Steve Thatcher said:


> I am getting many more of my UK bankruptcy enquiries who would be suitable for an IVA. It is in effect a shot to nothing. They have money available, that would have to go to the Trustee or OR anyway, so they might as well have a go at the IVA after three months. It could mean a done and dusted solution so much quicker.
> 
> Steve Thatcher


What is the minimum amount of time one would have to live in the UK in order to go through the bankruptcy process and does it need to be full time ?


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## jamesmack (21 Jan 2015)

Apart from that I have no other creditors, although I will have to pay €4500 for some apartment management fees in early 2015, and I'm not sure how I'll manage that, so they may end up being creditors too..





[broken link removed]


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