Urgent advice please re IVA

Legacy_user · 9 June 2017 at 5:03PM

In the post today was a letter from Creditfix for my daughter who lives with us. It is in relation to her "Proposed Voluntary Arrangement " which has a creditors meeting scheduled fo 19 th June.

She has shown us the paperwork and to be honest I'm panicking. I know it's not our debt but we never knew she owed so much and would have helped if we had but she is insisting on sorting it herself. We just want to know if this looks like a good arrangement.

So in summary she owes about £13800 and the IVA is as follows:

60 months duration
£190 per month
Nominees fees £1100
Total supervisory fee £1881.17
Total disbursement £1529.40
Dividend in Bankruptcy 27.69p
Dividend in IVA 49.6p

Can you tell us if this looks like a normal arrangement and what it actually means because £190 per month for 60 months does not cover the debt.

Is it likely there can be any fee increase or any other costs which are not included in the contract and which I have not given above.

Also how does an IVA differ from bankruptcy. I've googled but at the moment I can't understand the difference.

And how does an IVA affect her credit rating.

Finally if she accepted our help do these companies allow you to back out of the arrangement bearing in mind the creditors meeting is coming up soon.

sourcrates · 9 June 2017 at 5:39PM

Hi,

Yes its a perfectly normal arrangement, a certain amount of the debt will be written off on completion.

Fee`s should not differ much from that stated.

As with any debt solution, an IVA will badly affect her credit file for 6 years, there`s no getting away from that i`m afraid.

An IVA is much less invasive than bankruptcy, you can pretty much carry on as normal with an IVA, whereas in bankruptcy you have an official receiver watching your every move.

She will have a cooling off period, and she can cancel anytime before signing the paperwork.

I have to question through, if an IVA is the right choice here, as her debt is only 13k, IVA`s are usually, but not exclusively, for much higher amounts of debt, would she not qualify for a debt relief order instead ?

Google it, and see.

System · 9 June 2017 at 5:59PM

I think she doesn't qualify for the DRO because she has more than £50 per month surplus after making the minimum monthly payments.

sourcrates · 9 June 2017 at 6:07PM

Pam17 wrote: »

I think she doesn't qualify for the DRO because she has more than £50 per month surplus after making the minimum monthly payments.

You dont include debt repayments in your budget.

Has she done a realistic budget ?

If she can afford £190 a month for the IVA, then she wouldn't qualify for a DRO.

She should be ok on the IVA, as long as its affordable.

fatbelly · 12 June 2017 at 6:50PM

I don't think it is a good arrangement.

She will pay £11400 over 5 years against £13800 debt. So she's declaring insolvency for a £2400 saving over 60 months.

Whether it's the best strategy would depend on looking at the big picture, and I wonder if anyone has done that, or did she just approach an IVA company and say 'what should I do?' No surprise at the answer if she did that.

An IVA can be viewed as bankruptcy for those seeking to protect an asset, such as a house or business. Is she doing that or would she be better with normal bankruptcy and an IPA for 36 x 190 = 6480.

Or avoid insolvency altogether and do a debt management plan with full & final settlement to finish things off?

And I would not be so quick to rule out a DRO. An IVA-pusher would try to maximise the surplus for their own and the creditors' benefits. A DRO intermediary might come to a very different view of the surplus.

Johnsmith2016 · 18 June 2017 at 7:15AM

For 13k I'd say there is almost certainly a better option. Could you get a loan of 13k at 3% with M&S over 5yr about £230 a month that she repays you.

Failing that do a budget for a DRO, as and IVA seems drastic measures for only 13k

Next stop would be bankcrupty if she owns no assets over an IVA - in my opinion of course . Did she take advice and an IVA was considered the best option?

BrightLights14 · 19 June 2017 at 3:20PM

I don't think (and this is just my opinion) she should go down this route. £13k is a relatively small amount of debt and if she has nothing to protect like a house (which I presume she doesn't), it just doesn't make sense. Investigate the DRO, and if not maybe look at a DMP through one of the free debt charities like Payplan or Stepchange. This will be a much more flexible arrangement than an IVA, which at her age could have a huge impact on her career prospects. IVA's aren't as restrictive as bankruptcy, but they're still pretty restrictive. For example, she'll have to hand over any surplus income she makes from when the agreement was made - which means she could end up paying back way more than she owes if she gets a promotion/payrise in the next 5 years. Good luck to her xxx

Urgent advice please re IVA

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