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  • FIRST POST
    Find The Real
    IVA support and discussion thread
    • #1
    • 28th Sep 13, 4:07 AM
    IVA support and discussion thread 28th Sep 13 at 4:07 AM
    IVA's. There is a lot to talk about so I have started this thread for anything IVA related.

    Whether you want to debate any aspect of an IVA, ask a question, share your IVA journey including high and low points or offer support, are thinking of starting an IVA and have a million questions or having completed an IVA you want to share your experience and knowledge, hopefully this thread can offer a chance to do just that.

    It's not exclusively for those in the IVA club, anyone is welcome to join in but please kindly remember this thread is not for judgement.

    Wisdom comes from experience. Experience is often a result of lack of wisdom.
Page 1
  • Find The Real
    • #2
    • 28th Sep 13, 12:56 PM
    • #2
    • 28th Sep 13, 12:56 PM
    I'll start off with a discussion point that has interested me. Do IVA firms give the best advice for those who have a relatively small amount of debt? Although guidelines recommend it should be for debts over 15,000, quite often we are seeing much smaller amounts being accepted. Once PPI is factored in we are quite often seeing the value paid in exceeding the debt by some considerable sums.

    I appreciate an IVA is not guaranteed to reduce the amount paid into the debt and you are always liable for the debt in full until completion but are some firms thinking more of the fees especially if they do not charge until an IVA is accepted and are not giving those in debt the full picture with such as other options as a DMP or DRO or bankruptcy.

    Wisdom comes from experience. Experience is often a result of lack of wisdom.
    • UpToMyNeckInIt
    • By UpToMyNeckInIt 28th Sep 13, 5:15 PM
    • 878 Posts
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    UpToMyNeckInIt
    • #3
    • 28th Sep 13, 5:15 PM
    • #3
    • 28th Sep 13, 5:15 PM
    Find The Real.

    Good idea for a thread.

    In my view 'impartiality' when it comes to IVA advice is nigh-on impossible: IVA firms WILL flog you an IVA, and sell it on the basis of debt written off, interest frozen etc.

    Similarly, the debt charities like 'Stepchange' and 'National Debtline' are funded by the creditors. In my experience, they will advise you take out a DMP - I cynically think this is because it is in the creditor's best interests, and because they fund the charity, the charity 'looks out' for them.

    As you say though, there are a fair number of people it seems, who are lured into an IVA, when maybe a DRO or bankruptcy may be a better option.

    I struggle with recommending DMP's, not least because your credit rating does not begin to significantly recover for 6 Years after your final payment. That will leave a lot of people in the financial mire for a heck of a long time.

    With any form of Insolvency (BR, DRO or IVA), that 6 Year period starts from day one, so 6 years on, you are in the clear (OK that's an over-simplification, but you get the idea).

    So let's consider a 25-Year old individual, living in a private-rented home with a 15,000 debt, a car worth 2,000 and suppose they have 150 disposable income after living expenses. (Not an unrealistic scenario - Seen a fair number of enquiries over the last year on this and other forums with these sorts of figures).

    DMP: Assuming all interest is frozen, for the entire term (very unlikely I know). The customer faces 8.5 Years of paying off the plan, and not being able to get reasonable credit rating for a further 6. If you don't think you will need a mortgage or a half-decent motor the right side of 40 - fine. Let's be honest, the plan could easily be 10 years long. Equally, they may get a better job, more income etc. and may be able to end the plan sooner.

    IVA: The plan lasts for five years. The individual may pay off as little as 9,000, with the other 6K written off, and their credit rating bounces back in Year 6. If they get more than a 10% payrise throughout the term, they will most likely start having to pay extra contributions (50% net above the first net 10% normally).

    With the above scenario, purely comparing a DMP with an IVA, I'd go with the IVA.

    ...cue the debate!!!
    Last edited by UpToMyNeckInIt; 28-09-2013 at 5:20 PM.
    • Depth Charge
    • By Depth Charge 28th Sep 13, 5:52 PM
    • 964 Posts
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    Depth Charge
    • #4
    • 28th Sep 13, 5:52 PM
    • #4
    • 28th Sep 13, 5:52 PM
    Hi

    Good post again UTMNII

    Yes, this has the makings of a good and interesting thread

    And yes, the debate will no doubt come and why not, clear the issues, transparency!

    And another chance for the IVA industry experts and supporters to put over their side of the story too perhaps. Will they take it though on this very open forum, mmm that remains to be seen, hope so

    Stepchange may want to join or step in also?

    Yes, could get interesting given what is going on in the debt advice sector and help those in debt & IVAs etc

    My take
    • UpToMyNeckInIt
    • By UpToMyNeckInIt 28th Sep 13, 7:05 PM
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    UpToMyNeckInIt
    • #5
    • 28th Sep 13, 7:05 PM
    • #5
    • 28th Sep 13, 7:05 PM
    Excuse the long post, but as this thread is all about IVA experiences, here is my story:

    After racking up 35,000 in unsecured debt (I'll spare you the excuses), across 8 creditors. I was attempting to repay 600-700 pcm, but 500+ of that was lost on charges and interest.

    Suffice to say, I was borrowing from Peter to pay Paul, and reached that point where I ran out of credit. (Sounds familiar to many of you I'm sure).

    I had seen the writing on the wall for ages and spent a good 3-4 Months researching IVA's vs DMP's as the best solution.

    Going BR is not an option as I am MD of my own company (self-employed) and a home-owner. Due to long-term illness and childcare issues, my Wife does not currently work. The household income is C36k p/a.

    There are 2 adults and one child in our household. We are fortunate enough to 'own' a home worth 300K, albeit with a 268K mortgage (nothing flash: a 1950's 3-Bed semi. But that's London prices for you). We also have a flat which we let out, worth 140K, but with a 125K mortgage. (Values taken May 2012). I also managed to put all the debt in my name only to keep the Wife sane.

    I did of course consider selling the flat, but realistically after expenses, I'd still be left with a 25K debt, and 4K per year worse off in lost rent. I knew that I would be back at the same point again soon.

    So, I looked initially at the advice on here on MSE: Did all the right things, spoke to the debt 'charities', read the anti-IVA bias in the outdated IVA Guide, read some of the anti-IVA claptrap on the forums etc and heard similar at my local CAB office.

    (Please don't misunderstand me, there is a lot of great advice to be had here at MSE, and I am an avid fan of the site, but they don't give IVA's fair press in my opinion). They also don't seem to allow the private sector to have their say on these forums. This is a great shame, as it would be nice to hear from all sides.

    Stepchange and others advised that I sell the flat, and take out a DMP at c250 a Month. I was looking at minimum 10 Years to pay back my debt (I was told realistically 15, due to some of my creditors being notoriously stubborn at freezing/lowering interest). My DMP would last over 20 Years if I was not willing to sell up.

    It really sucked basically. Furthermore, the various charities told me that I earnt too much and had too many assets to be eligible for an IVA.

    In the end, I did what some here consider 'unthinkable'. I approached a private firm - an up-front fee-charger no less! (The 900 fee went on a credit card which went into the IVA anyway, so who cares, right? I stress they took the fee on the contracted understanding that it would be refunded if the IVA proposal, referred to their 'Sister' Company was not accepted). I did not know to google 'insolvency practitioner reviews', instead I was looking for 'debt management company'. Wish I had, got my search terms right from the start, because there are loads of private companies that charge nothing up-front.

    To give them their due, they were excellent: They proposed an IVA for 270 pcm. They even assisted me in 'undervaluing' my car, so that I could keep it. They were helpful as well in advising my creditors that having the second property assisted with my affordability.

    OK, so I'm 14 Months down the line, and coping pretty well. Thanks to continuing research, I took full advantage of every possible expenditure in the 'Stepchange Budget Guidelines' at my annual review (I can generally live within the allowances. I know some people grumble, but compared to what I was allowing us before the IVA, we are comfortable). This effectively cancelled out a significant rise in income, resulting in no increase in my IVA payment.

    I've managed to squirrel away 1,000 as an emergency fund, and was even able to afford a family Holiday (first one in 5 Years), to Spain. (I was nervously anticipating how I would have to explain payments to 'First Choice Holidays' on my bank statements at annual review, but it was not an issue).

    Being self-employed ironically seems to be an advantage: My accountant is very good at 'minimising' my income for tax purposes. These figures of course, are the same ones used in calculating my IVA affordability.

    I have to say though, that managing this is hard work, not least because my IVA firm, once you are trapped with them, are almost useless. Brilliant at getting the thing set up, but offered none of the 'assistance' at my annual review that they did when setting the IVA up. They carry out the day-to-day stuff well enough though, as well they should for their fee!

    In summary, I consider myself very fortunate, having had a lucky escape, and nearly risked losing my home. Providing my business stays profitable, I anticipate paying back c20k over 6 Years. 15K written off, and saving 500pcm interest/charges. I can live with the inconvenience of a knackered credit rating for the next 6 Years for that. Actually, it's a bargain!

    However, I have read of many other IVA accounts where the experience has been bad or even disastrous: Be it through being ill-advised at the outset, through lack of research into updating expenditure, unforseen changes in personal circumstances - or whatever). It is the nature of things I suppose: People are more likely to take to internet forums with bad experiences rather than good ones.

    Moral of the story?

    If you are in debt DO YOUR RESEARCH. You are the best person to help yourself. Seek several opinions. If you are considering an IVA, don't be afraid to approach private companies (heck, even Stepchange and CAB use Grant Thornton to administer many of 'their' IVA's - rather puts the kibosh on some of the claims of impartiality IMO).

    Good luck and best wishes to all of you.
    Last edited by UpToMyNeckInIt; 28-09-2013 at 7:12 PM.
  • Find The Real
    • #6
    • 28th Sep 13, 11:36 PM
    • #6
    • 28th Sep 13, 11:36 PM
    A fantastic post UTMNII as it covers so many of the things that people have doubts about and I think the really important message is to do your own research and not just rely on maybe a few companies or charities for advice. Like you say these do offer good advice but at the end of the day you have to make the decision based on all your circumstances and go with what feels right for you.

    Your whole story is of great help as it covers so many points as I think a lot of people just get to hear the downsides of IVA's rather than how it can make a positive impact and be less "damaging" than bankruptcy especially where assets are involved.

    I can see the reasons for not wanting to go for a DMP because of the uncertainty with them and the long term implications. However sometimes they can be a useful stepping stone when creditors are being demanding, giving you the space to spend the time to do the research I need. I know I used SC to do a 6 month DMP whilst the house was repossessed and I was waiting for the shortfall to come through so I could then decide on the more formal route of insolvency.

    I hope this thread does generate some debate but can also be a place to offer support as I feel IVA's can be a bit overlooked on here and on the internet in general. You sometimes really need to know what you are searching for, however you may not know what information you need unless you have come across someone else mentioning it!

    Wisdom comes from experience. Experience is often a result of lack of wisdom.
    • UpToMyNeckInIt
    • By UpToMyNeckInIt 29th Sep 13, 9:19 AM
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    UpToMyNeckInIt
    • #7
    • 29th Sep 13, 9:19 AM
    • #7
    • 29th Sep 13, 9:19 AM
    FTR: The use of a DMP as a 'stepping stone' is worthy of mention. It is a very good use of this product. It gives the customer some breathing space etc.

    Sorry to hear of your house repo. (believe me, I was nearly there myself at one stage, as both mortgages are 'interest only'). As you say though, maintaining a DMP throughout a difficult and stressful time such as that, must have been helpful.

    Hope you are back on track now though.

    I say it time and again on the various forums out there. People must properly research their best route to going debt free.

    Saying that, despite the research I did, I still chose a mediocre IVA firm. Don't get me wrong, for me an IVA is the way to go, but knowing now what I didn't know 18 Months ago, I would have gone with a well-reviewed company.

    These forums are a great support mechanism: We should all make the effort to pass on our experiences, and advice - especially those little nuggets of information that the various charities/companies are afraid to divulge (appreciating that we are not 'experts'). Example: where to find the 'Stepchange Budget Guidelines' - Actually: Anyone know where to find the new ones, applicable from October?

    Have also heard some great ways that homeowners may be able to 'dodge' the equity release clause in their IVA.

    Hopefully, this might assist others having difficulties in their IVA, especially those who like me, encounter a customer services 'brick wall' with their IVA company.

    Excellent thread once again, and I hope all forum members take advantage of it.
  • Find The Real
    • #8
    • 29th Sep 13, 11:48 AM
    • #8
    • 29th Sep 13, 11:48 AM
    Some people may think that a house repo and with the shortfalls pushing my debts up to 61K may not be great but in actual fact I think I have been very fortunate. Well ok the debt wasn't great and I would have liked to have avoided the house repo but when you have an ex that won't play nicely you have to make the best out of a bad situation.

    However I was fortunate that once I knew they way things were heading I could take my time to plan all of my steps that lead me to going into an IVA. I appreciate it is not always easy to do that, as quite often things are at a desperate stage for most people and they grab the first option they are given. It is never as bad as you are going to think it is though and I have to say having dealt with all my creditors over 18 months in the end, I never got the heavy handed approach. I think a thing that can make a great difference not to bury your head in the sand and tackle it direct. I really do think it helped me that the other liable party did just that and so my creditors could see that I was doing all I could to sort the financial mess out.

    I have to agree that research is everything, I went with a very good firm who accepted a F&F IVA from the start as I had a kind offer of help from a 3rd party. It is very important to research the advice you have been given, naturally given the house situation I was advised early on just to declare bankruptcy but to me that was the absolute last resort and although most of the debt would have been written off it just didn't feel right for me.

    I've not seen the new SC guidelines floating around but even the old version would give people an idea of what they can claim for. So many times we see an IVA become a real struggle a relatively short term into it and although as much debt as possible should be paid back it shouldn't be a life of poverty over the next 5 years.

    I think a lot of people are not aware of they key facts even when sorting out their debts. I am incredibly glad I found the MSE site (and a couple of others) that gave me invaluable information from the start, but I should imagine it may be a very small percentage that actually do research information further and come across sites like this. I really do think the charities and debt companies should do far more to give ALL the facts to everyone that approaches them.

    Wisdom comes from experience. Experience is often a result of lack of wisdom.
    • Depth Charge
    • By Depth Charge 3rd Oct 13, 2:10 PM
    • 964 Posts
    • 608 Thanks
    Depth Charge
    • #9
    • 3rd Oct 13, 2:10 PM
    • #9
    • 3rd Oct 13, 2:10 PM
    FTR: The use of a DMP as a 'stepping stone' is worthy of mention. It is a very good use of this product. It gives the customer some breathing space etc.

    Sorry to hear of your house repo. (believe me, I was nearly there myself at one stage, as both mortgages are 'interest only'). As you say though, maintaining a DMP throughout a difficult and stressful time such as that, must have been helpful.

    Hope you are back on track now though.

    I say it time and again on the various forums out there. People must properly research their best route to going debt free.

    Saying that, despite the research I did, I still chose a mediocre IVA firm. Don't get me wrong, for me an IVA is the way to go, but knowing now what I didn't know 18 Months ago, I would have gone with a well-reviewed company.

    These forums are a great support mechanism: We should all make the effort to pass on our experiences, and advice - especially those little nuggets of information that the various charities/companies are afraid to divulge (appreciating that we are not 'experts'). Example: where to find the 'Stepchange Budget Guidelines' - Actually: Anyone know where to find the new ones, applicable from October?

    Have also heard some great ways that homeowners may be able to 'dodge' the equity release clause in their IVA.

    Hopefully, this might assist others having difficulties in their IVA, especially those who like me, encounter a customer services 'brick wall' with their IVA company.

    Excellent thread once again, and I hope all forum members take advantage of it.
    Originally posted by UpToMyNeckInIt
    Hi

    Good post again

    I picked up on the 'dodge' the equity release clause in particular

    Fascinating comment and I wondered if you would not mind expanding on this a little?

    Also on the subject of secured loans in releasing equity for IVA customers has been touched on a few times but seems a little covert at times to me given that the protocol seems to be clear on the 12 month extension (just my opinion of course).

    Is there any conflict with the best interests of the IVAer or financial interest could be fair questions I suppose!

    My take
    • UpToMyNeckInIt
    • By UpToMyNeckInIt 3rd Oct 13, 8:42 PM
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    • 469 Thanks
    UpToMyNeckInIt
    DC, you make a fair point.

    Sadly, I have read anecdotal accounts of unscrupulous providers (there is a clear financial incentive after all), where the customer is under the impression that they have to accept a 'secured loan' offer where an application to 're-mortgage' has been declined.

    I personally agree with your sentiment on this practice. But worryingly, I don’t think it is as clear as you suggest.

    The protocol quotes:

    ‘where the debtor is unable to obtain a remortgage, the supervisor will have the discretion to consider accepting one of the following alternative proposals:

    • a third party sum equivalent to 85% of the value of the debtor’s interest in the property; or

    • 12 additional monthly contributions (with the aggregate sum paid to the supervisor being limited to 85% of the value of the debtor’s interest in the property).’

    Could you argue that a secured loan constitutes ‘a third party sum’? …Legal fodder for the lawyers to chew over I think.

    I posed this question on another forum a few Months back, and as I recall, consensus from the IP’s that posted a reply was that the intent of the statement is - eg: a gift or informal loan from a friend/relative, or from a redundancy payment for example.

    Assuming then, that protocol-compliant IVA customers cannot be compelled to take out a 'secured loan', they should quite rightly be offered the 12-Month extension where they have been unable to remortgage. Customers need to stand up to any IVA firm attempting to ram a secured loan down their throat (I am aware of one customer, armed with this information, whose IVA firm ‘gave in’ without too much of a fight).

    The only time you would want to consider the secured loan route is IF you are unlucky enough to be offered a remortgage as per your IVA terms: Then, it may be cheaper to take out a sub prime loan for a relatively small amount at say 20% APR, than to remortgage the entire debt on your property at presumably a naff rate (say 9-10% APR).

    In the event of a remortgage offer, the customer cannot then 'opt' for a 12-Month extension, but could theoretically offer to release the same amount of equity by way of secured loan.

    Will be interesting to see how this evolves over the years. History has a tendency to repeat itself: Ultimately, banks are in the business of taking risks to make money. It follows that some will eventually take the risk of routinely offering sub-prime remortgages again soon. When that happens, IVA customers will presumably clamour for the secured loan.

    Happy Days!!!

    PS: Other Equity Release 'avoidance' tips to follow soon. ('Dodge' perhaps is not the best choice of wording on my part)!
    Last edited by UpToMyNeckInIt; 03-10-2013 at 8:52 PM.
    • milliemonster
    • By milliemonster 4th Oct 13, 9:57 AM
    • 3,591 Posts
    • 6,200 Thanks
    milliemonster
    My story then, I have been a member of this forum for quite some time, initially when I was looking at ways to cut our outgoings to get our 45k debt paid off in record time, back in 2008 I was in a job I hated, felt trapped as we needed the money and used this forum for tips etc, 2 years later we had gotten nowhere, the debt had increased to 52k despite meeting every single payment in full every month and even overpaying at times, it hit me we were never going to get it paid off until we retired at this rate and I was sick of living a life of being in significant debt and feeling trapped, I wanted my freedom back, freedom to choose a new job based on what I wanted to do rather than whether it paid enough to repay our debts.

    I made the decision to sack the job in (it was making me ill) and giving up my 40k a year salary to return to nursing initially on nothing for 6 months while I did my return to practice course at Uni, and then a salary of 18k if I got a job part time so I could not miss out on the kids growing up anymore.

    We sat down, crunched the figures and initially thought of a dmp, but longer term knew even on 18k, a dmp would take 20 years to repay, stepchanges advice was a dmp or bankruptcy, hubby couldn't go bankrupt as he'd lose his job, so I started researching other options.

    Like UTMNII, I spent time researching Ivas, fortunately went straight to well reviewed private firm, initially with scepticism, this forum sort of brainwashed me into thinking you should only go to one of the debt 'charities', but after taking those 6 months of having no salary to ask endless questions, go through scenarios, what if this and what if that, once I secured a nursing post, went for the iva.

    Now we are 30 months in, half way there, so how has it been so far? From a mental health perspective, it's been the best thing I ever did, I'm now happy in work, have a great work life balance and don't feel trapped anymore. I still feel happy with the company we chose to represent us, they are very fair, consistent, treat us with respect and have been on our side from the start. Budget wise despite pay rises, we have not had to pay any more into the iva, our payments are still as they were at the start as we have been able to offset the rises against our budget so we are now better off than we were at the start.

    When I think back to how we were when we were overpaying our debt and how little we got to allowing ourselves each month for groceries etc, then we are quite comfortable now. I see this all the time on the dfw thread where people put their soa's up and others reply saying, you can cut your grocery spend down to 100 a month between four of you (extreme I know but you get the picture), well yes you can when you have to, but who can live like that long term?, we are 'allowed' over 500 a month for our groceries in the iva, I manage to save at least half of that each month, many other allowances also allow us to put money away for Xmas, birthdays, stuff that makes life worth living. I would never change that for a life of extreme restriction to ensure we would repay every penny backust to preserve a credit rating.

    Ah the credit rating, that thing we are brainwashed into thinking we must preserve at all costs or life will be unbearable, well yep mine is trashed, have I noticed? No, not at all, is it going to affect us in the future when all this is over? Probably for a time, but one thing the iva has taught us is to save, to spend only what we have and that we have to wait for things if we can't afford them this month, I don't notice in my day to day life that our credit rating is rubbish, I still have a normal bank account with a normal bank with a cheque book and Visa card, I have never had any issues getting a new mobile phone, insurances etc, no I don't feel subhuman.

    I have a brand new car that my iva company totally approved of getting and worked into our budget from the start, not on a high apr loan, but through salary sacrifice through my work, this wouldn't have been possible before the iva as every spare penny, and then some, was needed.

    The downsides? Life does feel on hold, wishing each month away, sometimes I get down about the whole sorry saga but then I remember why we're doing this, to get our financial freedom back, and also I remember what life was like before and I shudder.

    Fortunately for us we are in reliable secure jobs, essential I think if you are considering an iva, having said that, Ivas are flexible and allow for life changes to an extent, the key is picking the right company to represent you from the start, to help you make the most of your allowances and budget and who are realistic, sad to say I don't think a charity fits that bill
    • UpToMyNeckInIt
    • By UpToMyNeckInIt 4th Oct 13, 10:31 AM
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    UpToMyNeckInIt
    Excellent post.

    It shows that with proper research and thought, you can have a life in an iva.

    Good luck with the rest of the plan.you have broken the half way point, so it's downhill from here.
  • Find The Real
    A great post Millie and it certainly covers a lot of aspects people may be worried about when looking at IVA's as a solution. I do have to agree with the aspect of reliance on advise about debt charities, although they do a great job, I think there are far better firms out there at the moment than who the charities recommend.

    I must admit when I had my DMP through SC they were great but having researched IVA's there was no way I was going to go with them for one due to their relationship with a certain firm.

    I also totally agree that not throwing everything penny at your debt and living a life in poverty is the way to go, which I know goes against a lot of the advice here, but it seems to be one of the main reasons so many debt options fail because sensible living costs are not taken into account.

    Good luck with the rest of the term and I hope you keep positive that you are working towards the end.

    Wisdom comes from experience. Experience is often a result of lack of wisdom.
    • milliemonster
    • By milliemonster 4th Oct 13, 2:11 PM
    • 3,591 Posts
    • 6,200 Thanks
    milliemonster
    I must admit, after our iva was approved and the initial overwhelming relief wore off, i did feel like I was walking around with 'I'm in an iva' tattooed on my forehead and it took me a while to feel good again and realise that we hadn't failed, we'd just got to a point where we knew we couldn't continue to tread water anymore.

    Hundreds of thousands of people in the uk are currently treading water, denying to themselves that they are in fact insolvent and instead carrying on, protecting that credit rating, relying on credit to get them through each month, every month and waiting for that lottery win etc etc to get them out of the mire, why? I know this seems such a scary step indeed it was, but looking back now I don't know what I was afraid of really, we should have done this years ago.

    Despite all the morals about repaying what you spent etc, well yes in an ideal world I would prefer that, but I'm not prepared to spend the rest of my working life in poverty to achieve that, with the amount of interest I was paying back we've repaid the original amounts we borrowed anyway I'm sure.

    Now I smile when my friends tell me how skint they are, yet hours later are going to the pub for tea because they can't be bothered to cook, I know this is all going on credit, they're just in denial, but it will get them in the end.

    No one who knows us knows about our iva, that's the level of impact it has had on our daily lives, in fact people who know us think we are quite well off, because with what we have to spend on things now compared to when we were restricting ourselves so much to repay debts, we are.

    It's been a fantastic lesson for our kids who are now 10 and 14, they are learning the value of money, that you have to earn it before you can spend it and that the essentials must come first, they understand that and it's hopefully a good life lesson for them.

    Oh and I love the fact we are now over half way, I see it that we've finally reached the summit of that mountain and are on our way down the other side
    • Depth Charge
    • By Depth Charge 4th Oct 13, 6:06 PM
    • 964 Posts
    • 608 Thanks
    Depth Charge
    DC, you make a fair point.

    Sadly, I have read anecdotal accounts of unscrupulous providers (there is a clear financial incentive after all), where the customer is under the impression that they have to accept a 'secured loan' offer where an application to 're-mortgage' has been declined.

    I personally agree with your sentiment on this practice. But worryingly, I don’t think it is as clear as you suggest.

    The protocol quotes:

    ‘where the debtor is unable to obtain a remortgage, the supervisor will have the discretion to consider accepting one of the following alternative proposals:

    • a third party sum equivalent to 85% of the value of the debtor’s interest in the property; or

    • 12 additional monthly contributions (with the aggregate sum paid to the supervisor being limited to 85% of the value of the debtor’s interest in the property).’

    Could you argue that a secured loan constitutes ‘a third party sum’? …Legal fodder for the lawyers to chew over I think.

    I posed this question on another forum a few Months back, and as I recall, consensus from the IP’s that posted a reply was that the intent of the statement is - eg: a gift or informal loan from a friend/relative, or from a redundancy payment for example.

    Assuming then, that protocol-compliant IVA customers cannot be compelled to take out a 'secured loan', they should quite rightly be offered the 12-Month extension where they have been unable to remortgage. Customers need to stand up to any IVA firm attempting to ram a secured loan down their throat (I am aware of one customer, armed with this information, whose IVA firm ‘gave in’ without too much of a fight).

    The only time you would want to consider the secured loan route is IF you are unlucky enough to be offered a remortgage as per your IVA terms: Then, it may be cheaper to take out a sub prime loan for a relatively small amount at say 20% APR, than to remortgage the entire debt on your property at presumably a naff rate (say 9-10% APR).

    In the event of a remortgage offer, the customer cannot then 'opt' for a 12-Month extension, but could theoretically offer to release the same amount of equity by way of secured loan.

    Will be interesting to see how this evolves over the years. History has a tendency to repeat itself: Ultimately, banks are in the business of taking risks to make money. It follows that some will eventually take the risk of routinely offering sub-prime remortgages again soon. When that happens, IVA customers will presumably clamour for the secured loan.

    Happy Days!!!

    PS: Other Equity Release 'avoidance' tips to follow soon. ('Dodge' perhaps is not the best choice of wording on my part)!
    Originally posted by UpToMyNeckInIt
    Hi

    Yes, good post again

    On your point about the possibility of arguing a secured loan as a third party sum, well never in a million years in my opinion.

    A secured loan is a secured loan as a mortgage is a mortgage or re-mortgage a re-mortgage, there is a clear difference between all these and a lump sum.

    A number of questions -

    Are IVAers being approached by secured lender brokers in relation to the 12 month payment extension where a re-mortgage is not possible?

    Who benefits financially from secured loans in IVA equity release clauses?

    Are there any financial and referral connections between these secured loan brokers and any individual IVA companies?

    The subject of equity release, 12 month clauses, re-mortgages, secured loans etc should be clearly set out with full transparency, anything less leaves things wide open and uncertainty for those in the IVA. It is their home we are talking about not a loan debated product. I thought the idea of going into an IVA is to become debt free.

    Fair points and perfectly legitimate questions in my book, deserving clear, precise answers.

    Just my opinions, views and respectfully taking into account that all circumstances are not always the same.
    Last edited by Depth Charge; 04-10-2013 at 6:20 PM.
    • UpToMyNeckInIt
    • By UpToMyNeckInIt 4th Oct 13, 8:42 PM
    • 878 Posts
    • 469 Thanks
    UpToMyNeckInIt
    ...glad you concur with not deeming a third-party sum to be a 'secured loan'. Maybe I am reading too much into this.

    The few allegations I have read about seem to be associated with DebtFree Direct. Yes, the allegation is usually that an individual (claiming to have a protocol compliant IVA), has felt pressured to take out a loan, where a remortgage attempt has (as you would expect in the current climate) failed. IE: NOT where a remortgage has been offered, but a well-meaning IP has suggested a secured loan as a cheaper alternative.

    Everyone benefits HUGELY, apart from the poor sod who is 'forced' to accept this product of course.

    Then there is the question of impartiality - in all cases, the IVA company has 'found' this product. ( an 'associated' loan firm possibly?)

    as you say, the whole point of entering the IVA is to become debt-free, not turn unsecured debt into secured debt. (Albeit, I am fully aware of the equity release provision).

    The most recent example I read about (admittedly this IVA pre-dates the 2010 protocol, but gives you an idea of the numbers involved). Customer is paying 450ish pcm into the IVA, and is being pressured into taking out a secured loan of 14,500 over 15 years. (They did have a fair amount of equity mind you). APR 12.9% Monthly repayment of 185 - so it is deemed 'affordable' as per the IVA criteria. Doesn't sound too bad so far does it? ...But then there is a 'lender completion fee' of 995, and a (you are going to love this), 'broker advice fee' of 1,900!!!! - I bet that's a phone call between the lender and the IVA company lasting about 10 minutes. They are taking the p**s in my opinion.

    I make that a shade over 33,000 over the 15 year term.

    ...nice work if you can get it.
    Last edited by UpToMyNeckInIt; 04-10-2013 at 8:44 PM.
    • Depth Charge
    • By Depth Charge 4th Oct 13, 9:31 PM
    • 964 Posts
    • 608 Thanks
    Depth Charge
    ...glad you concur with not deeming a third-party sum to be a 'secured loan'. Maybe I am reading too much into this.

    The few allegations I have read about seem to be associated with DebtFree Direct. Yes, the allegation is usually that an individual (claiming to have a protocol compliant IVA), has felt pressured to take out a loan, where a remortgage attempt has (as you would expect in the current climate) failed. IE: NOT where a remortgage has been offered, but a well-meaning IP has suggested a secured loan as a cheaper alternative.

    Everyone benefits HUGELY, apart from the poor sod who is 'forced' to accept this product of course.

    Then there is the question of impartiality - in all cases, the IVA company has 'found' this product. ( an 'associated' loan firm possibly?)

    as you say, the whole point of entering the IVA is to become debt-free, not turn unsecured debt into secured debt. (Albeit, I am fully aware of the equity release provision).

    The most recent example I read about (admittedly this IVA pre-dates the 2010 protocol, but gives you an idea of the numbers involved). Customer is paying 450ish pcm into the IVA, and is being pressured into taking out a secured loan of 14,500 over 15 years. (They did have a fair amount of equity mind you). APR 12.9% Monthly repayment of 185 - so it is deemed 'affordable' as per the IVA criteria. Doesn't sound too bad so far does it? ...But then there is a 'lender completion fee' of 995, and a (you are going to love this), 'broker advice fee' of 1,900!!!! - I bet that's a phone call between the lender and the IVA company lasting about 10 minutes. They are taking the p**s in my opinion.

    I make that a shade over 33,000 over the 15 year term.

    ...nice work if you can get it.
    Originally posted by UpToMyNeckInIt
    Hi

    Good stuff UTMNII

    Really good, it must have been, I have pressed the thank you button

    The homework has been done my friend, as always, not expecting any rich tea answers however from the other forum my stooleys tell me.

    Quite sure you know what I mean

    DC
  • Find The Real
    Rather glad I don't have the equity problem as it does seem to be dependent on so many factors as to what the equity amount and subsequent repayments could come to if you take into account the additional money paid on the loan in the years after.

    My question is (sorry I haven't studied this bit much) given the possible figures added on even when the IVA is completed, is it really worth entering into an IVA with the equity release clause unless you have significant assets that would be lost if you choose bankruptcy?

    In all honesty I can see why working towards reducing the amount of equity in the property would be a tempting option when you consider you would pay probably less by extending another year rather than equity release.

    Going slight off topic but I think a lot could be debated about just how much extra fees can be made from the IVA in terms of PPI claims and from ER referrals. Whilst I appreciate once in an IVA the IP becomes the supervisor and is now working more on behalf of the creditors, I still feel there should be a better duty of care towards the clients needs as well.

    Wisdom comes from experience. Experience is often a result of lack of wisdom.
  • Find The Real
    I must admit, after our iva was approved and the initial overwhelming relief wore off, i did feel like I was walking around with 'I'm in an iva' tattooed on my forehead and it took me a while to feel good again and realise that we hadn't failed, we'd just got to a point where we knew we couldn't continue to tread water anymore.

    Hundreds of thousands of people in the uk are currently treading water, denying to themselves that they are in fact insolvent and instead carrying on, protecting that credit rating, relying on credit to get them through each month, every month and waiting for that lottery win etc etc to get them out of the mire, why? I know this seems such a scary step indeed it was, but looking back now I don't know what I was afraid of really, we should have done this years ago.

    Despite all the morals about repaying what you spent etc, well yes in an ideal world I would prefer that, but I'm not prepared to spend the rest of my working life in poverty to achieve that, with the amount of interest I was paying back we've repaid the original amounts we borrowed anyway I'm sure.
    Originally posted by milliemonster
    I think you have summed up a lot of points really well. Very few people actually go out of there way to rack up debts and most people do feel like they have failed and are scared to miss payments but I think it is more responsible to admit there is a problem and seek to resolve it. For someone that had always paid in full and on time, the first couple of months of not paying my debts in full did make me feel like I had failed but I decided it was better to just move on and concentrate on sorting my life from the chaos it was in.

    I do still think it is interesting how there is a barrier speaking about debt for a lot of people and perhaps this is why they are reluctant to deal with it or seek help. It is kind of hard to hide a house repo anyway but I seem to be one the very few that is incredibly open to all my family, friends and work colleagues about my debt problems. Obviously I don't flaunt it but on the other hand I am not ashamed of informing people why I don't have a lot of money.

    Wisdom comes from experience. Experience is often a result of lack of wisdom.
    • UpToMyNeckInIt
    • By UpToMyNeckInIt 9th Oct 13, 2:59 PM
    • 878 Posts
    • 469 Thanks
    UpToMyNeckInIt
    Going back to the issue of secured loans for equity release, this comment from an IP on another forum got my attention:

    'this will become an issue time and time again. Creditors are already getting wise to IVA proposals where there is significant equity by putting in minimum dividend requirements based on the projected equity release. This could mean that some properties will have to be sold in the future to meet these requirements'.

    One of the significant reasons I went for an IVA is that my property is protected. It would seem that, going forward, this may not be the case for some new IVA proposals.

    I suppose a customer faced with this clause in their IVA contract may well find the thought of a secured loan a lot more acceptable than selling their home.
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