IVA or Debt Management Plan, then which one?!

debt-free-by-40

I decided to take stock of my debts about 10 days ago and was really shocked to see that my 3 credit cards, 1 loan, overdraft and student loans all added up to almost £24.5K. I decided to call PayPlan and I had my consultation with them at the beginning of this week. Basically, the advisor told me I only have two options: IVA or Debt Management Plan (the third was bankruptcy, but for me this is not an option). I was shocked to hear this as I’ve kept up repayments and have no arrears, no demanding letters and no CCJ’s etc. She pointed out that I’d be funding my payments by living off my credit cards and that is where the problem is. She explained that with the IVA all my debs would be covered and I would be paying off £11,600 over the 5 years, then the remainder would be written off, and that my credit rating would be affected for this period plus a further year afterwards. If 75% of my creditors agree to this then we’re good to go. If not, however, then we go to the Debt Management Plan which will take 13 years to clear the debt, is subject to interest fluctuations and as my student loans couldn’t be included in this, I’d have to pay that separately so the overall payments would be higher (by about £40). I was advised that I needed to get another bank account ASAP as my particular bank has a ‘right to claim’ on any money I have available in the account to cover outstanding debts (my loan is through them). If I am unable to get another bank account (why would I have a problem with this if I have no arrears etc?) then they are able to offer a JB card which acts like a bank account where I have my wages 'loaded' onto it and I can set up standing orders etc as I would with a bank account - I have no idea how I would pay other money in (cheques etc of birthday/xmas for example). Would I be able to keep my paypal account? Can anyone shed any light on this?
I went on the CCCS site and did their online assessment and they’re saying that their Debt Management Plan would only take 6 years to pay off with them (obviously the payments are higher here, but still manageable), but there’s no mention of my student loan not being included in that – would it be? They’re also saying that I could keep my current bank account, surrender my debit card and request an electron card, but basically don’t mention anything about the bank being able to take my money.
I guess I’m just a bit overwhelmed by all this and all the info is quite daunting. I want to move in with my boyfriend at some point in the future and maybe even get married and have children in the next 6 years or so, so I really feel as though I need to get this right, for all of us but especially for me. I will be looking at getting a mortgage in the future and I realise that my credit rating will be affected by this for the times mentioned above. I think I need to hear what other people have done in similar situations and the experiences they’ve had.
Basically, do I IVA or DMP (and if the latter, then which option)? Thanks for your time.

Miss_Piggy_2

Hi and welcome. Well done on posting.

Yes, it can all be a bit confusing. I'll try and help with some of the points and I'm sure other people will help on some of the others.

* If any of your debts are with the bank that holds your current account then you WILL need to change your bank. Its very easy to change to a basic account with someone like Natwest, barclays or the Co-op

* Am concerned that CCCS and Paypal estimations on your debt free date differ so much. Did you give both of them the same figures?

* With an IVA you are very dependent on your creditors agreeing. Not always guaranteed. Sometimes they are happier with a DMP, even if over a longer period, as they will be getting all their money back.

* Am pretty sure Student loans are not included in DMPS but I would double check this if I were you (am sure someone else will come along that knows though).

If you ARE using credit to live then taking charge of your finances by doing an IVA or DMP is the best idea. Otherwise, 5 years down the line you will be in a much bigger pickle. Good luck!!

Miss P
xx

funkyspuke

Hi and Welcome,

I couldn't afford to anything other than get myself to work. I needed more money so ...

I started a DMP over 4 years ago and it lasted for 1 year at which point it then became an IVA. I owed approx £26k which includes interest. I was paying approx £450 a month of 1 credit card and 1 loan.

When I started the IVA they informed me that they could write off up to 75% of my debt! I would only be paying £270 a month! This was through Kingsgate or Churchwood Financial. It sounded great, more money a month and it would be over in 5 years.

Sounds great eh?! Well this is what they don't tell you.

The IVA is a form of Insolvency and for the next 6 years you won't be able to get a mobile phone, get Sky TV or even a bank account with a debit card (you basically get a cash card that can not be used in stores or online). Anything in which you are credit checked, you are shafted.

How does it work? Well they take into account your salary and all your monthly expenses to see what you can afford to pay and work out how much you can have written off! They over-egg all your expenses at first, when you say travel costs £50 a month, they put £100! Why do they does this? To make the initial write off and monthly payment on the scheme as sweet as possible.

This is what happened to me.

I was paying £270 a month and was told that I would be paying back £14k of the £26k that I owed. That's almost 54% written off! Great! After 18 months however, it all changed ... they reviewed my salary ... the took more details of monthly payments (rent etc) ... I was then informed that I would have to start paying almost £400 a month for the remaining 42 months! This meant that I was going to end up paying £22k (£4,860 payed over 18 months and then £16,800 for the remaining 42 months). I had already paid £2.5k on the DMP scheme .. so a total of £24.5k!

Now my initial debt was £26k? What the f*** had happened is what I was asking? Here is the clincher with the IVA! The company providing the IVA take a massive cost for doing it! In my case it was £6.5k!!!! This is a government run scheme as well! A scheme which has lost regulation!

If you are not expecting your salary to rise over the next 5 years, then you could risk the IVA! However my advice would be to stay away.

After I was informed that I would be paying £400 a month .. I asked for a settlement fee for the IVA. They said I would need to pay £9k to settle now. £9k + £7.3 I had already paid = £16.3k! more like what I shoud have paid. The settlement was based on the original % that they had agreed with the debtors (my credit card and loan companies) to write off .. this was 61% and not the 54% that it originally seemed (their fee in a way).

There is a lot to take in and read here and I am more than happy to give you more advice if you PM me. But I would stay away from an IVA if you can! Imagine not being able to buy or rent again for the next 6 years!

RAS

funkyspuke wrote: »

This is a government run scheme as well! A scheme which has lost regulation

The baloney about IVAs being a Government run schemes are just that.

They are enshrined in law, just like bankruptcy becauee they are a type of insolvency unlike a debt management plan which is informal.

BUt this is not a government run scheme.

funkyspuke

RAS wrote: »

The baloney about IVAs being a Government run schemes are just that.

They are enshrined in law, just like bankruptcy becauee they are a type of insolvency unlike a debt management plan which is informal.

BUt this is not a government run scheme.

I worded it in-correctly .. it was "introduced" by the Government and is not currently "run" by them.

IVA's work for some people .. those people not wanting to buy or rent a property. People who are not bothered about working for wage rises above inflation, people not bothered about being able to get past the smallest of small credit checks.

I was glad to get out of it and my advice has worked for another person also involved in an IVA. They did the same thing I did and got a settlement and paid it off!

My advice is DON'T DO IT. Pay your debts to your creditors even if it means living like a hermit. Speak to them directly as they will help you!

debt-free-by-40

Thanks for the advice. I totally get what you're saying and it seems like you've had a really bad experience with this. I've been told that I wouldn't be able to get credit if I was on a Debt Management Plan either and I would be in that for 13 years. So, I guess what I'm asking is what's the difference?
I've been told that I can keep my mobile phone with both the IVA and DMP - is that not true? I'm guessing if I already have it (been a customer of theirs for 13 years with no problems on the account) then it can stay?
On the plus side, it looks as though my application for a new bank account has been approved!

funkyspuke

You can keep an existing mobile phone contract, that's fine. You can just never get a new contract!

You have been approved for a new account now (before you start an IVA) as you will still have a good credit rating. As soon as the IVA starts, then it's all down hill.

My credit rating was so bad before I started the IVA that it was actually the only route that I could take. If I were in your position, then I would speak to my creditors and ask for solutions with them. Even consider a large loan and have it paid off over the shortest time possible. I am clreaing the remaining £9k over 2 years! It's a lot a month, but I only have 11 months left! With the IVA I would have been looking at another 3/4 years!

I would advise you to speak to the people who you have your credit cards and loans with. Tell them of your circumstances and I know they will help. I have seen many people do it and get out of debt without the hassle of an IVA.

JayJay7777

I had my annual review with Payplan yesterday as I am on a DMP and we discussed the option of an IVA.

For me it doesnt make sense as they do use your home as part of the equity if you own it and currently with these troubled times the price of property has dropped. Plus as the previous posters have stated you are tied into the plan and generally I understand the payments cant flucuate

Not judging but you mentioned that the IVA route suggests that you wont be able to get further credit, well if you are in the position that most of us are in why would you want extra credit??

With an IVA or DMP your credit rating will be affected as soon as you stop paying the full monthly payments, as there is the potential for defaults to be added against your credit rating.

You need to do what you feel is best for you really, but I just thought I would throw in my 10 pence worth

Good luck whatever you decide!

shakeNmake

IVAs and DMPs aren't for everyone, especially in these times when no one knows if they're going to have a job tomorrow! An IVA can become bankruptcy very quickly if you lose your job.

Have you done a SOA? There's some good people here who can help move things around so your not paying too much for your credit and see where you could cut back.

funkyspuke

JayJay7777 wrote: »

Not judging but you mentioned that the IVA route suggests that you wont be able to get further credit, well if you are in the position that most of us are in why would you want extra credit??

I am not talking about Credit as in loans or credit cards .. there are many things now that you get credit checked for. If you want to rent somewhere, then you get credit checked, you want to install a BT landline or have BT Television or even Virgin ... you get credit checked!

Most people, even Mr Lewis, would suggest that you try everything you can before you go down the IVA route.

---

I decided to take stock of my debts about 10 days ago and was really shocked to see that my 3 credit cards, 1 loan, overdraft and student loans all added up to almost £24.5K.

Is this including interest

I decided to call PayPlan and I had my consultation with them at the beginning of this week. Basically, the advisor told me I only have two options: IVA or Debt Management Plan (the third was bankruptcy, but for me this is not an option).

Why did they suggest such a drastic option? Especially considering what you say next

I was shocked to hear this as I’ve kept up repayments and have no arrears, no demanding letters and no CCJ’s etx

Exactly

She pointed out that I’d be funding my payments by living off my credit cards and that is where the problem is.

Well so far, it seems that you have been keeping up with payments! Why can't this continue? Could you not set yourself a 5 year plan and clear it without doing an IVA or DMP?

She explained that with the IVA all my debs would be covered and I would be paying off £11,600 over the 5 years, then the remainder would be written off, and that my credit rating would be affected for this period plus a further year afterwards. If 75% of my creditors agree to this then we’re good to go. If not, however, then we go to the Debt Management Plan which will take 13 years to clear the debt, is subject to interest fluctuations and as my student loans couldn’t be included in this, I’d have to pay that separately so the overall payments would be higher (by about £40).

Take what this person says with a pinch of salt. They should not be selling you this by saying you can get 75% written off! You may get nothing written off at all at the end of it.

I was advised that I needed to get another bank account ASAP as my particular bank has a ‘right to claim’ on any money I have available in the account to cover outstanding debts (my loan is through them). If I am unable to get another bank account (why would I have a problem with this if I have no arrears etc?) then they are able to offer a JB card which acts like a bank account where I have my wages 'loaded' onto it and I can set up standing orders etc as I would with a bank account - I have no idea how I would pay other money in (cheques etc of birthday/xmas for example). Would I be able to keep my paypal account? Can anyone shed any light on this?

You only needed to open up a new account if you decided to do the IVA! If you have never missed a payment on your cards and loans, then they bank/creditors wukk consider you a 'good customer' and are more likely to assist if your situation becomes worse. If it is indeed bad in the first place!

I went on the CCCS site and did their online assessment and they’re saying that their Debt Management Plan would only take 6 years to pay off with them (obviously the payments are higher here, but still manageable), but there’s no mention of my student loan not being included in that – would it be? They’re also saying that I could keep my current bank account, surrender my debit card and request an electron card, but basically don’t mention anything about the bank being able to take my money.

A student loan is probably the cheapest loan you will ever get! Pay this back, as you will never get cheaper money ever again (apart from a Mortgage).

I guess I’m just a bit overwhelmed by all this and all the info is quite daunting. I want to move in with my boyfriend at some point in the future and maybe even get married and have children in the next 6 years or so, so I really feel as though I need to get this right, for all of us but especially for me. I will be looking at getting a mortgage in the future and I realise that my credit rating will be affected by this for the times mentioned above. I think I need to hear what other people have done in similar situations and the experiences they’ve had.
Basically, do I IVA or DMP (and if the latter, then which option)? Thanks for your time.

Whilst in an IVA, renting or getting a mortgage will be very very difficult indeed! The IVA will become your partners problem as well. You don't want to do that.

It seems that you have been managing to pay your monthly payments and keep on top of things so far. Keep it up! Remember, it's not a case of 'how can I get more money to do things I enjoy' .. it's 'I have had my fun, it's time to pay it back'.

I wish I had done that.

hamish222

Hi
My hubby is in a dmp with cccs. He was in a very similar situation to you, (only his debts were nearly 42,000) in that he still had good credit rating as was using credit cards etc to live as payments were more than income. I don't really have a lot of knowledge on subject other than CCCS are all really helpful and easy to talk to (he is not very good in these situations and was dreading it). He decieded that he wanted to pay monies off and will take over 8 years from time he started at 395 quid a month (although I am going to try and reclaim PPI which was misold to him to try and reduce this). Other people will be able to advise you better about your own situation but just wanted to say that hopefully what ever you deciede will make a difference to you. He felt like the weight of world was lifted from shoulders. He was allowed to keep his phone contract and he opened a new basic bank account prior to starting it (no overdraft but debit card).