Should I go for an IVA or a DMP? Or neither?

Roger_Moore_007

Hi there this is my first post (I hope it's appropriate).

I have the following debts:

Parents £14000
Uncle £2000
Cahoot overdraft £1000
Cahoot credit card £3500
NatWest loan £1700
NatWest overdraft £700
Tesco credit card £600
Amex credit card £1100
Council Tax £800
Total £25400

Including wages and benefits I take home £1830pcm, after living expenses I have roughly £200 spare to pay debts.
We live in rented accomodation and have little in the way of assets (Car £1500, Computers and other home electricals £1000).
The vast majority of my debts are owed to my family as you can see, when I spoke to CAB a few months ago I was advised that loans from family members are treated exactly the same as any other unsecured loan. I haven't paid my parents anything for nearly a year now, the reason I owe them so much is because they bailed me out once before when I had credit card debts.
Although I would like to pay my parents back in full they don't expect it all back, with this in mind do you think I would be better off with an IVA or a DMP?
I have default notices from Natwest and Tesco credit card currently and another one likely to come from Cahoot credit card.
I'm in a position currently where I don't have to pay my parents anything, meaning I could just focus on paying the credit card companies and then worry about paying my parents later.
On a separate note I've got about £1250 in bank charges that I could reclaim from Natwest and roughly £400 that I could claim from Cahoot. Would I be likely to qualify to claim those charges now under the terms of hardship? If I could get those charges back it would probably mean I wouldn't need an IVA or DMP possibly?
I've got a few other questions to ask, but I will wait and see if anyone has an opinion on my situation as stated above.

Cheers

Charco_2

You definitely need to seek professional help. There are plenty of companies who will speak to you free of charge - if a company tries to charge you then walk away and find another (I can name you one if you like).

Unfortunately in my experience, most creditors require family members to step aside for the purposes of an IVA and probably Bankruptcy too. However, without your family members included in the debt it wouldn't look like you're actually insolvent (about £9,400 debt). This would mean a DMP for a while (during which you could reclaim charges etc - and take some creditor pressure off).

Speak to someone now though while you still have options

Roger_Moore_007

Thank you for your reply Charco.

Was the CAB person wrong to say that a loan from my family would count in terms of an IVA then? When I asked him about loans from family members I thought it could be a problem, but he was adamant that as long as there was evidence that I had received large payments to my bank account from my family then it's exactly the same as any other loan.

Also, the £14,000 I owe my parents is a pretty conservative estimate, and could be anything upto £20,000. If it is the case that I owe my family members 75% of the debt can they not just out vote the rest of my creditors in order to get the IVA accepted? Or, do you think I'm barking up the wrong tree completely and shouldn't be pushing for an IVA?

In terms of ruining my credit rating, I think that has already been done by not paying some of my creditors for four or five months, so an IVA or any other plan probably wouldn't make much difference to that.

Do you think I would qualify for reclaiming bank charges under the hardship guidelines? If yes, it could make a big difference to whether or not I take out a DMP or IVA.

Another thing that worries me about entering into an IVA is what happens if you suddenly have a large expense to meet like car repairs etc? The reason I've put off doing anything for the last three months is because we've had all sorts of problems with cars and I had to save as much money as possible to buy a new car (£1300). Also, I work from home so I don't have commuting costs to include on my budget plan for an IVA, but I do have Sky TV which is essential as I'm a sports journalist, would this be allowed on a personal budget? The alternative is that I would have to travel to my office on a regular basis which would cost far more than my Sky subscription!

Is it even possible that bankruptcy is the best option? The only problem is that I can't afford to have my car or computers repossesed as we live in a remote location where there is no access to public transport and I need the computers to do my job.

Thanks very much for your help, and if anyone else has a view please let me know!

Charco_2

Phew, that's a long post with lots of questions, but here goes! (My answers in green)

1. Was the CAB person wrong to say that a loan from my family would count in terms of an IVA then? (No, but...) When I asked him about loans from family members I thought it could be a problem, but he was adamant that as long as there was evidence that I had received large payments to my bank account from my family then it's exactly the same as any other loan.
CAB are helpful but my understanding of them is that they do not have a set policy on these things handed down from above and don't fully know or understand all the ins and outs of debt solutions. Each office relies to a certain extent on the personal knowledge and experience of the staff they are able to hire. In Scotland, in a Trust Deed, if the debt is provable (i.e. a paper trail showing where the money came from) then it would be included no bother. In the rest of the UK, (IVAs), a debt to a family member WOULD be included in the proposal but highlighted as an ASSOCIATED CREDITOR. More often than not the other creditors will ask or expect these creditors to stand aside (you'll deal with them in five years time after the proposal!)

2. Also, the £14,000 I owe my parents is a pretty conservative estimate, and could be anything upto £20,000. If it is the case that I owe my family members 75% of the debt can they not just out vote the rest of my creditors in order to get the IVA accepted? If they are not removed from the proposal, their voting right won’t work in the same terms or strength as your other creditors. They'll have an effect on the way the vote is done but won’t be able to outvote others. (If this was not the case, then anyone could just throw in any size of debt from their own family to have the proposal voted in their favour!)

3. Or, do you think I'm barking up the wrong tree completely and shouldn't be pushing for an IVA?
Not completely barking up the wrong tree, there's no harm in finding out about all your options. All IP's must legally give you a run down of all your options before you can commit to one anyway... However, as I said before, your debt levels may affect the viability of an IVA.

4. Do you think I would qualify for reclaiming bank charges under the hardship guidelines? If yes, it could make a big difference to whether or not I take out a DMP or IVA.
I personally think that it is a bit hit and miss in the industry and banks are still playing silly games with regards this. I wouldn't rely on it for a debt solution but obviously there is no harm in trying it out also.

5. Another thing that worries me about entering into an IVA is what happens if you suddenly have a large expense to meet like car repairs etc? The reason I've put off doing anything for the last three months is because we've had all sorts of problems with cars and I had to save as much money as possible to buy a new car (£1300). Yes this could cause a big problem. In an IVA you are obviously permitted to have a car but there isn’t exactly an allowance to save for the unexpected… you may have to rely further on the help of others!

6. Also, I work from home so I don't have commuting costs to include on my budget plan for an IVA, but I do have Sky TV which is essential as I'm a sports journalist, would this be allowed on a personal budget? The alternative is that I would have to travel to my office on a regular basis which would cost far more than my Sky subscription! This would be highlighted and explained within an IVA proposal and because it makes perfect sense the creditors would be forced to reject the notion out of hand... Just kidding! Because it makes perfect sense the creditors shouldn't have a problem with it. It regularly does happen that people going into an IVA may have certain items that creditors deem to be luxury rather than essential in their expenditure and so they may try to modify the proposal. However if there is a reasonable explanation – particularly if it makes financial sense - then it should be ok.

7. Is it even possible that bankruptcy is the best option? The only problem is that I can't afford to have my car or computers repossesed as we live in a remote location where there is no access to public transport and I need the computers to do my job. Bankruptcy is a very serious route to go down but an IP would obviously go over all the possibilities with you. A car of £1,300 is unlikely to be of interest to anyone in a bankruptcy situation, similarly the computers.

Roger_Moore_007

Thanks again Charco for all of your advice.

I was going to speak to the CCCS about my situation, but do you think I should go directly to an IP?

I'm almost starting to think that bankruptcy may be the best option now? How would a court decide on what belongings I have to sell? Bearing in mind that we live in rented accomodation that is fully furnished, could bailiffs come to our house and take items that they deem to be worth something? Apart from our car and computers the only things that are of any worth are my TV (£250) and Playstation (£200), the PS3 could easily be removed from the house and kept somewhere else and the TV could be the landlady's for all they would know?

I'm just trying to work out the practicality of going bankrupt, as I don't really want to lose the few small assets we do have!

Cheers

Charco_2

If you speak to the CCCS you may have to wait a while but there are plenty of other companies out there who will offer the same service promptly. The only thing to be wary of is if a company tries to charge you for advice or anything other than an actual solution. There are less reputable companies who'll try to get a fee or two off you before dealing with your case... probably by sending you to another company (money for free yeay!)

Speak to a reputable IP firm first as they will go through in detail the pros and cons of all solutions. Ask about an IVA, Bankruptcy and DMP. They may have a slight leaning towards an IVA but they wont be able to force a square peg into a round hole - the solution will have to suit you!

Roger_Moore_007

Fair enough, do you have any firms to recommend who don't charge fees?

Charco_2

I shall send you a PM.

SouthCoast

We live in rented accomodation and have little in the way of assets (Car £1500, Computers and other home electricals £1000).

A Martin's Money Moment

A quick rant about fees

It’s worth focusing again on how much IVA companies make. This often
means they have a vested interest in trying to set one up, when it may not be
the best option for you, meaning the advice you get could be skewed towards
getting an IVA. It’s for this reason I revert back to what I said earlier.
If you are thinking about getting an IVA... getting independent advice from a
non-profit debt counselling agency is a must. Far too many people go straight
to IVA companies, which purport to offer “free debt counselling” and guess
what they end up suggesting? An IVA. Big surprise eh?

http://www.moneysavingexpert.com/loans/pdf-iva-guide.pdf

Charco_2

That's a reasonable observation but it really is only an opinion. From records collected in my work, we would find that less than 30 to 35% of the clients we speak to are suitable for an IVA and so we'll advise them another way. We'll also help them through BR papers or other directions if that is what they feel is right for them... we do not earn money for BR advice but we would not turn away someone looking for help.

Insolvency is a highly regulated industry. However much an IP may try, they wont be able to fit square pegs into round holes!
(Some companies also offer alternative solutions like DMP or reclaiming charges so as to dilute their "vested interest" in one solution over another making their advice a bit more impartial too)

SouthCoast

Charco wrote: »

That's a reasonable observation but it really is only an opinion. From records collected in my work, we would find that less than 30 to 35% of the clients we speak to are suitable for an IVA and so we'll advise them another way. We'll also help them through BR papers or other directions if that is what they feel is right for them... we do not earn money for BR advice but we would not turn away someone looking for help.

Insolvency is a highly regulated industry. However much an IP may try, they wont be able to fit square pegs into round holes!
(Some companies also offer alternative solutions like DMP or reclaiming charges so as to dilute their "vested interest" in one solution over another making their advice a bit more impartial too)

From the link above:

IVAs aren’t for everyone. Leading debt help charity the Consumer Credit Counselling Service
recommended IVAs to only 3% of people with serious debt problems in 2006. There’s a
real danger that taking out an IVA unnecessarily will leave you facing the prospect of bankruptcy

anyway, despite having laid out £1000s in set-up fees.