Why

thewad

Why do credit companies let some people do IVA's that last for 5 years then are done and they only get say 60% of their money back?
Why not make them do a DMP for the same amount they would have approved for an IVA and get all their money back??
Surely a DMP is better for them.

John

Charco_2

Yes, a DMP is better for the banks but if you are insolvent then you are insolvent!

Before IVAs then the option for individuals was simply bankruptcy, in a bankruptcy the banks were getting nothing so in the mid 80s they petitioned the government for a new solution, this solution was included in the insolvency act of 1986 but only really came to the forefront about 10 years ago.

In the last decade IVAs grew in popularity as a method to deal with debts... comparitively the banks get more money back than in bankruptcy but they are forced to write the remainder of the debt off in their accounts which doesn't look good in "the city" and affects share prices. This does not happen in a DMP so is obviously a much preferred option for the banks but...

The banks have regulatory bodies watching over their shoulder to make sure they behave responsibly things like the Financial Ombudsman, the Financial Services Authority and the Office of Fair Trade AND they have signed up to a policy they pay lip service to called Treating Customers Fairly. Because of this, they are forced to some extent at least to be agreeable to debt solutions that give customers a chance of restarting ther lives - it's no picnic though!

Provided the debtor puts their best foot forward in a proposal it has to be considered by the creditors - doesn't mean they like it!

This was probably not the history lesson you were looking for, sorry

thewad

No quite the opposite.
Just wondered why they don't insist on DMP.
Isn't an IVA just a shortened version of a DMP.
Or is an IVA more restrictive??

John

Nick700

Creditors don't insist on a DMP when the payment period to repay all of your debts is in excess of 8-10 years. They realise that it is unrealistic to expect someone to stick to a payment plan for that length of time, and also that all creditors will stick to their side of the bargain(no legal action, always freezing interest) for that length of time.

Therefore, in these circumstances, creditors tend to accept IVAs as an IVA will stop all legal action, and are usually for 5 years which is accepted to be a realistic timeframe for someone to repay their debts.

IVAs are more restrictive than DMPS, in that nowadays, IVAs usually require you to attempt to remortgage your property(if you are a homeowner) at some stage of your IVA, and you are also forbidden to seek any further credit(although this is also not a good idea in a DMP).

However, many people think the benefits of an IVA in that there is an element of debt forgiveness, and no contact from creditors while repaying over a realistic time-frame outweighs these disadvantages, especially if a DMP will last for an unrealistic length of time.

Hope this post is useful.

Nick

thewad

Wouldn't call 8 to 10 years a long time in a payment plan, mortgages last 25 years.
Know what your saying.
Think if it was half your money back in 5 years or all back in 10 I know which I'd pick.
Also DMP's don't go on Insolvency list.
Thanks for your reply.

I'm thinking of applying for a DMP to pay off my excessive credit card bills and was hoping to do it in just under 8 years.

John