IVA or BR?

Loan_parent_needs_advice

Hi, I’m new to this but having really appreciated reading about other people in similar situations, it has given me a glimmer of hope! This forum is great and invaluable!

I am a single parent, 38 with a son of nine in a financial crisis. I have 18K of debt amongst credit cards x 3, bank loan and overdraft. I have no assets and work part time in a good job, I used to work f/t but was so stressed and needed to spend more time with my son. For years I have been struggling to pay the bills and live and have consequently been putting costs on the credit cards and robbing peter to pay paul! I rarely go out, don’t do any hobbies anymore and to be honest I have nothing to show for the 18K of debt, life has become rather depressing and lonely! I strive to do the best for my son but over the last couple of months we have been barely surviving, by the time I’ve been paying my bills and creditors we have very little left for food and petrol. I’ve only been paying the bare minimum (covering interest), my cards are maxed out and it has now come to a head where I can’t afford to pay them.

I have carried out a lot of research both on the internet, CAB and even phoned Payplan but with so much information, although fab it is mind boggling and I just don’t know which route to go down!

Initially, I thought about a DMP but realised with £170 left for creditors a month (assessed by Payplan although CAB quoted less! This is on a very tight budget), it would take years to pay off and effect my credit rating for about 12 years.

Then keen on the IVA route as I have always paid off my debts in the past, although I have heard good and bad things about them, however having read more about BR, I am wondering if this is the way to go to completely remove the weight off my shoulder and start afresh? At the moment, I don’t have the £500 you have to pay the fees, how would I hold off the creditors until I got this? Can anyone explain the benefits of the IVA over BR in my situation?

I am so worried about it all, can’t sleep, find it difficult to talk to people as I feel I have nothing to say anymore – I just feel it’s affecting everything. I can’t talk to my parents as they don’t understand and we get very little financial help form my ex husband.

Can anyone offer some advice, I feel at my wits end!
Thanks.

Matt1982

Personally I dont like IVA's. I entered one in 2006 and now in the process og going BKO. At the time I thought an IVA would be good as I wanted to pay as much as the debt back as possible as it was my fault, I had spent that money.

However after paying over £10,000 and the IVA company keeping over £6000 of this for themselves the only people I feel to benefit from an IVA is the IVA company. The creditors get a fraction of the fraction you were paying.

In sense of going forward the view on IVA and BKO are the pretty similar e.g. if you ever wanted a mortgage viewed the same

This is just my opinion but hope it helps.

the-muffin-man

In my opinion, if you'd really struggle with the payments on an IVA/DMP then BR could be a better option. The living allowances are more generous and if you do have surplus income you could still pay back some of your debt through an Income Payment Agreement (and the debtors would probably see more of your money!).

I think Bankruptcy allows you to rebuild your life whereas an IVA just cripples you financially for years. And as Matt says, whichever option you went for your credit rating is ruined anyway.

Bankruptcy does have other negatives though - if you work in financial services you may lose your job, and things like cars may be taken by the OR.

Read through the thread linked below first, and take some professional advice (CCCS seem to be the preferred option on here).

http://forums.moneysavingexpert.com/showthread.html?t=1056083

And good luck!!

RichesToRags

An IVA is beneficial if you have assets such a house with equity in it which you don't want to lose, or your job would be affected by going bankrupt.

Bankruptcy is beneficial if you clearly cannot service your debts and taking other routes such as a DMP (which you have already considered and ruled out) or an IVA are not appropriate to your situation.

IVA's and BR have much the same effect, your credit rating is shot to pieces by both, both are listed on the insolvency register and both carry very similar restrictions. However an IVA lasts for 5 years (sometimes longer), whereas even if you have to pay an IPA in bankruptcy it only lasts for 3.

Additionally general living allowances in BR are more generous than an IVA and certain benefits cannot be counted towards your surplus only the % of earned income can. In an IVA all income is counted, regardless of the source.

It may be a good idea for you to call national debtline or CCCS and see what they have to say.

RichesToRags

Forgot to add....

As for the BR fee's, if you are on a low income you can take in bank statements (think its the last 3 months) to show this and the £150 cout fee can be waived.

Loan_parent_needs_advice

Thank you guys for your advice - I must admit the BR route is seeming more favourable and you guys that have been through it seem so relieved now! I just find the whole thing scary and am struggling with the moral side but hey, I've got to get over that I know inorder to help my situation.

On the IVA I don't understand why the creditors don't see much of it, is this the same through payplan as although a free service don't get paid by some other route?

The other things that concerns me about BR is the whole bank account thing, I have just got another current account away from the one that I owe on. How does the managing of wages and direct debits all work once BR?

Thanks so much for all your help, I just feel so low at the moment so it is very much welcomed!

seeya23

you can get a bank account with the coop or barclays open account befor your br

Loan_parent_needs_advice

Just rang one of the help lines which was very informative and reiterated that with IVA's, they can move the goal posts a few years later so althought you thought it was for 5 years if you are paying a low amount it could end up going over 6 years. Also, they advised that an IVA should normally be for someone who can afford around £300 a month, which I can't so I guess it only leaves me with one option.

Just been told about a cashplus account online, has anyone heard of it?

Thanks

nervousmother

I have a bank account with the co-op. I use the local post office to pay in and withdraw. I also have a cashplus card. www.cashplus.co.uk it is a great card that i use alongside my co-op visa card.

BR seems to be a hard step to take, but as long as you dont own your own house it is often the easiest route and can be all over in as little as 6 months (that is if you are granted early discharge) otherwise the BR will last for 1 year. It stays on your credit record for 6 years (but im guessing its shot anyway) if you have to pay anything into your BR you will do so for 3 years, but im guessing if cab said you had £170 left per month in reality with the allowances you get in BR you wont have to pay into it.

Loan_parent_needs_advice

Thanks - it is a really difficult decision, sometimes I wish I could be a bit more carefree! I will look into the accounts, it's goign to be weird as I have always had cards/accounts, etc. I have made the first step by contacting the local court for the forms. Although, still slightly unsure, I almost feel a light relief that I have made a decision.

Does it get easier?! Do you ever talk about it amongst friends, I feel so embarrassed/ashamed?

RichesToRags

If you look at the wording it will be along the lines of free IVA advice, if entered into the IVA won't be free.

Morally, what have you done wrong? I'd say the majority of us (there is always the odd exception), got into debt fully intending to repay it but circumstances beyond our control led us down the BR route, usually after years of struggling and trying many other ways to pay. Its not really a moral issue, it's more of a mindset issue. I've always been a 'pay your way' kinda gal, so I can understand where you are coming from.

You can have a basic account as a BR, I use the co-op as it also offers online banking. You can have wages paid in and pay DDs as normal, you just have no overdraft or cheque book.

Being in your situation is hard and can be scarey but there is light at the end of the tunnel, good luck.