DMP to IVA

willows18

Hi....

I am looking for some advice. We have unsecured joint debts of approx 70k (9 creditors). We have been doing a DMP through Greggory Pennington for the past 5-6 months (not all our creditors have agreed to this yet, but have stopped hassling us). Based on what we pay per month this will take us approx 30 years to clear.

We originally wanted to do an IVA but couldn't as we still had an hp agreement on a motorhome. The motorhome is now sold so we are considering an IVA again now.

We have also considered maybe making settlement offers by borrowing money from parents. We have recently been offered a settlement of 1,100 for a 3,900 debt and 3,660 for a 10,452 debt from MBNA. Both are very tempting offers but would have to borrow the money to pay them.

We have spoken to a settlement person at GP who said we would likely need 51k to settle 70k of debts (this being approx 75%). But we have been offered 35% settlement figures by 2 creditors already? Is 75% a realist settlement figure?

I understand that an IVA can be very restrictive in that they say you are only allowed a certain amount for shopping, mobiles etc...... Can they make you sell your cars and buy cheaper ones? We currently run 2 cars.

My understanding of an IVA is that it is a fixed term i.e 5 or 6 years and that you have to make an attempt to re-mortgage in the final year (not possible for us as no-one will lend us the money). But I keep hearing horror stories about IVA's and that it can change during the term and they can decide to lengthen it etc, is this really true? I thought it was legally binding.

What are the major pitfuls of an IVA that you can tell us about before we talk to our IP?

Many thanks

Nargleblast

An IVA would be for five years. In the final year you would be expected to release some of the equity in your home to finish the IVA. However, no-one knows what will happen to the housing market in five years time. Also, when working out what equity you have, you have to bear in mind that if you did remortgage, lenders would only be prepared to lend 80 -85% of the house value, so that in itself would cut the amount of equity available. Chances are, as you suspect, no-one will lend to you, and if they do, then the amount available for the IVA might only be a few thousand and not worth bothering about. In that case, your IP would discuss other options with you, eg getting a lump sum from somewhere, or extending the IVA for another year.

As far as things changing part way through is concerned - people's circumstances change, sometimes without much warning. Accident, sickness, unemployment etc. Once an IVA is up and running your monthly payments are fixed until you have your annual review, then you revise your budget with your IP taking into account increased salaries and household costs. Any unexpected expenditure arises, speak to your IP and see if payments can be reduced for a month or two. It's all a question of talking through your options with your IP and keeping them informed of any changes. IVAs tend to fail because of people not sticking to their budgets, or because of unforeseen events. Many IVAs go to full term with little or no problems. Suggest you talk to one or two different firms and don't let anyone push you into a solution that is not right for you.

Charco_2

Really good post Nargle!

Chris_1066

I also looked at reaching a full and final settlement with my creditors however the problem is .. what happens to the remaining creditors if they don't all agree ?

You would still have to pay off the remainder via a DMP or IVA. Depending on your circumstances you could consider a one-off IVA. For some reason there's not much discussion about these however they're usually settled in 2 - 9 months.