Is this advice correct?

Shoe_Gal_3

Hi everyone, hope you can help me out on this.

My Mum has been on an IVA plan for the last 3 years and has 2 years remaining. At the time of entering into the IVA, she had gotten herself in some debt trouble and due to her low income, it was the only feasible way out for her.

Time has flown by and she is very much looking forward to Summer 2012, when her £200 a month payment plan will finish.

However, she visited a friend of hers on Saturday and got talking about her IVA situation. Her friend used to work in finance and has explained to my Mum that her Gregory Pennington IVA is one big scam, and that after the 5 years the debt will not be wiped, but the creditors will then start to contact her again asking for payment. She told told that only roughly 25% of the £200 a month payment is going towards her debts and Gregory Pennington will be pocketing the rest and that once the 5 years have expired that GP will cut her off and wash their hands of her and leave her to a still huge debt.

The advise her friend gave to her was to file bankruptcy immediately.

My Mum is really quite impressionable when people tell her things like this and I'm not sure what to believe - this advise has really got her worried and she's looking into bankruptcy as I type.

Any advice? Is my Mum's friend right?

althas

Check exactly what you Mum has. If it is a DMP (Debt Management Plan), then what her friend is saying is essentially correct. This is an informal agreement with the creditors, who can and do change the terms as they like

If it is an IVA, then her friend is VERY wrong. An IVA is a LEGAL agreement (Gregory Pennington will have to have registered the IVA through the courts, thats how Legal it is)

Your Mum and GP will have drawn a proposal up that detailed everything, how much your Mum owes, and to whom. Her income and expenditure. How much she can pay per month and how much of that will be to fees for GP. Reasons for her debt position etc. GP then submit this to the creditors who then vote at a meeting to either accept or reject the proposal (or make any amendments). A 75% majority of voting creditors is needed for the IVA to be accepted, but once it is accepted, THEN ALL THE CREDITORS ARE LEGALLY BOUND TO THE TERMS OF THE IVA (EVEN THOSE THAT VOTED NO)

It does not matter if your Mum is paying 25p per £1 owed, 40p per £1 or 75p per £1, that is what she pays, period. Any fees for GP are negotiated between GP and the creditors, and are deducted from your Mum's payment. You Mum does not pay extra for that

Once the IVA has been completed, presuming it was completed successfully (no missed payments etc), then THAT IS IT. The creditors wipe the remainder of the debts off (again including those creditors who voted No) and your Mum's slate is clean. The record of the IVA will remain on your Mum's credit history for a period of 6 years from the commencement date

I hope this sets your Mum's mind at ease, just double check she is in an IVA and not DMP. And if all else fails, she can ring GP to ask the question

Charco_2

All of that is quite right from Althas, just ask yourt mother to check that it is indeed an IVA (Individaul Voluntary Arrangement) that your mother has entered into and not a DMP... if she thought it was an IVA then most likely it is an IVA!

And since it's an IVA she is covered and legally protected from her creditors PROVIDED SHE ENDS THE ARRANGEMENT SUCCESSFULLY!
No creditor will be able to enforce payment for any of the debts because they will already be deemed to have been settled.

Your mother's friend is confused about something or is simply mis-informed.

moneysavingplumber

A DMP is informal but would generally be designed to take as long as it would take to clear the debt, so it's unlikely it would be a five year plan, too much of a coincidence. Additionally, on a DMP she would still be getting a fair amount of harassment from creditors asking for more money, as it's not legally binding. My guess is that, if there has been no direct contact from the creditors for the last three years, then it is almost certainly an IVA. If it's an IVA then your mum should have a wedge of paper work, too.

debtinfo

or just check here, you can find out in 2 minutes

http://www.insolvency.gov.uk/eiir/