IVA or Bankruptcy?

Ames

I really need some advice on the way forward.

I'm disabled and on benefits. I've built up a lot of debt over the last few years (about 9000, low compared to most but higher than I can afford), because of yo-yoing between being a student and being too ill to study, and the lag between getting benefits, meaning I've had to live on credit a lot of the time.

I spoke to cccs, who said that because my income is higher than my outgoings I don't have a debt problem. However, two problems there. Firstly, benefits are paid every four weeks. They worked my income out over calendar months, so there's a big difference. Also, the budget they did doesn't leave me any money to pay for the care I need, which I can't carry on without. I need to reduce my debt payments to afford to pay carers.

Most of my creditors have accepted small payments, but natwest are threatening court action unless I pay them £150 per month, which is way over what I can afford, even now without paying carers.

So what are my options? I've just read somewhere that an IVA is only for debts over £15,000, is that true? Because if not, that seems the best way forward. But will my creditors accept one if it's leaving me with spare income every month? Will the accept needing to pay for carers as a legitimate expense, because all the forms don't cover things like that.

The alternative is bankruptcy. That means that I'll never be able to get myself in this position again, which is very appealing. But it's a huge step, and again I don't know if my spare income will mean that my application's turned down.

The bottom line is, my benefits are there to pay for the care I need. I really want to be able to do that instead of just paying interest on debts. And the stress of letters and phonecalls telling me 'give us a thousand pounds today or we take you to court' is making my health worse.

So, my questions in a nutshell are:

Is there a minimum level of debt for an IVA?
Can I keep the benefits intended to pay for carers for that purpose?

Any help and information would be great, I'm having real trouble finding actual facts about the options.

Ames

rog2

There ARE other options - you have come to a good place where you will benefit from both good advice and the experience of others who are in a similar position.
May I suggest that you post your SOA, listing Income and Expenditure, and the advice will come flooding in.

Ames

Ok!

Income (calendar month)

Income support 331
DLA 341
SDA 249

But in most months I get 850, as they're paid 2/4 weekly, not real monthly.

Outgoings:

Rent (arrears) 15

Water 18

Electricity 50 (I think, based on my last flat, but I've only been here since June, not had a bill yet. It's storage heating, so if I want to be warm through winter I need to turn on electric heaters and it'll get really expensive, another reason I need to sort my finances. I have an immune problem which makes me prone to pneumonia etc so heating is REALLY important.)

Contents insurance 15

ntl (phone/tv) 50 (Planning to cut this back)

internet 15

TV licence 11

Car servicing 20

road tax 15

insurance 45

AA 4

Fuel 20

Food etc 150

clothing 20

hairdressing 10

window cleaner 2

entertainment/socialising 80 (although cccs say this should be 15, they told me on the phone 60 but on the plan it's 15. But, and I know this sounds weak, I'm mentally ill and if I have to spend the next two years sitting in the flat 24 hours a day never seeing anyone, my condition will get worse to the point of suicide, I've been there before with friends to catch me, if I can't keep up with friends then it'll get bad).

emergencies/presents 10

Debt repayments

Loan 1 (Yorkshire Bank) 131, expires March 2008
Loan 2 (egg) 160, expires May 2009
Barclaycard 12 (they've agreed to accept this, it's 1% of debt)
egg credit card 10
Natwest, I owe 1240, I've offered 15 a month, they've asked 150, I've no idea what to do next.

Until August my income was 520 every four weeks, this is the first month where I've actually had the full income.

Hope that's enough info.

As for the mental health thing, I asked a couple of years ago if my parents would accept power of attorney but they said no I should have more self control (mania causes spending). If anyone knows how I can get power of attorney without it being someone I actually know personally then please let me know.

I need to free up enough cash to pay for a cleaner, someone to do my laundry, and if possible someone to help wash and dress me but that gets expensive.

Thanks,

Ames

james32_uk

An IVA does need to be a debt of at least 15k. Try speaking to Payplan making sure you include in your SOA a payment for a carer. Hopefully they will be able to arrange a DMP for you.

Do you have any chance of increasing your income in the future? If not, and assuming you have no assets, you're probably better off with bankruptcy.

Ames

My income definitely wont increase for the foreseeable future, this is the highest rate of disability benefits I've ever been on and I'm actually expecting it to drop next summer when it's reviewed.

I'm planning to see CAB on monday, I just want as much info as I can get before then.

Friends have said that bankruptcy's not an option because I'll never get a mortgage, but since I'm highly unlikely to ever work above minimum wage, I can't see I'll ever earn enough to get one anyway. My worry with bankruptcy is losing my switch card, which I need to be able to buy things online. When I'm really bad I can't get to the shops for food, so I'll have to be able to shop online.

Thanks for the responses,

Ames

james32_uk

A bankruptcy doesnt mean you'll never get a morgage but it'll certainly make it alot more difficult especially for a while. You may be able to get some kind of card that you can use online. I'm not sure on the rules but you could investigate what happens if you have a bank account with a card that is not overdrawn. Perhaps you could keep that? Especially if you have special circumstances.

Ames

Unfortunately one of my loans is with the bank I have a current account with, so I'd lose that card.

I have found a pre pay credit card, but they charge £5 a month, so I'm not sure it's a way to go. Although if I were bankrupt and had more spare cash then that would be less of a problem, since it would be less than the interest I'm currently paying.

Biffa

Ames,
Welcome to MSE!
Just a quick question - how much are your rent arrears in total? The maximum you should be paying (if you're with a social landlord) is around £2.85 per month. I assume you are getting full HB & CT benefit as well?

Ames

I'm in a council flat, I moved in at the end of June. I got offered it on the 30th April, and in my old rented place I had to give a months notice from the 27th, so I had the best part of two months paying rent on two places. I got housing benefit to pay the private one until I moved, as that was highest.

On the day I moved in, the arrears were £351. I was getting full housing benefit from that day, yet they've somehow increased to £501. I *think* that it's because HB is paid in arrears, and so the statement was done at a different point in the month to the HB being paid, and so it really is only the 351.

I was told that the minimum they would accept was £3 per week, although I didn't get the card to pay it with and so I haven't been able to pay. I got the phone number the other day so I can call and set up a direct debit.

Ames

Biffa

Ames,
Ask them to do Direct Deductions from your Income Support. In the meantime, pay £3 per week until you receive a letter of confirmation from the DWP that the money is being deducted. It's worth checking if you have an outstanding balance on your council tax account as well, if so, do the same - get them to deduct £3 per week from your IS. This is the maximum they can ask you to repay as you're on benefits.

Also, ask your council if they have a Contents Insurance scheme. Most of them do - you could probably get £15k worth of cover for around £2 per week.

Biffa

Forgot to ask - what area are you in? OH also suffers from depresion as well as M.E/CFS and a broken back, so I know how bad depression can be.