Should we or shouldn't we?

jp13

Hi all,

My wife and I are in debt and all though we haven't missed payments yet, it won't be long before we do.

We owe approx £43,800 between us.

I had contacted a debt company a few weeks ago and they advised IVA, they worked through our budget and advised us to start an IVA and pay £700 a month. This amount is approx £200 less than what we are paying. Then we saw a BBC report regarding IVA companies and the guy on the telly recommended speaking to CCCS. We called CCCS and they looked at our situation and advised we go for an IVA at £464 a month. This was based on my basic, my bonus and extra freelance work I do. They advised us that they are backed by a major bank and would pass our details onto a recommended Insolvency Practitioner.

The IP called us an went through our budget, changing a few things and recommended we pay £330 a month.

This amount is actually all that we have spare after they had worked out our budget. There was a couple of discrepancies as I have some gadget insurance and vehicle recovery with my bank account but obviously doing an IVA means we lose this account so we needed to change the budget to reflect Vehicle recovery and insurance.

The company then recommended a payment of £225 a month. This seemed much more realistic figure to me as on my basic only pay then that would be the amount we have left over. They also asked for freelance earning projections. Well this has been very sporadic as its not my main source of income. Anyway I was as honest as I could be and they then came back to us and recommended £335 a month repayment.

Then we received a letter from Child Tax Credits which seems to be advising us that based on our income next year we would get about £3 a month payments from them so this affected our income. We sent back to the IP and told them this. They reworked the budget, changing quite a few things from what CCCS had advised and from what they had originally advised and now with the reduced Tax Credits but including the projected freelance income, we still ended up with a figure of £335 a month to repay.

We are now at the stage where they are waiting for our documents to take this a step further.

Now, before I actually jump on this I have to say I am really uneasy about the whole thing. If there are any changes in my extra earnings, and this year there already has been with me getting, so far this year, half of what I got the last two years since I started trying to get the extra work. Hence why we are now struggling to maintain minimum repayments on our debts.

We've been in debt for years. I was a mature student and started back at college when they introduced the student loans. After 7 years (I had to start at ND level without funding, and did ND, HND then Degree) I came out with huge debts. During that time we were living with my alchoholic mum and helping her pay the mortgage and supporting her through 3 drying out programmes. My mum continued drinking and eventually asked us to move out just before my final year at college. We had to rent somewhere and pay for everything, deposit, beds, pots pans etc on credit. After college and breaking contact with my mum (haven't spoken to her in 10 years) We actually managed to pay off all the student loans and got almost out of debt, but then, somehow, cost of living, moving around for work etc have managed to build the debt back up again.

I am 40, my wife a year younger, and we basically were two income no kids and after NHS treatment had really given up on ever having kids, with two incomes we could mange the debts. But then, miraculously my wife got pregnant. She's been on maternity leave and we managed ok while we had that payment but, after that stopped and my wife didn't return to work, we figured out that to pay everything we needed to reduce our outgoings. We've moved to a cheaper area and have less rent. But now, with the slightly reduced extra income, we are struggling. If my wife goes back to work we would have to put our child into childcare and with those costs, and now the extra petrol costs for traveling we really would possibly only just have left over enough to pay minimum repayments on my wife's debts. After all the waiting and uncertainty to get our child, we don't want to put her in childcare and both want my wife to stay at home and raise her.

The experience we have had with the IP's and the fact that they are backed by the banks has really made me question their advice.

I have found out that if we do an IVA, and actually manage to finish it in 5 years then we will have another 6 years of bad credit score, making it 11 in total.

I also have doubts about being able to live within such a strict budget for 5 years. What happens if you have unexpected costs, car or washing machine breaking down etc.

My daughter is now 1 year old, she's going to get more expensive as the years go by not cheaper.

My freelance is really just a part time, irregular job. The first year I made £2,500 extra but this year I've made £1000 so far. So its not massive and if I change company from my current main job employer (and I am currently considering it) I may be contractually obliged not to freelance anymore.

The IP has given us its fee's and its £6000 each. So £12,000 for the service before we start to repay any debt off.

I have also found out that even though we will be paying a large sum of the debts back, Landlords, banks, etc still view this as bankruptcy.

So, I'm questioning, what is the point?

We may as well bite the bullet, go bankrupt, we really have nothing of very much value, After a burglary in January where we had the car stolen and got no payout from the insurers (both house contents and vehicle) we have just bought another one for £700. I have a classic car worth about £1500 (if we're lucky to get that. Looking on ebay its probably worth £1000 max)

Neither of us really want to go bankrupt, we would like to try and pay off the debts but I don't have a pension, don't have health insurance for my wife or child, don't have savings, unlikely to be able to get on property ladder in this climate. But I do have quite a good wage that would allow my wife to stay home and raise our child if we didn't have the debts. If I get a bit in overtime and freelance then actually we could end up with £800 a month as spare cash to save.

So my feelings are, if we go bankrupt we would within a few years (after IPA etc) be in a position to actually save money for the future, for pensions etc (I opted out of SERP's back in the late 80's when it was all the rage but haven't been paying anything into private pension)

Our credit rating would begin to be rebuilt after 6 years, not 11.

We wouldn't fail at IVA meaning we waste a few thousand to IP's and then go bankrupt anyway.

We would have a bit more to ourselves every month as IP has advised that in bankruptcy, on my current earnings, the OR would take about £280 a month.

I honestly can't see why I should do the IVA???

But I am really worried about going bankrupt. I do not think it would affect my job, but I understand my tax code would change to NT therefore my employer would know what I'm doing.

Our rental agreement has a bankruptcy and IVA clause saying we mustn't do it. But with IVA we get to hide it from the landlord and my employer, friends family etc.

But apart from the privacy aspect of an IVA to bankruptcy I see little gain in doing the IVA. I feel it puts us on an uncertain path that we might fail while in the meantime have a really strict budget that given how cars break, child costs etc means we may well fail anyway.

Both my wife and I are really uneasy about going to court, being interviewed by OR and then generally living afterward. We don't want to admit it to our landlord, don't want to be on pre-pay utility meter's etc But I really don't want to take up an IVA and then be penalized if I fail and have a bad credit score for a longer period when I've actually tried to make good on my debts. Whats the point of that?

After the conflicting advice we have been given regarding how much we should pay I do not have confidence in these IVA practitioners.

After hearing they are backed by the banks I have even less confidence that this is in our interest but is in fact in their interests and the banks or creditors interests.

I really feel bankruptcy is the best option to wipe the slate clean and start again and be able to save for the future and manage any unexpected costs etc. We just really don't want to actually go through with it.

Any advice would be gratefully received.

I_luv_cats

Try contacting Mike Thomas The Debt Wizard.com for advice.

He is well known on the radio, tv, police officers, web. I think
He is the most genuine person.

jp13

I_luv_cats wrote: »

Try contacting Mike Thomas The Debt Wizard.com for advice.

He is well known on the radio, tv, police officers, web. I think
He is the most genuine person.

Ooh thanks, sorry didn't see your reply as I've been editing my original post.

I'll look him up on the web.

(I luv cats too!!)

Cissie1

Hi jp13

I have just read through your post and a lot of it related to me. My husband and I were in an IVA for 4 years which then inevetably failed. We struggled for ages with the budget and ended up in an overdraft which isn't allowed and things just snowballed. We had another child and of course I went on maternity leave again and this was the last straw really. Debt Free Direct (who arranged our IVA) then put our monthly payment up and added a year on to the 5 years to cover the fact we had to pay less whilst on maternity leave and we decided then that we couldn't do it any more. We decided to bite the bullet and file for bankruptcy. It wasn't an easy decision but I have to say I wish we had done it in the first place. We have now been living on the IVA for 4 years and now have a year of bankruptcy (with an IPA for 3 years) and 6 years bad credit rating where as we would be further down the line if we had gone bankrupt to begin with. It has been a complete weight off our shoulders and we can start to rebuild life with the kids debt free rather than struggling quite so much. Of course every case is different and you are right to explore all options. Think it all over and choose whats best for you and your family. Feel free to give me a shout if you need a sympathetic ear! and the guys oon here are all so helpful and full of great advice and knowledge, I wouldn't have been able to get through it all without thier help

Good luck
Cissie xx

confused76

hi there
i have never heard of the debt wizard?

we normally recommend you speak to one of the free debt charities, such as the national debtline, cccs or the cab...they will look at your situation and give you your options based on this.

tigerfeet2006

I haven't heard much about this Debt Wizard, he certainly doesn't hit my radar at all.

I would give National Debtline a ring and go through your options with them. I would say in general if you have no assets to protect and it certainly sounds form the limited info we have that you don't have any then BR is usually the better option.

As for the BR clause in your tenancy agreement, it generally means if you owe rent and it goes into your BR then they can get the property back with in 2 months, which they can do normally anyway I think. If you are up to date with your rent payments and are a good tennent and don't trash the property then it is very unlikely that your landlord will want to go to the expense of getting a new tennent in.

There are other reasons than BR for getting a Nil Tax Code. The peyroll department won't even blink an eye lid. They get a letter from HMRC to change it with no explaination and they change it. If anyone asks you, then you just shrug and say I don't know aren't I lucky. They are not allowed to discuss it as it is covered by the DPA and they will be in big trouble if they do. One of our regular posters tells of an employer ringing HMRC to find out why an employee had gotten NTcode to be told shortly and bluntly 'because we said so, goodbye!'

Do you owe the utilities any money? If not, then it is unlikely you will get put on a meter and even if you do owe them, they rarely put a meter in.

Sunnylooloo

I agree with Confuzzed - please speak to one of the debt charities and get some free impartial advice.

No one can really "tell" you what to do this is something that you and your wife need to decided on your own.

I don't really know enough about IVA's to be able to help you at all.

What might help you is if you post up your http://www.makesenseofcards.co.uk/soacalc.html and then people can advise what you would or would not be allowed in BR.

Sorry not really much more I can say - it is not an easy decision to make but please take your time and do what is best for you and your family

LL

boysep

Hi JP13,

After reading your post, I can only give advice on my own personal circumstancies, which are not too disimilar to your (apart from my debt was somewhat larger than yours.
I too went down the route of pursuing an IVA and can only state that after a year of phone call meetings and discussions, there only appears to be companies that either haven't got a clue or are just after your money (in the form of Fees).

I am now a discharged bankrupt but with an IPA in force for 36 months and still with 22 months to go.

The bankruptcy process is surprisingly humane, with very little sigma from those who require contact directly with you. All you have to be is honest with yourself and others that are dealing with your case. Hiding anything will have grave consequencies!!!.

So my advice for what it's worth, and if you post has detailed all the facts, bankruptcy is your only path and I can assure you that an IPA is the way to rid you of your creditors once and for all and to bring some sanity back into your life.

I personally, submitted my statement of affairs on my own but with minimal help from the CAB (to check I had filled in all that was required) and then just contacted the court to submit my petition.

Based on your disposible income, I would assess that your IPA would be fairly low and not more than 50% of your disposible income (or perhaps less than that) and would not last for more than 36 months to become debt free.

So forget the IVA and get your life sorted with the Bankrucy process. Nothing is guaranteed in this life, but what have you got to lose.

casual_2

Unless you have assets which you want to protect or your profession forbids it, then why on earth would anybody take an IVA over Bankruptcy?

With an IVA:

Your credit file is trashed for longer.

You have to pay thousands just to set one up.

You have to pay for 5 years 100% of your surplus.

In your circumstances, this is a no-brainer. Forget the IVA and declare yourself bankrupt.

jp13

casual wrote: »

Unless you have assets which you want to protect or your profession forbids it, then why on earth would anybody take an IVA over Bankruptcy?

With an IVA:

Your credit file is trashed for longer.

You have to pay thousands just to set one up.

You have to pay for 5 years 100% of your surplus.

In your circumstances, this is a no-brainer. Forget the IVA and declare yourself bankrupt.

This is my sentiments exactly. It took a while to reach that conclusion but I see the IVA route as beneficial only to the banks.

I just don't want to face the truth of it I suppose.

jp13

boysep wrote: »

IVA "Dont do it" !!!

Thanks boysep, the advice is appreciated. It's what I have already thought. Hearing your explanation of the process has made me feel a lot easier about it.