IVA repayment cheaper than bankruptcy?

BabyZim

Hi all,
I saw an IVA company today (set up by CAB), and they went through monthly allowances, income etc etc and came up with a proposed repayment of £255 a month (£43K of unsecured debt) over 60 months. I think this works out at around 33p to the £ owed. I only have two creditors (MBNA and Lloyds TSB), what are the chances that this offer will be accepted?

I found this to be much lower than I was expecting and was quite prepared to go down the bankruptcy route, but now wonder if an IVA would be better purely due to the lower monthly repayment. She also mentioned that from the 1st December, they'e clamping down on allowances etc for Bankruptcy and I would be better off with the IVA - anyone have any comments / advice?

Many thanks

Charco_2

I'd be surprised if that was true.

You should be paying as much as you can afford no more and no less... if the amount calculated by a company sounds too good to be true then it just might be - so it could be worth ringing another company for a second opinion (or you could post a copy of your I&E onto here and we could see if there are discrepancies)...

Your company now could propose an IVA for £255 a month but at creditors meeting this could be uplifted. You'd be better knowing before hand.

I'm not saying the company you're with aren't exactly correct (I dont know what company you're with) but if you have your doubts then check it out!

Bankruptcy figures will change (tomorrow i think) but not by a huge amount... in both solutions (IVA and BR)the aim is to calculate how much it is affordable for you to pay - they're debt solutions, they're not designed to make things harder!

JCS1

Don't forget that an IPA in Bankruptcy lasts for 36 months rather than 60, and that the allowances tend to be more generous than in an IVA too.

Charco_2

Thats sort of a myth JCS1, the figures will be largely similar (as it's about affordability).

The 36 months v 60 months is true, although in many cases can actually be less than a year (for bakruptcy) depending on disposable income!

JCS1

Charco wrote: »

Thats sort of a myth JCS1, the figures will be largely similar (as it's about affordability).

The 36 months v 60 months is true, although in many cases can actually be less than a year (for bakruptcy) depending on disposable income!

IPA's run for 36 months, if income changes then they can be suspended, they no longer cancel them.

All the IPA proposals I saw when working for the IS had much lower allowances than BR, though that was a few years ago now.

debtinfo

Me to JCS1, IVA allowances are usually less than IPA's, generally because the creditors have direct input and squeeze them as much as possible, the only person the Bankrupt has to convince is the OR. But there are a couple of things allowed in an IVA which are simply not allowed in an IPA.

Also it is worth noting that an IPA does not fail lihe 1/3 of IVa's do, if your income drops you simply dont pay with no comebck

so alot to consider on all fronts, id love to see this IP produce some figures to back up their claims, one suspects a money making company jumping on the bandwagon and using the change in IPA's to drum up business

BabyZim

Thanks for your replies so far. The IVA company is Grant Thornton and I've been given the following monthly 'budget':

Income £2,000 -

Rent £830
Council tax £106
Water rates £22
Electricity £65
Gas £65
Telephone £50
TV licence £13
Satellite TV £21
Food & housekeeping £195
Petrol £130
Car insurance £47
Car tax £12
Car service etc £20
Dental / Optical £13
Medical £7
Clothing £28
Laundry £10
Newspapers £7
Sundries £11
Home repairs / service £15
Meals at work £31
Sports & hobbies £16
Pets £21
Hairdressing £10

Leaving £255 for IVA payments?

JCS1

How many people in the household?

BabyZim

The figures 'allowed' are for single occupancy. Just me on my own.

debtinfo

Thats not to bad actually and about what you would get in bankruptcy give or take a little bit, Lets hope thats what it ends up being after the creditors meeting.

As i said above the main advantage that an IPA has (baring in mind that bankruptcy has other downsides) is that it cant be failed as such ie if you become unable to pay it you dont end up with most of your debts back

Charco_2

JCS1 wrote: »

IPA's run for 36 months, if income changes then they can be suspended, they no longer cancel them.

All the IPA proposals I saw when working for the IS had much lower allowances than BR, though that was a few years ago now.

I was alluding to the fact that if you have NO DISPOSABLE income then there would be no need to have an IPA/IPO at all.

The "allowances" may differ but as debtinfo said some things in BR are simply not allowable at all... it's swings and roundabouts!

The bottom line (the figures that the debtor will have to pay in the end) will be largely similar in an IVA or in BR. The BR wont allow certain things (like the IVA) but then it doesn't take the full amount of the disposable (altho i think that's part of what's changing), what you save on one you'll lose on the other and viceversa.

It doesn't account for 36 months vs 60 months of course.