Thinking about IVA but worried about income fluctuation

Pink-Angel

I'm not getting anywhere with paying my debts on a DMP thanks to Lloyds interest and charges, and I'm no better off after a year of paying out. For this reason I'm considering an IVA as I'm looking at much longer than 5 years before be I'll debt free.

What worries me is the fact payments are set for the duration. What happens about income fluctuation from the cost of living? My salary isn't going up and hasn't for a while, yet the cost of living is. I've got to pay £20 more a month rent, plus gas and electric have gone up, not to mention food goes up all the time. What happens during the IVA when the cost of living goes up but not my salary? I really don't want to have to face bankruptcy and I know that's where I would be if the IVA failed.

Any advice will be gratefully recieved!!

Gimpsdad

You are, sadly, incorrect in your assertion that payments are set, they aren't. Who told you that? Nor is it true that you face BR if an IVA fails, that went out with the Ark as well. Unless it is specifically written in the proposal that your IP retains funds to send you to BR in the event of failure then it won't happen, creditors are unlikely to bankrupt you in the event of failure either. It doesn't really matter where you got these impressions from I suppose, but you do need to speak to a professional who will look at everything for you and spell out the pros and cons. If your income fluctuates then find an IP who will propose on minimum income alone, that way it will always be affordable, but do take time to familiarise yourself with the rules as to extra income earned over and above your minimum. They work very much in a debtors favour, but you must stick to them nonetheless.

Well meaning mis-information regarding IVA's sees far more people in debt for far longer than they should be by embarking on never ending DMP's.

GlamGirlie

Payments are reviewed annuallly, and if you suffer a fall in income you may be able to get your payments reduced.

However, my IVA had a minimum dividend set by the creditors so despite having no payrise for 4 years (and I'm a banker, people!!!) the cost of living continued to rise and my lliving standards were reduced.

Make sure any payment you agree to has plenty of leeway built in for things such as food & petrol costs.

Also the annual increase of £10 in costs which I am allowed is not an annual increase per se, but an increase against the INITIAL costs - so 4 years later I was still only allowed to increase by £10 on top of the year one cost, not the year 3 costs, if you follow me.

milliemonster

I'm 1 year into an IVA and I can vouch to tell you that minimum dividends are no longer set as they are dangerous, these days they generally are set as 'expected' dividends and are detailed from the outset as to what the creditors can expect to receive but as Gimpsdad has said nothing is set in stone with an IVA.

Yes years ago they were very inflexible but now they are more than flexible, you can actually have a review whenever you want, I am having one now before my annual review as certain bills have gone up.

A couple of months back I had an electric bill demand for £180 which they wanted paying there and then and my IP was straight away telling me I could miss my IVA payment to pay it, no problem, no issue.

It's also correct that you don't have to go BR if the IVA fails, no one will make you BR, that's up to you, many people repropose another IVA or come to some other settlement but it's in noones interests for your IVA to fail and your IP will work with you to make it work to its conclusion.

The key thing is to speak to a few companies (don't just automatically go to the 'charities') and get some advice and information to be completely fully informed before you make a decision if it's right for you

Pink-Angel

Thanks very much to you for replying! I'm really grateful. Although I get a fixed salary, I'm conscious that pay rises are unlikely while rises in the cost of living are a given.

I'm going to look into different IVA companies. I just want to get out of debt, not have to pay out for years and years like it feels I'll currently have to on my DMP.

Thanks again.

milliemonster

a DMP is great in certain circumstances, for example if you know your situation is going to improve in a few months and just need a it of breathing space, but as a long term debt solution? nah, complete waste of time, I don't understand why people choose a DMP as a long term solution over an IVA, I just don't get it at all, I just can't see any advantage of a DMP in these circumstances.

It's interesting that CCCS take thousands of calls a month and only have 1, yes 1 IP to deal with IVA's, the company I am with take on 30-40 IVA's a month and have 4, so I never have an issue speaking to or getting hold of my IP, speaks volumes really.

FoggyBrain_2

I gather that CCCS don't do that many IVA's ---- they tend to try for DMP's first. Some IVA's they deal with themselves, or through their sister company CCCSVA. They often pass them on to GT as well.

debtinfo

do remember though that whilst your IP will try and negotiate lower payments (and probably will be able to with a small reduction in payments), it is likely that if if you have a serious reduction in your income the IVA is likely to fail, in fact about 30% of all IVA's do fail before they are complete any the outcome for a lot of those is bankruptcy (although it is rarely compulsary anymore, there are often few other options after a failed IVA).

Many people do start off with a DMP first, in my opinion that is usually a waste of time but many people need some time to readjust before commiting to something like an IVA, or to give some breathing space if the circumstances that lead to an unability to pay are temporary.Anyway DMP's are rarely usefull for paying of the whole debt, just a quick fix before a permenant solution

FoggyBrain_2

A lot will depend upon the common sense of your chosen IP in setting your payments in the first place. In modern IVA's there is usually a clause allowing the IP to reduce payments by up to 15% during the term, however, this will also depend upon the discretion of your IP -- it is not a right!

Pink-Angel

It's interesting that CCCS suggested a DMP to me initially, as I am wondering now whether an IVA might have been better to start off with. I feel I have wasted a year with the payments I have made, but at least I am a bit more aware now and can hopefully get some proper advice.

I called National Debtiline and spoke to a guy who was not helpful at all, he was really quite obnoxious. It also seems they don't really want to speak to me because I have a DMP with CCCS. Am I not entitiled to get advice about my options from anywhere else then?

I do appreciate the comments here, thank you!!

oplus

I used CCCS and I have to say their systems were faultless whether it was using their online service to work out which solution was likely to be the best for me to reviewing it many times and then chatting with them online or by phone and then talking to their IVA people who referred me to GT because I am self-employed it was all plain sailing. I have no issues with GT, I don't doubt that smaller firms might be more personable but an IVA is an IVA.

And best of all it didn't cost me one penny from beginning to end, all I have to do now is find the £150 per month!

For me it was a toss up between BR and IVA, it still might be if it doesn't work out but I can always say I tried.