thinking of iva but few questions!

glenandemm

hi guys ive got about £13000 worth of credit cards,and an od.
basically im self employed but work has dried up the last 3 months and im just making enough to pay my mortgage and live with basic needs to get by and have around £150 if im lucky to split between about 7 debts.
i went into arrangements with the credit cards but they wont accept lower than what i originally agreed and my od with natwest im paying £50 a month interest on £3000 but they cant put me in an arrangement to start paying my od down but happy to keep me paying the interest each month,
i cant keep scraping what i can to pay these cards, i owed nearly £20k two years ago and have payed a fair bit off but as i say work has dried up and im just living if you know what i mean, i feel i could pay a regular lower monthly payment rather than miss a payment here pay one there when i get some money like now and have the cc companys ringing me 6 times a day!
i have a mortgage but theres no equity in the house and i own a car and work van worth about £2k together so not much there either.
would an iva be right for my situation and how do they work out what they think you can earn to repay the companys each month, i really dont want to and wont sign up to an iva with high payments that i might struggle with in a few months.
can anyone suggest a decent company to speak to, ive been suggested a company called stepchange as they dont charge?
can anyone give me any advice and am i doing the right thing thinking about going down this iva route?

manzanilla

Rule out an IVA - they are VERY inflexible. Also 13k is too little for an IVA.

Talk to Stepchange about a Debt Management Plan - not an IVA. DMPS are much more flexible and suitable for 13k of debt. You will need to open a bank account with someone you don't owe any money to and put the OD into the DMP.

FiatFan_2

or maybe even a DRO depending on your full circumstances. maybe the stepchange debt remedy tool or similar could give you an automated result with an information pack to consider your options. Payplan or a.n.other larger free debt agency may have a similar information product to the stepchange debt remedy. I believe most of stepchanges self employed customers are dealt with by Grant Thornton, so that could be an avenue of enquiry too.

good luck

manzanilla

a DRO isn't possible if you own a house, even with no equity

glenandemm

hi guys cheers for replys.
you are right the dro is a no no if you have a home but i'll look into the debt management plan, how does that work?
is it similar to an iva?

manzanilla

A DMP is conmpletely different to an IVA.

In an IVA all your creditors are bound and interest is frozen (Good) But it is very inflaxible and demand a high monthly payment so is not suitable for "small" debts (Bad)

In a DMP no-one can make your creditors freeze interest - but most will do so for 6 months or a year - more if your Statement of Affairs looks reasonable, And a DMP can be varied as your income or costs go up and down. But there is no set end date (Bad) and you repay the whole debt.

But the pros and cons of IVAs ve DMP don't actually matter for you because an IVA is not a possibility - so it will have to be a DMP.

UpToMyNeckInIt

Manzanilla, you make some fair points, but some of your advice is misleading:

There is nothing in UK insolvency law saying there is a minimum level of debt for an IVA. Many IVA companies state a minimum, but it's their minimum due to the fees they charge to creditors. Some won't consider an IVA for less than £15,000 of debt for example, but others will.

IVAs routinely get approved for £10,000 to £15,000. However with debts towards the lower end of the scale, often only a smaller percentage of the debt can be written off.

I've even come across a few IVAs covering less than £10,000.

If one's circumstances, by level of debt or otherwise render an IVA not possible, then a DMP or BR are the only alternatives in these circumstances as discussed.

Glenandemm: What is the likelihood of your sustained self-employment? If you do decide to pursue the IVA route, your IVA firm will want to be satisfied that you will have a sustainable income. Check out some IVA company reviews at IVA.com. BUT also consider the restrictions of an IVA, and ask if you could put up with those for the sake of a £13K debt.

Good luck with whatever you decide.

manzanilla

It is true I was simplifying. But IVAs for less than 15k are rare and it doesn't sound like he has actually missed many (any?) payments so his creditors are not likely to approve an IVA with a very low return. And an IVA is a truly terrible option for someone self employed with a fluctuating income. And with little equity, there is simply no point - a DMP is a much better way forwards.

UpToMyNeckInIt

I must say, in this instance, a DMP is worthy of consideration: The debt is relatively low (most IVA customers I've come across seem to have debts of £30,000-£40,000ish). Also, the apparent inconsistent income may be an issue.

But it's all relative. A £16K debt may not sound much to some, but if you are earning only a little more than that a Year, then it's huge. Say, you can only spare £100pcm towards a DMP, then it's going to take a minimum of 14 Years to pay off - that sucks - it's a life sentance.

Little equity for IVA purposes is good: you are less likely to have to attempt a remortgage/extend the plan for a 6th Year. Also (I know), you don't have to have got to the stage of missing payments to be considered for an IVA.

I'm self-employed, in an IVA and nearing the 1st annual review. It's worked fine for me so far.

I suggest the OP considers all options VERY carefully.

Just my opinion though.

manzanilla

the apparent inconsistent income may be an issue

it is a huge issue. Some of the saddest debt cases I have dealt with are people whose IVAs fail who should never have had one in the first place because their income was not secure.

Say, you can only spare £100pcm towards a DMP, then it's going to take a minimum of 14 Years to pay off - that sucks - it's a life sentance.

But an IVA on £100 a month is just not going to happen - it would never be approved. If the available income is £200+ then the DMP time is down to a more manageable 7 years. Which could then decrease if income goes up or increase if it goes down.

Little equity for IVA purposes is good: you are less likely to have to attempt a remortgage/extend the plan for a 6th Year

and it is also good for DMPs

Also (I know), you don't have to have got to the stage of missing payments to be considered for an IVA.

Agreed. But if you haven't missed any payments and nothing dramatic has happened (redundancy, major illness etc) then your creditors are not going to agree to accept a very low level of return.

milliemonster

manzanilla wrote: »

it is a huge issue. Some of the saddest debt cases I have dealt with are people whose IVAs fail who should never have had one in the first place because their income was not secure.

But an IVA on £100 a month is just not going to happen - it would never be approved. If the available income is £200+ then the DMP time is down to a more manageable 7 years. Which could then decrease if income goes up or increase if it goes down.

and it is also good for DMPs

Agreed. But if you haven't missed any payments and nothing dramatic has happened (redundancy, major illness etc) then your creditors are not going to agree to accept a very low level of return.

Totally wrong, we owed £57k our iva was approved with a return of 17p in the £ and we hadn't missed a single full payment prior to calling our iva company 3 years ago, the only reason we went down this route was because we were sick of making minimum payments but realised we would never get the debt paid off before we retire, our creditors approved our iva with no questions.

Also many Ivas are approved on £100 a month if that is all the debtor has, your advice is extremely misleading and appears to be very out of date.