Companies that claim to make you 'debt free' - governement legislation

Hendrix_lennon

Hi folks,
I'm looking for more details on these companies who claim that by using governemnt legislation you can become 'debt free'.
They say that they agree with your creditors that you can only pay so much each month and then after 3 years your debt is written off.
Are they too good to be true ?

Anyone have any experience with them ?

Storm

What most of these companies are talking about are IVAs (Individual Voluntary Agreements) - I'm not an expert, but this is what I've learned (mostly from these boards!)

- Your debts have to be I think £15K or more
- Your income & expenditure will have to be assessed & the monthly amount you can afford will be worked out (this gets re-assessed each year I believe)
- 75% of your creditors have to agree (pro-rated on the amount owed)
- You pay the set amount through a company for 5 years (not 3)
- At the end of 5 years the debts are considered settled

However - stuff to be aware of:
- You need a certain level of income to put towards the debts each month (not sure how much though)
- IVAs have to be arranged through an insolvency practitioner, so there is a fee attached (CCCS & PayPlan are charities though, so take the minimum)
- I think you will be expected to release any equity in property you own
- If the IVA fails (i.e. you can't meet the repayments) you may face bankrupcy
- Oh, at will completely trash your credit rating!

Hope this helps!

lynzpower

They are talking about IVAs.

Yes the way they advertise it it is too good to be true. your creditors have to agree to having the debt written off - they can and do refuse.

Are you struggling with debt yourself at the mo?

Hendrix_lennon

I keep getting letters from the bank saying that my direct debits are being returned every month and - natrually - they are charging me for the priviledge of sending them back.
I get in deeper and deeper ever month.
I'm trying to reclaim charges but it's a long process.
Because of the length of time I've been reclaiming I could probably put another claim in now !
On second thoughts these IVA's may not be the way to go.
I take it I'd have no chance of getting a mortgage later in life if I went down this route ?

Shineyhappy

Hiya,

Have you posted a statment of affairs on here to get other options from the posters?

The more options you are aware of the better in my opinion.

Hendrix_lennon

I'm not really sure how to do one and calculate interest rates etc shinehappy.
God, bet the banks just love idiots like me lol.

Basically I take home just over £1000 a month after tax.
It's usually around £1050 ish.

I pay £160 to Northern Rock as part of a 10 year £10,000 loan - gulp - been paying that for 10 months.
I pay around £50 to a credit card
£99 to Lloyds on a £3700 loan over 4 years
£100 digs to my family
£75 to my car finance company - got around £1800 to go.
£23 car insurance
£65 to one of these nasty high street high rate loan companies - got around 8 months to go on that.

I'm reclaiming bank charges to the tune of £364 from Lloyds and if I'm succesful I'll use this to put towards the nasty high street loan.

southernscouser

By my calculations you have about £480 left over every month after the outgoings above. Obviously if you are struggling to pay them money is going else where. Start a spending diary. Every day write down what you have spent and on what. It's a real eye opener.

Also, do you have any payment protection on your credit card or any PPI on your loans? :think:

Shineyhappy

What about food, MOT, going out, haircuts, presents?

It would be good to keep a spending diary every month so you know exactly where your money goes and then you can see how much you have left over every month to over pay on your debts.

Have you thought about making some extra cash through Ebaying/amazon/car boots?

Hendrix_lennon

Hi Shinehappy.
I tried to set up a sellers account on ebay today - my books and cd's are sitting right across from me as we speak - but because i'm over my agreed credit limit on my credit card they wont let me register!
I phoned them this morning to say what i was doing and that i was starting the account to make money to pay my card but they weren't interested.
You are all right about the money diary though.
I tend to just fritter money away on nonsense when im at my work.
IE sandwhiches etc etc.
I'll start making a packed lunch from now on.

Gemmzie

I set up a seller's account with a Visa debit card if you have one of those.