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Setting up an IVA and have some questions - can anyone help please?

Hello

I've lurked the forums on here for years, but have finally acknowledged that I can no longer sustain the amount of debt I have so I'm doing something about it, I'm a little bit terrified about what lies ahead and I have lots of questions that I'm hoping someone can help me out with.

My tale goes a little like this.... My husband and I have always had a little bit of debt, but for one reason or another this has snowballed and has now reached a level where we can't afford to pay the minimum payments any more, it got to the point where I was borrowing from one card to make payment on another and now there is little left to borrow.

We have just over 85K debt which is made up of 2 unsecure loans, credit cards and one store card.

Today I called the credit card company that we owe the most to with the plan of asking them to set up some form of arrangement for us; we owe them 14k and the payments have just increased to 470 a month. The girl I spoke to was fantastic and said that we could pay £76 a month and explained what would happen if we did this. However, she then went on to say that due to the amount of debt that we have and how many calls I would have to make, without the guarantee that each lender would be as understanding, and then how many letters phone calls etc I'd have to fend off, that we should consider contacting a debt management company. She reccommended Step Change.

So, I looked in to some reviews about them and then called them with the thought in my head that they'd say they could set up a debt management plan for us, however after taking all of my info the girl I spoke to said that, yes, they could do a debt management plan, but it would take over 16 years to pay and there was no guarantee that all of the creditors would accept it due to the small amount they'd be offered, and she reccommended an IVA.

Up until today I didn't really know what an IVA was. I've now looked in to it more detail and have read both positive and negative things about them. I feel mostly positive about what I have been told by step change and what I have read, but I don't know if I'm being naive or if I'm missing something.

The person I spoke to at Step Change seemed really good. After 2 hours on the phone she emailed me a pack and said that someone from their IVA team would be calling me within 48 hours to discuss if I wanted to go down that route and if I had any questions they'd be able to answer them.

I understand about the implications to our credit files - but we can't continue as we are now, so they'd be impacted by doing nothing, taking an IVA or by taking a DMP, and I never want to be in this situation again, so the thought of not being able to get credit doesn't bother me.

This is where I need someone's advice please.

My main concern is that we have 2 cars and a house, which is on a joint mortgage, I don't want to and can't afford to loose these. The woman I spoke to today said that with an IVA I wouldn't loose them. The cars are both on HP and have 48 and 60 months remaining. She said that the IVA would run over 5 (possibly 6) years, and if the car HP ended before the IVA did then we'd just have to put the money that we were paying to the HP companies in to the IVA - Does that sound correct?

She also said that we wouldn't be forced to sell the house/have it taken off us. She said that at the end of 5 years we'd be asked to re-mortgage and if we couldn't get any additional money on the house then the IVA would be extended for a further year - Again, does that sound about right?

Also, I've just started selling things on eBay, I get paid by PayPal and then transfer the money in to my current account. It's just things like baby clothes that my little boy has grown out of and and little bits and pieces we have lying around the house. If I continue to do this will that money be taken straight in to the IVA? I was thinking I could just not mention eBay when the advisor calls me back and just leave anything I make sitting in the PayPal account and then use it to pay for Christmas presents etc straight from there - Would I be allowed to do that?

And, another question, last week one of the credit card companies took a DD for £190 as my normal monthly payment. I need that money to pay for my council tax and fuel later in the month. I've not set the IVA up yet, I was planning on withdrawing the £190 back from the credit card. Would this have a negative impact on anything? For example might I not get the IVA if I did that?

I have a million other questions, and my head is like a washing machine at the moment trying to think everything through. The IVA seems like the best option for us, is there anything that I need to think more carefully about, or anything that I might not get told by SC when they call me back that I really should know?

Going bankrupt isn't an option as we can't get rid of the house or cars (we need them both as we live 35 miles from work and work different hours, so couldn't rely on one) and a DMP seems to be never ending, where as the IVA has an end date.

I don't know if more info about my circumstances would help answer any of my questions, but just in case it would, as I said above, we have 85k debt, a joint mortgage of £121K (of which 30K is a secure loan) and our house is worth about £140K (but we can't increase the mortgage any further). Our combined monthly pay after take offs is £2900 and our outgoings (incl mortgage/bills/food/fuel/school dinners etc, not including any payments towards debt) are £2600. This leaves £234 which is the amount that the IVA would get (I don't know if that's the correct term...), that's what SC told me today.

Any answers that you can offer, stories that you can tell me, advice you can give would be fantastic. I feel like a weight has been lifted because I have finally acknowledged the mess I'm in enough to do something about it, but feel anxious that I don't really know what's going to happen next or if I'm making the right decisions.

Thank you for reading my ramblings, and I'm really sorry it's such a long post :)

Comments

  • Hi Tatty,

    Welcome.

    This is purely my opinion, speaking as an IVA customer:

    Please consider the ramifications before entering an IVA - speak to a few providers to see if it is the right option for you. Remember: It is a form of insolvency, which in turn potentially puts all sorts of restrictions on everything from the ability to open a bank account, or even get a mobile phone on contract.

    I only went down the IVA route as I had no real option after an unexpected change in financial circumstances.

    Google 'Insolvency Practitioner Reviews'. Contrary to what some might have you beleve, many don't charge you anything 'up-front'. In any event, their fees are paid out of your monthly IVA payment (and agreed by your creditors).

    By all means seek advice from the ‘charity’ organisations, but don’t be afraid to approach a private firm if they don't think you are eligible for an IVA.

    I have a cynical view of the so-called 'independent' charities (Stepchange, National Debtline etc…) - they are all sponsored/funded by the banks/credit companies, and I can't help feeling that was who’s interests they were looking out for when they advised me. They tried pushing me towards a debt management plan (would have taken 10 years to pay off my debt + loads of interest).

    Sounds like Stepchange have offered you reasonable advice on this occasion though.

    Be aware: Stepchange, may refer your IVA to Grant Thornton anyway. (Just google 'Grant Thornton Complaints' to see why that may not be in your best interests). They are all very competent etc. (Most of the problems seem to be associated with delays in closing the IVA, associated with reclaiming PPI). But with only a handful of IP's to cover their 20,000+ customer portfolio (nearly half the IVA market basically), one-to-one customer service is probably not their strong suit.

    Saying all that, I am sure that some private firms will ‘over-sell’ IVA’s to people for whom it may not be the best solution. (Based on your information though, an IVA does seem a reasonable solution).

    You will have to work out your income and expenditure. Whatever is left over is your IVA payment. Regarding what is deemed 'reasonable' expenditure: All IPs that I’ve come across make reference to the Stepchange Budget Guidelines Report here.

    https://docs.google.com/file/d/0B7LabJy69BP1M0gxeHQ1SDFiN1E/edit?pli=1

    (Sorry, have not yet been able to get hold of the latest version that came in at the start of this Month, but the figures only differ by a couple of quid here and there).

    It is well worth a read, as it covers every form of expenditure, right the way down to allowances for hairdressing, kid's school dinners, meals at work, even hobbies etc.

    If you are careful to correctly record your income and expenditure, your IVA payment should be set at quite an affordable level. I have come across people who underestimate their expenditure and subsequently have difficulty.

    As for stopping creditor payments: best take the advice of your IVA company. Personally, I would try to keep up with min. payments until I know my IVA proposal is viable.

    In the interim, it is worth trying to withdraw what you can IN CASH, NOW. This is because many creditors, once they get wind of an IVA application, will freeze your account without warning. You may therefore need this cash buffer to tide you over.

    Equity release - yes that sounds about right: Bear in mind that, however unlikely it is currently likely to happen, most IVA's require homeowners to (subject to a property valuation in Month 54 of the IVA), attempt to release equity via remortgage / secured loan up to 85% LTV to increase creditor dividend up to 100p in the £. (Subject to the resulting payment being max. 50% of you current IVA payment for affordability reasons). For most, equity release is not possible, so your IVA goes on for a 6th Year instead (which usually works out a lot cheaper). But who knows what the economic climate will be like in 4-5 Years time?

    Bank Accounts: If you still are in the pre-approval stage, and any of your debts are with your existing bank, you need to open a full current account with a non-creditor institution now! (less overdraft of course). Best not to reveal that you are considering an IVA though (no requirement to volunteer such information).

    Important to do this before you are on the register, as you will then probably be limited to a handful of basic accounts.

    Do not switch to HSBC/First Direct: when they find you on the insolvency register, (which they will), they will make you close your account.

    Glad I went the IVA route in the end - can now sleep at night, Hope you get back on track financially soon as well.

    Just my opinion though.

    I'd better stop browsing social media, and get back to work!!!
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