Preparing for an IVA - some questions before we do

Bluey42

Hi all

With our recent tax credits renewal our monthly income has fallen by more than £200, which is no longer sustainable along with the three credit cards we have. So we went to PayPlan who have started preparations for an IVA.

One of the things they told us to do was get bank accounts set up elsewhere (we both bank with HSBC, both have overdrafts and one of our credit cards is HSBC). So we're looking at opening Barclays current accounts and getting our salaries paid there. This raises a couple of questions:

1. My salary is being paid on Tuesday, which is the same day that I need to pay lower repayments, informing the creditors that I am setting up an IVA and cannot afford full repayments. Will this immediately invoke the "right to offset" or do I have time until the IVA is in place?

2. If I don't have time, what should I do? Deliberately fail to make any payment until new bank accounts are set up, transfer this month's salary in, then make the lower repayments?

Also, any other general advice would be greatly appreciated. Thank you very much in advance!

longtermplanner

Cancel the payments you are due to make. Move your salary out immediately to new bank accounts or in cash if new accounts are not yet open. Don't worry about making lower payments. Pay nothing this month.

An IVA - can I ask how much you owe? Do you have a house? If yes, are you comfortable with the remortgage/secured loan you may be required to take out in the 5th year of your IVA?

Bluey42

Thanks for your reply. Why make no payment at all? The impression I got from PayPlan was that the gesture would be appreciated. I was advised to make smaller payments and advise each creditor, along with the payment, that I was working with PayPlan and to give my PayPlan reference number.

Between our two overdrafts and three credit cards the debt is around £18K, but we don't have a house, we're in private rented accommodation. With two children, if that makes a difference.

Edit: Actually it's close to £20K.

milliemonster

Paypal are telling your a load of !!!! to be honest, there is absolutely no value to making any further payments if you are definitely going ahead wi an iva proposal, the people who vote at the creditor meeting vote on behalf of your creditors, if you pay a few quid towards a debt outstanding, it's not going to influence their decision in the slightest, that money is now better off in your pocket to save towards a contingency fund.

We stopped all payments for 6 months before our iva was approved and not one of our creditors rejected it.

Bluey42

Six months! Is it normal for it to take that long? Without making any payments to our creditors we could save a lot of money in that time!

To be fair to PayPlan, they didn't outright suggest we make token payments; it only came up because I specifically asked about it...Tuesday is the day I'd normally pay all our minimum payments, but this time, if I do that, we won't have enough money to get through the month.

Thank you both for your replies so far!

By the way, we're looking at opening a Barclays Basic account, one each, in the next day or two. Is there an easy way to transfer all existing standing orders and direct debits to it? Also, if I were to transfer my month's salary from HSBC to Barclays, would HSBC have a problem with that and possibly stop me from doing it?

milliemonster

There is no 'normal' an IVA proposal can be drafted and a meeting called within 6 weeks but we took our time, for 2 reasons, a because I wanted to save a damn good contingency! and b because I wanted to take my time to make sure our proposal was right that our I&E was accurate and liveable and I didnt want to rush to get it through just to stop hassle from creditors and then find i was tied to something that was doomed to fail.

No idea about barclays im afraid, I changed to a normal current account with a cheque book with TSB so we've never had a basic account so no idea how they run, but as far as transferring your salary from HSBC, its your salary not theirs so you can do with it what you wish

althas

From the time I approached my IP to the time the IVA was agreed, I did not pay anything to my creditors

I wrote to each of them explaining that I was in trouble and talking to an IP about entering into an IVA, and asked them to have a little patience whilst this happened. I think as long as you keep communication open with them, that is the important thing

One thing you mest be careful about is giving preferential treatment to one creditor over another. That is a deffinate no-no in a big way. So whatever you decide to do, make sure you do it to each and every creditor

milliemonster

I didnt bother writing to any of them, the problem is most creditors will just continue to hassle you regardless of what you say, do or pay unless it is the minimum amount they require, we were threatened with debt collectors yada yada yada but it never materialised, I spoke to them all on the phone initially but when they continued to constantly phone and hassle us I ended up just ignoring them and putting the phone down as I knew it made no difference.

Anaheim

Once we had decided to go down the IVA route we stopped making payments to our creditors, we had never missed a payment up to that point so we didn't receive any immediate phone calls, just a few letters etc. The only phone calls we received were once the IVA was in place and as soon as we made the callers aware that we were in an IVA they instantly stopped. As people have said before it's a good way to build up a contingency fund as you will need this, we used our 'missed payments' to replace an aging washing machine and to squirrel some away for car repairs as we were running a nine year old car then. I think our IVA took about 6 weeks to set up so all in all it was only one month's payment that was missed.
Transfer your wages into a new account and cancel all direct debits and standing orders to creditors, we set up a basic account with Barclays and went into our local branch and where completely honest with them, they were very understanding and helpful, they'll advise you what to do regarding direct debits etc. We did have a long standing yearly payment for RAC which we almost forgot to cancel so don't forget to cancel anything like that.
Our house and contents insurance was also with our old NatWest bank account and Barclays also looked after that for us, the quotes were actually cheaper than we had been paying previously and gave us the same amount of cover.
Good luck!

longtermplanner

Bluey42 wrote: »

Between our two overdrafts and three credit cards the debt is around £18K, but we don't have a house, we're in private rented accommodation. With two children, if that makes a difference.

Edit: Actually it's close to £20K.

Can I ask why you are going for an IVA rather than bankruptcy? With no assets to protect, there is little to be gained from an IVA for most people.

Read a lot of the recent threads on here. There have been a couple here from people whose IVAs are in big trouble because their tax credits have reduced. a lot of IVAs fail. About 20-25%. You should seriously think twice about an IVA in your position. It may seem like a great option because you are so stressed by your current situation, but 5 years is a very long time to make this commitment, so much can go wrong in that time.

This site compares IVA with bankruptcy: http://debtcamel.co.uk/hard-choices/iva-vs-bankrutcy/ .

Bluey42

First I want to say thank you very much to all of you who have replied, I've read it all and taken a lot of comfort. I'm not looking forward to the next month or two, getting phone calls all the time and threatening letters.

longtermplanner wrote: »

Can I ask why you are going for an IVA rather than bankruptcy? With no assets to protect, there is little to be gained from an IVA for most people.

Read a lot of the recent threads on here. There have been a couple here from people whose IVAs are in big trouble because their tax credits have reduced. a lot of IVAs fail. About 20-25%. You should seriously think twice about an IVA in your position. It may seem like a great option because you are so stressed by your current situation, but 5 years is a very long time to make this commitment, so much can go wrong in that time.

We rent privately. Our landlord need never know about an IVA, but she will find out about a bankruptcy and we don't want to give her cause to evict us.

That being said...I thought I'd better get a second opinion and went to StepChange. They have recommended a debt management plan. I explained that it didn't sound like a good option when PayPlan mentioned it because it sounded easy for our creditors to renege on it. They said that's true, but with the DMPs they adminster, that is actually a very rare thing.

They also explained that the flexibility of a DMP can be really helpful to us; if something goes wrong and we need to spend cash in an emergency, StepChange can negotiate it there and then for us.

So we're pretty much decided that we're going the DMP route now. It does sound like the right way to go, and if the worst comes to the worst, we'll revert to bankruptcy anyway if we have to.

StepChange reckon we can be debt free in just over four and a half years!

Again, thank you so much to all of you!