IVA Please help

Handyman_London

I have had two customers go bust owing me thousands of pounds and have had to lay off my staff and close the company.I am a sole trader and so I'm liable for all my debts so I am considering an IVA.Has anyone got experience of this,or have you got any advice, and if so could you recommend someone.Thanks

longtermplanner

My main suggestion is to take your time and do a lot of research.

5 years is a long time to make a committment for. Even if your current situation seems impossible and an IVA looks good at the moment, you need to see if you have any better options and if an IVA will still be good for you in a year or two.

You say you have closed the business. Where are you going to get an income from in future? If you expect to be self employed, how regular is your income? If it is very erratic, an IVA could be difficult to manage with its regular monthly payments. IVAs are not flexible arrangements.

If you are uncertain and may want to get a job working for someone else, it might be better to postpone the IVA decision until you are more confident about your income. A temporary debt management plan for 3-6 months could be a good interim move.

There is a useful page on IVAs here http://debtcamel.co.uk/debt-options/iva/. If you could say some more about your situation - total amount of debts, likely amount you could repay each month, do you have a house? does it have equity? is it jointly owned with a partner who has little or no debt? will an increasing in mortgage rates cause you difficulties? - we could be more specific about what you shoudl be looking for.

UpToMyNeckInIt

Some great advice there from LTP - Definitely check out the 'Debt Camel' website.

I sympathise with your situation, being 'self employed' myself, I understand where you are coming from. 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.

Research other options as well: Debt Management Plans, and bankruptcy.

Have a look at the 'Debt Camel' website here:

http://debtcamel.co.uk/debt-options/

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

However, if you feel the IVA is right for you, Google 'IVAcomparison'. That takes you to a nice little review site. The top 3 firms should be on your 'must call' list.

Contrary to what some might have you believe, 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).

Speak to 2-3 well-reviewed companies, and choose one that feels right for you. This is important, as you will not be able to change providers once your IVA is up and running.

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 15-20 years to pay off my debt + loads of interest).

Be aware: Stepchange, on the aparently rare occasion that they suggest an IVA, will likely refer your IVA to Grant Thornton anyway. (Just google 'Grant Thornton Complaints' or have a look at some of the other forum posts here to see why that may not be in your best interests). They are very competent etc. I'm sure (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.

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 out in October 2013, 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.

If you are serious about going the IVA route, 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 (if applicable): 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 (or secured loan with the advent of the 2014 protocol), 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). It goes without saying that the other usual affordability criteria apply such as limitations based on multiples of household income and no secured borrowing beyond state retirement age etc. For most IVA customers, equity release is not possible, so your IVA goes on for a 6th Year instead (which usually works out a lot cheaper). Just factor this risk in though if you have stacks of equity, and a very high disposable income).

Bank Accounts: As you still are in the pre-approval stage, if 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 insolvency 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.

Lloyds are pretty hostile now as well (so I have read).

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

Good luck, and let us know how you get on.

longtermplanner

UpToMyNeckInIt wrote: »

Be aware: Stepchange, on the aparently rare occasion that they suggest an IVA, will likely refer your IVA to Grant Thornton anyway. (Just google 'Grant Thornton Complaints' or have a look at some of the other forum posts here to see why that may not be in your best interests). They are very competent etc. I'm sure (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.

StepChange have their own internal IPs. AFAIK they don't refer clients to GT. Are you mixing them up with Citizens Advice?

UpToMyNeckInIt

They do have their own IP, but thousands of IVA's. They obviously handle what IVA's they can, but if demand exceeds what is workable, I guess they have this referral arrangement with GT.

...Read it here on MSE, albeit quite a while back from a Stpechange Rep. who confirmed at that time they were certainly referring ALL Self-Employed Cases to GT.

Numerous other posts that I have read here and on another IVA forum, (where this was confirmed by 2 other IVA companies, one account coming directly from arguably one of the best IP's in the business:

http://www.iva.co.uk/iva_sitemap/Anyone_had_an_IVA_through_Stepchange_CC_51769.asp

...suggest that this policy is clearly not limited to the just the self employed.

Also, just Google 'iva stepchange grant thornton'. Loads of other accounts suggesting the same, and read this review:

http://www.ivacomparison.com/iva_review_detail.iva.asp?r=7517

Only reaffirms my belief that SC are not the 'impartial charity' some would have you believe.

I know some CAB offices refer to GT as well. Again, not good. Great example of that here:

http://www.ivacomparison.com/iva_review_detail.iva.asp?r=6435

The above links took me about 2 minutes to find, suggesting that this is quite a widespread practice.

If these organisations believe an IVA is right for someone, they should maybe compile a list of reputable firms for perspective customers to contact, not just have a cosy arrangement with one.

SPELLKASTER

My advice to you is to avoid a company called Debt Free Direct.

I had such a bad experience with them I had to cancel my IVA and I reported them to the Financial Ombudsman Service.