IVAs vs Bankruptcy

NekoZombie

So here's whats got me thinking. I've noticed over the past couple of weeks increasing amounts of posters mentioning that they were mis-sold an IVA. Now, I've always maintained in the past that people in desperate situations do desperate things; I myself nearly went for one, but I could see the numbers just didn't add up. In the end, despite all the heavy sales talk, I declined and went bankrupt.

So my question is this; so many people seem unclear of how their fees are structured, what the terms of the IVA are, how long they last etc etc. SO many people IVAs seem to be failing too. Is this a case of people being misinformed, or not thinking clearly and going out of their way to make sure they understand what they are getting in to, before they sign on the dotted line? I myself went over the contract I was sent with a fine tooth-comb, but it was a massive document with complicated jargon, and I can imagine some could be daunted by the prospect of trying to read it.

I'm seriously concerned by what's coming out of the woodwork, so to speak. I mean, are these debt companies completely taking advantage?

allofadither

NekoZombie wrote: »

I mean, are these debt companies completely taking advantage?

In a word YES!

An IVA wasn't an option for me, perhaps it was just as well. I'm sure there was someone on here recently who went BR after a failed IVA saying they'd been paying it for 2 years and non of the money had gone to the creditors...it was all 'eaten up' in fees and charges by the IVA company.:mad:

RAS

Neko

yes

Just look at the ads. IVA is sold as a Government approved debt solution

It is not just one person but loads on the DFW board who have either IVAs or DMPs for which companies are charging high fees but not passing on any money to the creditors. Because the deal is structured, all the fees come off the payments before anything is paid to the creditors.

People with DMPs in this situation can get out of the deal and sign up with a debt charity or self manage, people on IVAs are stuffed.

People panic when they get sent CCJ threats or Statutory Demands. Some are in the doo doo because they are not terribly good with money anyway and the sales folk know so much and can offer an easy payment that reduces the debt. So they sign up without doing the checking the fine print.

The other issue is that a number of people who have found that nothing has been paid off the debt after a year or two despair and throw in the towel. Psychologically they feel that the IVA is acheiving nothing so they bail out.

NekoZombie

Thanks RAS,

true of course. But is being in the doodoo enough of an excuse not to read the fine print? The one thing I've learnt going through this process is that the better informed you are, the less people can pull the wool over your eyes.

jam3162

I agree that debt companies are taken advantage. I went for a IVA and after a year of paying them have got apparently 2 ccjs. I am going bankrupt next week. I am in the process of filling out a complaint form for the IP regulator.

It suddenly dawned on me that the agreement says that if at least 75% of your creditors agree at the initial meeting then the IVA goes ahead. What dawned on me is that i have had countless letters and now 2 ccjs from my creditors. Did they actually turn up? I am going to ring my creditors and enquire.

I would advice anyone who is thinking about an IVA please please think carefully about entering into it.

jam3162

Dr_Hook

RAS wrote: »

The other issue is that a number of people who have found that nothing has been paid off the debt after a year or two despair and throw in the towel. Psychologically they feel that the IVA is acheiving nothing so they bail out.

Worrying if this is a reason for people to quit the IVA - I suppose it all comes back to reading the fine print and understanding the mechanics of IVAs:

An IVA is not a DMP - as such, creditors don't get a monthly payment. They receive dividends, usually annually commencing on the second anniversary of the commencement of the arrangement. This is fine as long as the IVA runs to term, but if debtors 'bail out' before the first distribution to creditors they're effectively back at square one, having made payments for 2 years and having not reduced their debt. Apologies if I'm preaching to the converted, but so many people seem to misunderstand.

Neko wrote:

Is this a case of people being misinformed, or not thinking clearly and going out of their way to make sure they understand what they are getting in to, before they sign on the dotted line?

I reckon it's the latter - people are desperate and will cling to whatever 'lifeline' they can. Once the IVA's up and running and they have enough breathing space to think clearly they begin to wonder exactly what it is they've committed themselves to.

You should always read the small print before signing any contract, an IVA is no different. If you don't understand, ask - the guidelines/standards that IPs adhere to (as they are enforced by the licensing RPB) state that the debtor should be able to speak to the IP - ideally face to face. You have a right to talk to them to ensure you understand what you're doing and that it is the right thing for you to do.

That said, I do think it's six of one and half-a-dozen of the other - the IVA industry has become very competitive in recent months and there is definitely an element of sales pressure applied, which is dangerous given the emotional state of those on the other end of the phone.

Dr_Hook

jam3162 wrote: »

It suddenly dawned on me that the agreement says that if at least 75% of your creditors agree at the initial meeting then the IVA goes ahead. What dawned on me is that i have had countless letters and now 2 ccjs from my creditors. Did they actually turn up? I am going to ring my creditors and enquire.

The IVA binds all creditors who were entitled to vote, whether they attended or not, and it prevents further legal action (which is kinda the whole point) so if the CCJs were awarded post-commencement you should apply to court to have them annulled.

NekoZombie

Dr_Hook wrote: »

The IVA binds all creditors who were entitled to vote, whether they attended or not, and it prevents further legal action (which is kinda the whole point) so if the CCJs were awarded post-commencement you should apply to court to have them annulled.

Yes, I was thinking the same. The IVA is a legally binding agreement so the creditors should not have imposed a CCJ post agreement. Is is possible that they snuck it in before the creditors meeting though.

As a general point, I think this demonstrates how little people understand the process. I personally think it quite scary that someone could sign up for an IVA without being clear what the creditors obligations are. I remember being sent a shed load of bumpf that I had to read, and then sign a form to say I'd read it before entering into the IVA. TBH, I bet a load of people don't bother reading everything they're sent because they find it overwhelming....not sure that is an excuse though.

Dr_Hook

Ignorance is no excuse, although it is understandable.

I think there's a further problem inherent in all IVAs: you're asking people who have been unable to successfully manage their finances (for whatever reason) to suddenly adhere to a strict budget for a substantial period of time. Is it surprising that a number of people are unable to do this?

There's no learning curve or period of adjustment.

I suspect that some people will experience something akin to those who have just obtained a consolidation loan - in the belief that they have resolved their financial situation they loosen the purse strings and subsequently find themselves back in the proverbial poo.

NekoZombie

Dr_Hook wrote: »

Ignorance is no excuse, although it is understandable.

I think there's a further problem inherent in all IVAs: you're asking people who have been unable to successfully manage their finances (for whatever reason) to suddenly adhere to a strict budget for a substantial period of time. Is it surprising that a number of people are unable to do this?

There's no learning curve or period of adjustment.

I suspect that some people will experience something akin to those who have just obtained a consolidation loan - in the belief that they have resolved their financial situation they loosen the purse strings and subsequently find themselves back in the proverbial poo.

There's none with bankruptcy either. Just a short sharp shock.

Dr_Hook

True, although I understand that an IPO/IPA is often much less than contributions would be under an IVA.