IVA lump sum help please.

Magicbeans_2

Over the past few years me and my husband have managed to accumulate about 34k of debt, stupid I know but we ended up playing a juggling act due to amount of interest each month.
We are considering an IVA and have worked out that we have about £98 a month left to put towards the debts.
I've been looking into it and there seems to be an option of a lump sum IVA. I think we have about 12k available in our house that we could hopefully release so we could offer a lump sum of around 10k (I'm guessing the cost of fees we will accumulate I could be completely off with them at 2k.)
From the amount we can afford each month we would end up paying back about 7k in an IVA. What are the chances of them letting us do a lump sum IVA with the 10k so we can just start a fresh and sort ourselves out quickly rather than having it hanging over our heads for 5 years?? The amount we have to offer monthly is based on completely minimum budgets so I'm worried about what will happen if we have an emergency as it seems husband cannot do much overtime in an IVA (overtime that he has been doing to keep our heads above water as debts now total 1k a month payments) and I doubt they approve of you saving any possible left over money.
I'm scared and confused as I've only just found out about the debt husband took out an extra card and a loan that I didn't know about.
Any help or advice would be greatly appreciated.
Thanks.

National_Debtline

Hi Magicbeans,


In a standard IVA you will normally need to repay approx. 10p in every £1 owed (this can vary). Your equity is factored into how much it will cost you per month because in the 4th or 5th year of an IVA you will be asked to try and release some equity (known as an equity release clause). If you are unable to get a secured loan the IVA will normally run for another 12months or so.


Based on you having approx. £34k of debt, and £12k of equity to potentially release, your monthly payments of £98per month would only equal approx. 2-3p in the £1. Unfortunately, IVA fees tend to be a lot higher than £2k and it is unlikely you will be able to do a standard IVA at this rate.


A lump sum IVA is a possibility. If you decide to shop around for your own IVA ensure the provider follows the IVA protocol which is a set of guidelines to give you more protection. Or you can approach your creditors yourself to do full and final offers without an IVA provider at all so you do not have to pay the fees. Or, you can consider doing repayments without doing any kind of equity release, such as a Debt Management Plan (DMP).


You will have a few choices to deal with your debts, and I think you should give one of the free debt advice charities a call to discuss them in more detail.


Laura
@natdebtline

mwarby

The thing is in a normal IVA creditors can release equity anyway,(and in intervening 5 years maybe more equity to release so no real advantage in your offer be a normal IVA. A lump sum is much more attractive if it's money that's not otherwise available

z1a

That's a similar percentage to what I did about 8 years ago, - owed £84k, raised £32k, was accepted by all but MBNA (Their loss).
Did it through Grant Thorntons, all very smooth & sorted within about 6 months.

mwarby

an IVA isnt about pence in pound or percentage of debt repaid, its about putting together an offer which is more attractive to lender and debtor than bankruptcy. There are IVAs at less than 1p in £, but these work as better than the lenders getting 0p in £ in bankruptcy

Magicbeans_2

Thank you all for your responses.
My husband spoke to stepchange yesterday and they decided on a DMP providing the creditors agree to stop the interest on the accounts. They decided on that as he has more flexibility with his overtime so we can either use it to pay off more debt faster or save it to perhaps do a lump IVA in a couple of years.
If they won't agree to stopping interest then we will have to do a normal IVA as we don't have the time to get the money from the house and set it all up before the creditors get annoyed ( we couldn't afford a couple of payments this month we would of been left with no money.)

I never quite realised just how stressful debt is.