Repaying 100% of debt owed via IVA

jsd00

Hi,

I have £58k of unsecured debt that has now become unmanageable. I am seriously considering an IVA. My regular, salaried income would allow me to repay 100% of the amount owed over a period of six years, while still being able to live to a reasonable standard.

I have a few questions:

1) Am I even eligible for an IVA if I can repay the full amount, or would I need to explore other options such as a DMP (which isn't my preference)?

2) In addition to my regular, monthly salaried income of £2,350 post-tax, I earn an additional £500 - £2,000 per month on a freelance basis, although on the odd occasion this is £0. So, would I need to 'hand over' any of this additional income to speed up repayment if my IVA agreement is setup to repay 100% of the debt on the basis of my regular salaried income alone?

3) If I'm aiming to repay 100%, will I be subject to the equity release/remortgage clause in year five?

I still don't have any missed payments on my credit file, but I obviously can't secure any kind of unsecured consolidation loan for £58k. We only have around £6k of equity in the house, so that's not a viable option either.

Any advice would be much appreciated.

J

mwarby

1 - I'd expect at least some of your creditors to reject, given you could clear debts in 5/6 years. Its not 100% clear that your are insolvent or not. A IVA company would be able to confirm if you are eligible

2- you'd be expected to pay this over. - the reason being that while your doing well now, it may not always be the case, the creditors preference would be to repay IVA early(make hay while sun shines basically)

3 - so its not 100% of the debt, its 100% of debt plus IVA fees,possibly plus statutory interest. If by year 5 your on track to have repaid all this I see no reason why they'd seek to release equity. If your close but not all the way there an additional year of payments would make more sense(releasing equity costs in term of surveys, mortage fees etc)

Why are you keen to avoid a DMP ? it would likely save you money (IVA fees arent cheap), it would give you more flexibility and would likely look better for future credit worthiness

jsd00

Hi mwarby,

Thanks for the quick reply, very much appreciated. All makes sense.

I'm reluctant to opt for a DMP for two main reasons:

1) There's no guarantee that all creditors will agree to a DMP. Some could go on to add further fees, charges interest etc. And there's the potential for being regularly contacted by those creditors - or DCAs if they sell the debt.

2) From what I understand, an IVA looks like the cleanest route to having a clear credit file in six years because once the IVA is registered on my file, nothing further relating to those debts will be placed onto my file. If I opt for a DMP and pay everything off over six years, I'll likely be left with six years of late/partial payment markers or even defaults that we were registered late. That means I'll need a further six years for those to drop off. A few such stories on this site.

I know I need to seek some proper advice, just trying to get a basic understanding of options/principles so I know what questions to ask.

Cheers,
J

mwarby

I can see why a IVA looks attractive compared to a DMP but I wouldn't rule a DMP out

An IVA will likely need to be disclosed for some lending products forever. A DMP is less clear cut, and not viewed as harshly. To a mortgage company an IVA is pretty much bankruptcy

Certainly if you go for an IVA make sure you understand all the fees, as its likely you will end up paying them (for many they arent relevant due to amount of debt thats written off)

Craig1981

you reckon your payments into an IVA will clear 100p to the £ in 6 years?
Fees from an IP will be between 6k and 10k as well. Usually IVA last for 5 years. in the final year, they will ask you to release equity, if available. if not, will carry on payments for another 12 months. however, will come down to what your creditors think, and if they agree. at least 75% of your credits need to agree. So if one debt is £20 on its own, and they disagree, you wont be able to do this

you may end up paying circa £10k fees plus all your debt at 100%. in my opinion, that is like taking out a loan for 6 years for £58k with an APR between 3.5% and 5.5%

if accepted for an IVA, yes, probably a good route to go down (above example means payments of around £950pcm). my only concern here would be remortgaging etc in year 5

speak to Stepchange or national debtline to see best option for you.

PrettyKittyKat

Craig1981 wrote: »

however, will come down to what your creditors think, and if they agree. at least 75% of your credits need to agree. So if one debt is £20 on its own, and they disagree, you wont be able to do this

It is 75% of the voting creditors by amount, so a £20 creditor would have very little say in the outcome.


If you can repay your debt over 6 years then an IVA really isn't the way forward. If you are concerned re reporting then just make sure you default all your debts and your creditor record the default asap.

Have you done a SOA and looked at your budgeting? Could you maybe live frugal for a couple of years to repay the debts quicker without using an IVA or DMP?

Clouds88

Wow seriously insolvency when you can repay your debts in 5-6 years?

DMP is just taking control of your finances. You are more likely to get the interest and charges frozen as soon as you default. However, you may not even have to default on some of them depending on how much you can afford. Why don’t you head over to the debt forum and post an SOA.

ToxtethO'Grady

Why would any creditor agree to an IVA in that scenario?


An IVA is a legally binding arrangement to pay some your debt off and write off the rest...you're not asking for that. You're asking to pay back all your debt, IP's fees and they could even add on 8% statutory interest
An IVA is a form of Insolvency and has a much worse impact on your credit file than a DMP - your DMP payments will be marked as DM on your credit file and will not show under Public information like an IVA would.
They would also want a joint budget for an IVA
I would suggest you speak to Business Debtline 0800 197 6026 as you are self-employed and insolvency has more of an impact on self-employment.

BeeBee0301

Never trust an IVA or Trust Deed
You will have some debts written off , but you’ll still have to pay the full amount over so many years , but the majority of that money goes on the fat cat solicitors fees ! They will extend your IVA if they feel the need to , they will hound you for more money and information. Personally I’d steer clear - it was the worst thing I ever did - and I’m still paying it 6 years later !!