IVA help please

silly_lilly_

So, I’ve been a bit silly. After losing my father suddenly  I had a bit of a mental breakdown and managed to get myself into 20k debt over a couple of credit cards and a loan which I took out before he passed away. My circumstances changed very quickly and I found myself falling behind with payments. 

I did an online thing to see if an IVA was possible as with interest rates I couldn’t see a light at the end of the tunnel. Within 1 minute of the online calculator a company called astute finance called me and went through income and expenditure. Ultimately the IVA they are proposing is £285 a month over 60 months but may go up to £525 a month once my HP on my vehicle runs out in 7 months. I’ve discussed with my husband who says it doesn’t sound right. I’ll be ruining (my already ruined credit score) for 5 years to write off £3k of the 20k debt. They also said bankruptcy is an option. 

Wondered if anyone could shed a little light for me? Does it sound right? I’m so worried and upset I just don’t know what to do. 

thevdm

That does sound like a bit of a raw deal, should the payments go up to £525 in 7 months that would mean 7 payments of £285 and 53 payments of £525 which equates to £29,820, depending on the type of loan you are paying this could possibly cost more than paying the loan off with interest over 60 months.

With bankruptcy there would be a high chance you would loose the car on HP as it would likely be sold, if they view you as in need of owning a car you would have around £1,000 from the sale to buy a cheap car. Even with an IPA on bankruptcy, say at £525 the repayment would be £18,900, leaving you with the bankruptcy restrictions for £1,100. A debt management plan may be worth looking in to.

silly_lilly_

Thanks for replying. 

I need a car to get to and from work. I also get commission depending on my performance which I believe I only get to keep 10% of. 

I don’t know what a debt management plan is they’ve not mentioned that I don’t think. My head is hurting from all the numbers, terminology and the likes. They’ve also took my husbands income into the calculations which I’m not overly keen on. The ‘personal allowance’ for him is £750. 

mwarby

You could always get a cheap car, and let them take away the HP car. At least with bankruptcy its all done in 3 years, and can't fail if say you lost your job

JCS1

There seems to be some confusion on this thread about cars on HP and bankruptcy.

If there is no equity in the vehicle, then the OR will send a letter of non-adopt to the HP company.  It is then down to the HP company to decide what to do.

If there is equity, then the OR may take as an asset and sell.  If there is a need for a vehicle, they may decide to allow up to £1k for a replacement.

thevdm

Thank you for correcting me JCS1, I've never owned a car on HP so hadn't considered that it may not have any value as an asset.

As mwarby says, bankruptcy is guaranteed to be over in 3 years as long as you stick to the terms so although finances may be a bit tight, it would only be for 3 years. If your income changes the IPA payments will go up or down to compensate, if they end up going down a lot (or if you lost your job) then the IPA would be put on nil payment until income goes back up again, once the 3 years are over then it doesn't matter any more.

A DMP is basically an agreement between yourself and creditors (via an intermediary such as one of the debt charities), interest is usually frozen and a single payment is made each month and split between creditors. The one downside of a DMP is that there is no limit on how long it takes to finish as it is paid until the amount of credit is cleared. For example if you're income goes up, then you can clear it quicker, if you're income goes down it would take longer to pay; if you lost your job or income went down a lot then the DMP may fail, leaving you at square one with a lower amount of debt.

Which ever way you go, an IVA is definitely looking like the worst option.

thevdm

I forgot to mention, as for taking your husbands income into account, this isn't as he will be expected to pay towards your debts, it's more to work out how much of the household excess income belongs to each of you.

For example, if you both earnt the same amount (and both had the same personal expenses outside of the household expenses) and there was £1000 excess each month, then you'd be counted as having £500 each.

If he earns £750 and you earn £1,500 a month and there was £1,000 excess income each month then £333.33 would be his excess income and £666.66 would be your excess income.

I may be wrong in saying this (someone may correct me), but I believe that there is no legal obligation for your partner to disclose their income, if they don't disclose their income then it is assumed you are responsible for 50% of the household bills and as such only 50% of the excess income is yours to pay debts with.