Advice on iva please

nicoladee01

Hi all I'm new here and looking for some advice, I've just over £6,000 of debt and was struggling to met the monthly repayments, I called stepchange and they advised me that they would do an iva for me, it sounded great in the phone, affordable monthly payments over 60 payments and I dont have to do anything other than send some I'd and bank statements ect.
I'm worried that there will be hidden things and once I've agreed to it will find out then.
Plus I googled and read all sorts of worrying things.
Has anyone used these or just has some knowledge on an iva as I'm clueless and so worried about entering into something I'm not 100% sure of 
Thanks in advance for any replies x

thevdm

For an IVA to be worthwhile you'd be paying less than you owe, £6,000 over 60 payments is £100 a month, so I'm guessing your excess income is less than that otherwise they would have suggested a debt management plan (DMP). If your excess income is under £50 a month then you would be better off looking into a debt relief order (DRO). My experience with "charities" suggesting an IVA is the best option can sometimes lead you to believe that it might be the best option for them as it's the only option they earn good money out of you for setting up.

Please don't take this the wrong way, but as £6,000 is a rather small amount to consider an IVA, would your income be from benefits rather than employment? If so a DRO would most likely be your best option as benefits are designed to give you enough to live on and as such it would be considered that you have less than £50 a month excess.

nicoladee01

The payment plan he worked out over phone was £90 per month 60 payments, yes at the moment I'm on benefits as im sick, 
He didnt mention  a DRO but I have more than £50 excess each month as I get higher rates of care could this possible the be the reason? And should I maybe ask about the DRO 
Also what effects can I iva have, sorry for all the questions, like I said in previous post I'm overly worried about just signing and not knowing facts 

thevdm

In my oppinion an IVA wouldn't be the best option for you, the high rate care component either shouldn't be included in your SoA, or it should be included and offset with an "Adult care" expenditure of the same amount, step change seem to like taking PIP from people who could use it for what it's intended for.

From Debt Camel: https://debtcamel.co.uk/dro-applications-faqs/

I have applied for PIP but don’t know if I will get it

Tell your DRO adviser. If your only income is from benefits, this won’t matter, you will definitely qualify for a DRO. Even if you have other income it may be OK – although your income may be going up, your advisor can include extra disability expenses.

A DRO would involve a £90 admin fee to set up, if after 12 months your circumstances don't change then your debts are wiped. There are no monthly payments to be made past the admin fee.

For what it's worth, an IVA is effectively like bankruptcy, but longer.

nicoladee01

Thank you so very much for your information I've been in a world of confusion over this, I will most definitely ask about the DRO, as I do feel a bit iffy about the whole Iva thing.
This has been invaluable advice cheers.

Concerned75

I would've thought a DMP would be more suitable for £6k. If you owed £60k, that would be a different matter, but my experienced advice, having been in one would be not to lock yourself in something over 6/7 years, a block on your home via land registry and your credit details on file, for the sum of £6k. IVAs are a very stressful and draining experience as the years go by. Think very carefully what you sign up to, when it comes to debt and get the right advice and management for you in the long term. 
All the best.

thevdm

As I’m a bit more awake now, I have written up a list of possible debt situations based on what I know. With a DRO and Bankruptcy, your SoA is mostly irrelevant as having no employment income automatically puts you in a situation as set out below. Your SoA would have an effect on an IVA or DMP, although as you can see, they are likely to cost you a lot more.

Situations:

DRO – Initial fee of £90, no monthly payments. As your income comprises only of benefits you would qualify automatically.

Length: 12 months

Risk of failing: If your income goes up during the year (through employment), then you may have more than £50 excess income per month, you will lose the £90 admin fee and the amount of time spent on the DRO (up to 1 year)

Total cost if no change of circumstances: £90

Debts not included: Student loan, Magistrates court fines, Child maintenance, Social fund loans, Criminal fines, Damage of personal injury claims against you, TV license arrears.

 

Bankruptcy – Initial fee of £680. As your income comprises only of benefits you would not be subject to an IPA (income payments arrangement) so no monthly fee would apply.

Length: 12 months

Risk of failing: Bankruptcy is virtually impossible to fail, if your income goes up within the first year through employment then you may have to set up an IPA to make payments, these are calculated similarly to those of an IVA, although any money received through benefits can’t be taken (i.e. they can take no more than you earn). If an IPA is set up it will last for 3 years. If your income doesn’t change during the year then you will be discharged and free from liability.

Total cost if no change of circumstances: £680

Debts not included: Magistrates court fines, Court payments under confiscation order, Child maintenance, Student loan, Secured loans, Personal injury claims against you, Social fund loans.

 

Debt Management Plan (DMP) – You arrange to make monthly payments which are split between creditors, if for example you paid £90 a month as suggested by StepChange for the IVA then it would take 67 months to clear all debts.

Length: Variable, 67 months

Risk of failing: A DMP can fail if your income goes down below a level that creditors are happy to be receiving towards the debts. As every penny of what you pay goes towards your creditors your debts will at least be reduced by what you have paid into them making them more manageable. If your income increases then you can increase payments and reduce the amount of time until completion.

Total cost if no change of circumstances: £6,000

Debts not included: Mortgage arrears, Gas and electric arrears, Council tax arrears, Magistrates court fines, Child maintenance, Income tax or VAT arrears, TV license arrears.

 

IVA – As set out by StepChange you would pay £90 per month towards your debts for 60 months.

Length: 60 months (can be extended if you take a payment break to replace a broken fridge etc...)

Risk of failing: An IVA can fail if your income goes down and you are unable to make the payments or the creditors don’t agree to a lower payment. If this happens then some of what you have paid into the IVA will be paid to creditors, so the level of debt will decrease a bit, but a reasonable amount of what you have paid will have been taken in fees, possibly leaving you having to pay more in the long run (as you will have paid more money towards your debts than they have been reduced by). If for example your IVA failed 3 years in you would have paid £3,240 towards it, of which £418.50 would have been taken as the 15% ongoing costs and £450 would have been taken as the supervisor fee; meaning you would have paid £868.50 in fees and still have a debt of £3,628.50

Total cost if no change of circumstances: £5,400

Debts not included: Mortgage, Secured loans, Hire purchase agreements, Court fines, TV license arrears, Student loan, Child support arrears, Social fund loans.

nicoladee01

Concerned75 said:

I would've thought a DMP would be more suitable for £6k. If you owed £60k, that would be a different matter, but my experienced advice, having been in one would be not to lock yourself in something over 6/7 years, a block on your home via land registry and your credit details on file, for the sum of £6k. IVAs are a very stressful and draining experience as the years go by. Think very carefully what you sign up to, when it comes to debt and get the right advice and management for you in the long term. 
All the best.

This is what's worrying me so much that a big comment for this amount 🤷‍♀️ thank you I think I've made my mind up I'm not going to risk this 

nicoladee01

@thvdm
Thanks for taking so much time to reply, this morning I called around for DRO I a few including debt management line as I can on paper afford more than £50.00 a month they have took it the IVA route too, I've not signed anything so it's not set in motion, I'm thinking I might be best to just call up my creditors and arrange something myself, if anything they have so far been less hassle than the few companies I've spoke too, and feel a little like it's been layed on thick with the whole IVA thing, I dont think it would be wise for me to put my name to something for 5 years, 
At a quick workout I could pay it all off in 2 years by myself if I be really sensible, truth is I was losing sleep over having debt so I thought places like step change were there to help with making a plan, wish I had come here first everything you have posted makes more sense to me so thank you again 

thevdm

I would hazard a guess that there's something not quite right on your SoA, would you be putting values at what you can scrape by on or what you would actually spend if there wasn't any debt issues. Often people feel that they need to put the bare minimum they can live on. Theoretically without any employment income it should automatically be considered that you have less than £50 a month and simple to prove with the SoA. From what I gather CAB tend to be the most impartial with help, although they're usually the hardest to get hold of as you have to wait around at your local CAB first thing in the morning to get an appointment.

The main reason IVA's are over sold is because of the amount of money they get from each route:

Bankruptcy: £0

DMP: £0

DRO: £90

IVA: Usually the first 5 months payments + 15% of each payment thereafter (£1,192.40 in your case)

If you would like with help regarding your SoA, post it on here and there's a few people who will be able to let you know if parts of it don't look right.

Edit: I lost a lot of sleep over debt, and then a lot more when I started realising that StepChange had advised an unsuitable IVA for myself. After paying into it for a year I took the plunge and cancelled it with virutally nothing taken from my debts and chose to research the best option myself. If I was still paying into the IVA I would have just under 3 years to go and still be liable for a considerable amount of debt. Instead I no longer have to think about the debt I had as I was discharged from bankruptcy last week without an IPA.

nicoladee01

It would be what I would spend if no debts were there, I just didnt like how stepchange and debt free was add more on my outgoing which wasnt true, to my lifestyle, my issue is with o2, others debts I pay monthly,  and these have come down lots, but my daughter ran up a 1,800 bill with o2 which they want me go pay over 6 months that amount plus my other debts I just cannot do so I went into a panic mode over it, Cab did state that I can request that o2 send it to a debt collection agents which they will spread it out more, making it easier to pay back! I'm really hoping this true.
And yes the stress can be so destructive, I'm really happy to hear you are back in control of your finances.