IVA and Equity

Mum2Boys_2

Hi all 

I have come a long way since January and thanks to the advice on these forums I have managed to make lots of savings! 

I am am now looking in to plans to clear my debt, the obvious would be a DMP or a IVA. 

I own my own property... valued at 210k 
my mortgage is £122k 
my secured loan is £25k 
and my unsecured debts are around £25k (slightly under) 

I am currently not in a position to release equity which would be the obvious choice. 

I looked at the DMP, it would take 12 years to complete in my current position. 

The IVA 6, and I may be in a position in the 5th year to remortgage and release equity. 

I have however been told that my creditors will not accept my IVA (shorter period so more tempting) due to the level of equity in my property, as an IVA is insolvency and the equity in my property means I’m solvent. 

Has as anyone had a similar experience? 

Or or have any advice? 

I plan to complete some information on PayPlan to see what they can offer also. 

sourcrates

Yes, on paper you are not insolvent, so for that reason alone I think an IVA will not be suitable, you should probably be looking at a self managed DMP.

There are many, many people on these forums who are in long term DMP`s, some of 20 years or more, but as with everything, there is a method to the madness.

You start off by making either token or no payments to your debts at all, this will encourage the lenders to default you, and to sell your debt on, now once that happens, all interest and further charges are stopped, for good, use the money you would have paid them to add to your emergency fund.

You then work out a budget whereby you can also save on a monthly basis, after a few years, you should have a good pot of cash saved up, debt collectors, and/or debt purchasing companies always make settlement offers from time to time, now these settlement figures are never set in stone, and you should find they are open to further negotiations can reduce the amount you end up paying even more.

So you can use your savings to settle accounts early, thus saving time and money in the process, so those 12 years may only be 6 or 7 in reality.

fatbelly

There are two definitions of insolvency:

1. Your debts are more than your assets
2. You cannot afford to pay your bills as they fall due.

You are insolvent on the second definition.

However, you should not be so quick to jump into an IVA, and from that point on I agree with Sourcrates. IVAs tend to be pushed by those who make a profit on them and the potential problems do not get a mention.

Mum2Boys_2

Thank you Sourcrates, you mention a good point. 

I suppose ultimately what I want to avoid is 

1. Having bailiffs come to my home 

2. Losing my property 

I was originally advised an IVA but I guess I now need to go down the DMP route. 

I know stepchange organise DMP plans, would this not be advisable? 
Im not sure I’d know how to arrange one myself. 

sourcrates

Mum2Boys_2 said:

Thank you Sourcrates, you mention a good point. 

I suppose ultimately what I want to avoid is 

1. Having bailiffs come to my home 

2. Losing my property 

I was originally advised an IVA but I guess I now need to go down the DMP route. 

I know stepchange organise DMP plans, would this not be advisable? 
Im not sure I’d know how to arrange one myself. 

Forget bailiffs, and losing your home, there is a long court process before any of that may even be a possibility.

I know its a natural assumption to jump to worst case scenario, but that kind of thing usually only happens when you disengage with reality on a permanent basis, and just completely ignore your problems.

The collection process is a long one, it can take years in some cases, nothing happens very fast, there are various stages of collection before, a court would get involved, if at all.

You are correct, step change do organise DMP`s, when I say organise, what I really mean is that they write a letter to each of your creditors, basically telling them you are in financial difficulty, and have taken advice from them, and they have recommended a debt management plan.

They then go on to tell them what % of payment they will get, and when, that`s it, they also request the creditors payment instructions, but really, its nothing you cannot do yourself, they write a letter, and ask for payment instructions, the only difficult part is initially imputing all the creditors payment details and reference numbers into your online banking so you can pay them, once that`s done, its an absolute doddle.