Step Change recommending IVA?

ByzantineByron

Hi all, 

Looking for a sanity check really because I'm at the end of my rope. 

Basic numbers are that I'm £59,000 in debt, pay £1,150 a month in repayments, have a joint mortgage (£191,000 on a £230,000 valued property) and am left with about £150 a month after all payments.

I've never missed a bill but I'm at the point where it's all getting a bit much. 

I went through the Step Change questionnaire and completed everything accurately. I was expecting them to recommend a DMP but they said it's not feasible and just straight up recommended an IVA. Basically said my only options are this or Bankruptcy. 

I'm prepared to go ahead with the IVA but the reason for the sense check is that is it normal for them to recommend an IVA or is my financial situation so bad that it's the only option? 

stu12345_2

fill this in please 
https://www.lemonfool.co.uk/financecalculators/soa.php

I don't understand clearly if you mean you pay £1150 to creditors repayments and mortgage and priority bills and you have £150 left for basic needs .

or you pay £1150 just for creditors and you only have £150 left for mortgage, bills and living costs.

a dmp should be clear without paying interest on debts between 5 and 7 years max, then maybe less if you get full and final settlement offers 

you will have to do a remortgage in year 5 in an IVA to help clear debts too.

and if your wages increase to in the 6 years you keep increasing your iva repayments 

in step change recommendations, they will say dmp not advised as cos the length of it will be too long, how long did they advise it would take.

bankruptcy is not an option as you own a house and you need to protect it,( they won't do 10 years dmp, I know that) hence they are saying use IVA to protect house if you dmp is very long

stu12345_2

do not sign anything until you have spent some time reading all the answers you will get from posters.

we need you to fill in that link I posted, and that will include all Income into household including partner if you have one

ByzantineByron

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 2

Number of children in household......... 2

Number of cars owned.................... [b]

Monthly Income Details[/b]

Monthly income after tax................ 2812

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 2812[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 1073

Secured/HP loan repayments.............. 0

Rent.................................... 0

Management charge (leasehold property).. 0

Council tax............................. 146

Electricity............................. 60

Gas..................................... 65

Oil..................................... 0

Water rates............................. 0

Telephone (land line)................... 0

Mobile phone............................ 75

TV Licence.............................. 0

Satellite/Cable TV...................... 70

Internet Services....................... 0

Groceries etc. ......................... 350

Clothing................................ 30

Petrol/diesel........................... 0

Road tax................................ 0

Car Insurance........................... 0

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 500

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 24

Buildings insurance..................... 23

Contents insurance...................... 0

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 50

Haircuts................................ 20

Entertainment........................... 0

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 2486[/b]

[b]

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 235000

Shares and bonds........................ 0

Car(s).................................. 0

Other assets............................ 2000[b]

Total Assets............................ 237000[/b]

[b]

Secured & HP Debts[/b]

Description....................Debt......Monthly...APR

Mortgage...................... 193000...(1073).....5.75[b]

Total secured & HP debts...... 193000....-.........-   [/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Halifax Loan...................20589.....466.......0

M&S Loan.......................3000......65........0

BetterBorrow...................4605......114.......0

Sainsbury......................2700......85........0

MBNA...........................6550......139.......0

Barclaycard....................1530......38........0

Marbles........................1100......25........0

Fluid..........................1750......45........0

Capital One....................3253......75........0

Zopa Loan......................14550.....187.......0[b]

Total unsecured debts..........59627.....1239......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 2,812

Expenses (including HP & secured debts). 2,486

Available for debt repayments........... 326

Monthly UNsecured debt repayments....... 1,239[b]

Amount short for making debt repayments. -913[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 237,000

Total HP & Secured debt................. -193,000

Total Unsecured debt.................... -59,627[b]

Net Assets.............................. -15,627[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

ByzantineByron

A few things to consider;

• I have a wife but she is on maternity leave with statutory pay. She has savings but a lot of it is tied up and furthermore we are a family that wants to value self sufficiency. I do not ask her about her money and she doesn't ask about mine (although I have told her about this because of the debt implications)
• Some common bills (such as water and TV License) are completely paid by my wife. She also owns the car in her sole name.
• Nursery bills are estimated. I currently pay £280 a month on average but we have a second child starting nursery in November so I've rolled in my expected contribution to that.
• My other assets are a large Warhammer collection. It goes without saying that I'm aware a lot of this will need to be sold off.

Thanks in advance for the advice!

stu12345_2

your Warhammer stuff is yours to keep , why the devil would it have to be sold.
only in bankruptcy are assets sold eg house, boat, land, caravan, rare paintings, expensive jewellery 


in an IVA your assets are protected eg your house your car if you own one unless it's a very expensive car then it's expected to be sold to a cheaper one, but the car is in your wife's name so that won't effect you or her

wife's savings do not come into this as the debts are not in her name and she isn't going bankrupt or an iva
and neither are you
 only your savings are expected to be used in an IVA or bankruptcy towards creditors but you have no savings in your name(, not legally expected to be used in a dmp)

why no child benefit , if you can get it you would be expected to claim if especially if it's a IVA. all income is worked out 
even though she owns a car it's still household expenditure and thus I expect even less money available for debts.

if one person owes debts and two are in household then bills are split based on the ratios of earnings, I'm not sure why you marked wife's income as zero if she is on maternity pay

as that is how you work out what you have available left at end of month to contribute to creditors  it's a total joint income sharing bills and outgoings.based on income amounts  eg you  water , TV licence, gas elec, food, based on total income amounts, doesn't matter who pays the direct debit etc, eg it's still shared 

the important thing here is what is your wife's wages at present and what will they be and when is she going. back to work as that would help the household income and thus you would be able to contribute more in a dmp and sadly even more if you went for an iva

please note an IVA is insolvency as the official receiver needs to know total household income including benefits in order to work out your share of bills and hence how much you should pay monthly in an IVA, if you don't declare her income, you must declare benefits though and claim them too, your creditors would expect you to max all that income.

then if you don't declare her income then the official receiver splits it 50 50 for household expenses 

you have also left out prescriptions, dentist,entertainment and emergency fund which are all expected in a household budget, even if your wife has savings tied up
 your shopping bill is too low and should be higher, even if you say you live frugally, it would be expected  to be higher and indeed allowed higher in a dmp and IVA to be higher( which would reduce any contribution you would have to legally make if you went for an IVA)
why no travel costs , do you work from home

stu12345_2

I understand why step change say IVA cos you have marked your wife gets no money and thus all household expenses are paid by you leaving you £326 .

and that's a very very long dmp thus they say iva.

it's important that you tell me again the exact current position of wife's wages how much she is currently  getting and when and how much they will also rise to when she goes back to work, as this not only effects the likelihood of a shorter dmp but also how much you would be expected in an IVA cos household expenses would be shared more and probably your iva amount would go up per month as you will have more disposable money per month to your IVA.

thus the more she earns the worse it will be your IVA payments( you pay more per month) but better for you if you go dmp cos you can repay debts faster 

much faster than step change think at mo cos you put down all outgoings are yours( and add in car as it's a household costs too)and it's only you that has a wage, thus they say go for an IVA.

but things can change for worse or better depending on wife's wages in near term and future term depending if you go dmp or IVA route 

stu12345_2

you could do your own self run DMP in meantime if your wife earns nothing and you declare poverty to creditors and pay them the £326, probably less cos you need to up shopping, emergency fund, dentist, and (car running costs,cos you can, cos they are a House hold expense)then once wife goes back to work, increase your dmp amounts or indeed go back to step change and they would probably advise a dmp at that point. and not an iva

if your creditors accept your poverty payments and don't go for a ccj, cos technically they could put a charging order on your ccj eg your home, I need some experts to comment on this

ByzantineByron

Hi both, 

Thanks for the advice. In terms of the wife's earnings she earns circa £15k when she goes back to work in January, she has her own debts however (around £7k) and has been clear this is my problem to solve and she will not assist. 

This may sound harsh but I've had debt problems in the past, I'm considering this more a tough love scenario. 

Also no child benefit marked down because the wife solely claims it and it goes towards swimming lessons for the kids, it basically comes in and goes out straight away. 

stu12345_2

so how much is your wife's maternity pay at mo.£12000,£13000 ??

and how much is she paying her debts off.

cos if she clears it all , then that's an extra £8000 a year in income plus say £2500 in child benefit you never included total £800 a month  approx plus your £30000,

meaning a dmp is looking better , you could probably pay off your debts in say 5 years, or even less if you get full and final discounts, thus avoiding an IVA 

cos if you do another budget it will show. even though your wife has maternity pay and indeed £15000 when she goes back to work, she has less free income to contribute to house hold expenses as she has her own debt payments to account for .

again this will affect the amount you can pay into a dmp and also how much you can pay into an IVA monthly 

child benefit is a shared total extra income, it's only seperate if you are split up and the person who has full custody rights gets to claim the child benefit.

si at moment include it as household income, regardless of what it is spend on, which would be marked under leisure in your budget anyway 

which you have marked as zero si that's wrong, and you're allowed and expected leisure budget in an IVA or dmp, so please include one 

oh and do you work from home as you have no travel costs 

ByzantineByron

I'd need to check on the debt but I'd estimate she's paying £200 a month on it. She gets £170 a week in statutory maternity pay (which goes to £0 in November) and £450 a month in rent from a property in her name.