Thinking of entering into an IVA - advice gratefully received

samwin2912

Hi All,

I am looking for some advice, I'll be talking to Payplan and/or National Debtline too, but figured it couldn't hurt to ask here as well.

Here is my situation:

I have about £20,000 worth of debt, Credit cards, loans, store cards, you name it.

I got into this situation after my wife became ill and was unable to work, we thought it was temporary and so I borrowed to fill the gap, but then found I had no feasible way to pay it back and the cycle had to continue.

Pretty much all of these debts are with DCAs, apart from 2, 1 upheld my irresponsible lending claim and has frozen interest, the other (Very) put me in touch with their specialist support team who advised they would send me a default and then not chase for collection and wipe the debt. That last bit is yet to happen from what I can see.

I was briefly in a DMP, but I got fed up of the DCAs selling the accounts between themselves, then step change would email me asking who now owned the account, then when I replied I had to "prove who I was" and then that DCA wouldn't get paid that month, and it was just an infuriating experience, so I pulled out.

For the last 6 months I have tried my damnedest to manage my own DMP, but literally none of the DCAs are officially willing to accept the payments I am offering despite them being roughly the same as what step change had agreed with them, and are insisting of reviews every 6 months.

I have gone through and submitted a budget to all of them that clearly shows just how many debts I have, and how much I have to spend on repayment and they just ask if it's correct, or how I plan to make payments.

So I've hit a brick wall.

I am thinking of going with an IVA, but I'm worried I'll end up worse off. Seems for every story of an IVA being successful, there are numerous horror stories.

So please, if you have had or are currently in an IVA, share your experience with me, and if anyone can offer any advice whatsoever, it would be gratefully received.

Thanks in advance.

RAS

IVAs are very rarely suitable solutions to debt, particularly for a mere £20k.

They are really aimed at home owners with £50k+ in debt and a very stable income projection. The are massively mis-sold and people don't realise they could end up repaying the entire debt plus £xk in fees if their finances improve. If one is suitable, then Stepchange charge lower fees.

Do you own a house, or mortgage or rent?

With £20k debt, how much per month can you afford to pay back? If it's low, your creditors might not even accept an IVA.

You also need a complete change in attitude to your creditors. Those who've bought your debt will have paid 5-30% of the book value and can make a profit even if you never pay it all back.

You are begging when you really need to sort out your day to day finances and pay what you can afford.

I'm also just checking that before you started the DMP you allowed all debts to default and built up a decent emergency fund?

samwin2912

Thank you RAS, so some further details.

My annual wage is £36,000, so the total debt is over half my annual salary.

I went through a complete budget with Step change.

I have around £100 a month to make payments towards these debts, because that is all I am left with after I have paid my bills.

I rent from a housing association, we have a 16 year old and two children in primary school.

I do not have an emergency fund, or savings of any kind purely because I cannot afford to.

The only asset I really have is my car - which I use to commute - a ford Bmax which is probably worth about £3k if I'm lucky.

The trouble I have is this, a DMP with step change didn't work, and self managing didn't work due to greedy DCAs not accepting a payment of what I can afford, and an IVA potentially won't be suitable - so where does that leave me?

Do I just make payments and avoid any official agreements with DCAs? Ideally I'd prefer a method of clearing this that won't leave me open to surprise interest or further charges.

I want to deal with all of this as it is affecting my mental health, on top of everything else going on in my life. I'm pretty miserable, I always feel exhausted, and it isn't helping my diabetes either.

RAS

Ok, there are two other options, assuming you are in England or Wales. Please don't panic and make a decision now; allow other more experienced members to comment. There's folk who done all options and those who've worked in debt advice longer than I've been on these boards. You have time to check it out and you need to talk to your wife as well.

Being in secure housing removes the biggest downside to insolvency and makes an IVA completely unnecessary because it's designed for people with assets to protect.

Did anyone explain that insolvency is a matter of public record which can affect the chances of private renting? Which is why people in unsecure housing may wish to avoid it? You need not worry about that. Bankruptcy, IVAs and DRO are all forms of insolvency with different rules.

Stepchange may not mention a DRO because they can't support them. They lost the contract a year or so ago. But it may suit you. Just you'll need to use one of the provider to whom the government gave the contract. It's impact on your financial record is pretty much the same as an IVA. It has to be declared if you are asked if you have ever been insolvent and may affect insurance.

But it's impact on your life over the next 6 years would be very different. To qualify you need to owe less than £50k, own a car worth less than £4k and have less than £75 left after budgeted necessities per month. And less than £2k savings.

You apply through an intermediary, and when it's granted you can't take out more credit without their approval. A year later all the listed debts are wiped out and you live your life as please.

The downside is that you need to meet those criteria for the whole year so it's not good if you get a major pay rise or an inheritance. The DRO would be cancelled and you'd have to pay off the debt some other way.

If you are struggling to find £100 for a DMP, then stop struggling, allow another £20 on the food budget, and a fiver on clothes and car costs. Which is probably a more honest representation of your actual needs. And you'd meet the criteria for a DRO.

It takes a bit of time to organise so you'd be putting that £75 per month into a minimal emergency fund to cover breakdown of white goods or a family emergency. You'd also need to make sure your list of creditors was accurate. In bankruptcy all debts are covered including forgotten ones. In a DRO, it's only those listed. So check all your credit records for anything to which you may not have paid for a while, and get it included.

The other alternatives are the DMP or an IVA, both of which keep you on limited budgets for 6 years, or more.

You would get offers of discounted settlement in a DMP after a couple of years, but you'd need some savings to take advantage of those.

Yoh might get £100 accepted for an IVA as it's close to 30% of the debt but it'll be a long slog.

Wait for others to comment and meantime check out whether there any CAB offices near you, as they usually support DROs?

Grumpelstiltskin

One of your problems is thinking your creditors can object to what you are offering to pay them, they can't and you don't enter into any conversations with them. You just set up a standing order for the amount you can afford and pay them,

You have to realize you are in charge not them.

ManyWays

You may well be eligible for a DRO, I suggest you visit your local Citizens Advice and get some good advice from them on this.

If not, then bankruptcy is much your best option,. not an IVA. You can keep a car worth 3k. in social housing, your tenancy is secure and will not be affected. Over much quicker than a IVA. Exactly the same bad effect on your credit record as an IVA, which is also a form of insolvency, as is a DRO.

A £100 a month IVA is precarious. There is no room to reduce much if your bills and expenses go up. So the IVA may fail.

In bankruptcy you pay for a maximum of 3 years, never extended, and the amount can Drop to zero

MEM62

For the last 6 months I have tried my damnedest to manage my own DMP, but literally none of the DCAs are officially willing to accept the payments I am offering despite them being roughly the same as what step change had agreed with them, and are insisting of reviews every 6 months.

You are assuming that they have a say in it. They don't!

Prepare you own budget, work out what you can afford to pay them each month and send them that amount.

sourcrates

I think its best if you change your outlook about who is in charge here, because its not them, its you.

Debt collectors have no say in anything, there is no acceptance or rejection of payments, you simply pay what you can afford, and keep doing so until the debt is repaid, ignoring all correspondence from the collector, unless that correspondence is a prelude to a court claim (LBA) its that simple.

If they don`t like it, they may seek a judgement through the courts, but as long as a CCJ will not harm your employment, you still pay the same amount, only this time its court approved.

With the cost of living crisis on-going, these companies may bleat about wanting more money, its all a Sharad, they are lucky to get anything for their non priority debts, don`t fall for their subterfuge.

samwin2912

Thanks all.

Been taking the weekend to ponder everything, and you're right - they don't have any say!

My plan is to setup £1 token payments to each creditor.

Then I'll just take the rest of what I can afford and pay off the smaller debts first one at a time.

This makes more sense to me, as it will actually feel like I am making progress with it all.

Matthew1279

oh dear im am at a loss. Created a thread regarding offered possible solution to my credit card debt being a IVA ( all new to me ), and had a few questions in that thread. Reading/searching this site for this IVA…seeing that on here it says more suited to someone with a house? i have £17000 credit card debt, making minimum payments only…i can just about get by…but its just a circle. Wanted a loan to pay off credit cards..but no chance.

Phoned these 'brokers' i think,. helpfuly..solutions one being IVA. Now i am confused.. They said, payback £115 for 60months….personally i got myself into this mess, i should have to pay to get out of it…but £115/month is tempting….able to save own monies…but it seems its not that simple then..after 60months…credit history remains awful, never be able to get credit/loan etc…and im renting so…would the next landlord even give me a chance? OR, perhaps is IVA a good solution?

Isthisforreal99

As said on your IVA thread, an IVA would be a crazy 'solution' for you not being a homeowner and the debt being relatively small.

As already has been suggested post your SOA and let us see the full picture. You do need to be aware that any form of debt management is going to damage your ability to get future credit but it's finding the least worst option.