IVA support and discussion thread

IVA's. There is a lot to talk about so I have started this thread for anything IVA related.

Whether you want to debate any aspect of an IVA, ask a question, share your IVA journey including high and low points or offer support, are thinking of starting an IVA and have a million questions or having completed an IVA you want to share your experience and knowledge, hopefully this thread can offer a chance to do just that.

It's not exclusively for those in the IVA club, anyone is welcome to join in but please kindly remember this thread is not for judgement.

Wisdom comes from experience. Experience is often a result of lack of wisdom.
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Comments

  • I'll start off with a discussion point that has interested me. Do IVA firms give the best advice for those who have a relatively small amount of debt? Although guidelines recommend it should be for debts over £15,000, quite often we are seeing much smaller amounts being accepted. Once PPI is factored in we are quite often seeing the value paid in exceeding the debt by some considerable sums.

    I appreciate an IVA is not guaranteed to reduce the amount paid into the debt and you are always liable for the debt in full until completion but are some firms thinking more of the fees especially if they do not charge until an IVA is accepted and are not giving those in debt the full picture with such as other options as a DMP or DRO or bankruptcy.

    Wisdom comes from experience. Experience is often a result of lack of wisdom.
  • UpToMyNeckInIt
    UpToMyNeckInIt Posts: 884
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    edited 28 September 2013 at 4:20PM
    Find The Real.

    Good idea for a thread.

    In my view 'impartiality' when it comes to IVA advice is nigh-on impossible: IVA firms WILL flog you an IVA, and sell it on the basis of debt written off, interest frozen etc.

    Similarly, the debt charities like 'Stepchange' and 'National Debtline' are funded by the creditors. In my experience, they will advise you take out a DMP - I cynically think this is because it is in the creditor's best interests, and because they fund the charity, the charity 'looks out' for them.

    As you say though, there are a fair number of people it seems, who are lured into an IVA, when maybe a DRO or bankruptcy may be a better option.

    I struggle with recommending DMP's, not least because your credit rating does not begin to significantly recover for 6 Years after your final payment. That will leave a lot of people in the financial mire for a heck of a long time.

    With any form of Insolvency (BR, DRO or IVA), that 6 Year period starts from day one, so 6 years on, you are in the clear (OK that's an over-simplification, but you get the idea).

    So let's consider a 25-Year old individual, living in a private-rented home with a £15,000 debt, a car worth £2,000 and suppose they have £150 disposable income after living expenses. (Not an unrealistic scenario - Seen a fair number of enquiries over the last year on this and other forums with these sorts of figures).

    DMP: Assuming all interest is frozen, for the entire term (very unlikely I know). The customer faces 8.5 Years of paying off the plan, and not being able to get reasonable credit rating for a further 6. If you don't think you will need a mortgage or a half-decent motor the right side of 40 - fine. Let's be honest, the plan could easily be 10 years long. Equally, they may get a better job, more income etc. and may be able to end the plan sooner.

    IVA: The plan lasts for five years. The individual may pay off as little as £9,000, with the other £6K written off, and their credit rating bounces back in Year 6. If they get more than a 10% payrise throughout the term, they will most likely start having to pay extra contributions (50% net above the first net 10% normally).

    With the above scenario, purely comparing a DMP with an IVA, I'd go with the IVA.

    ...cue the debate!!!
  • Hi

    Good post again UTMNII

    Yes, this has the makings of a good and interesting thread

    And yes, the debate will no doubt come and why not, clear the issues, transparency!

    And another chance for the IVA industry experts and supporters to put over their side of the story too perhaps. Will they take it though on this very open forum, mmm that remains to be seen, hope so:)

    Stepchange may want to join or step in also?

    Yes, could get interesting given what is going on in the debt advice sector and help those in debt & IVAs etc

    My take
  • UpToMyNeckInIt
    UpToMyNeckInIt Posts: 884
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    edited 28 September 2013 at 6:12PM
    Excuse the long post, but as this thread is all about IVA experiences, here is my story:

    After racking up £35,000 in unsecured debt (I'll spare you the excuses), across 8 creditors. I was attempting to repay £600-£700 pcm, but £500+ of that was lost on charges and interest.

    Suffice to say, I was borrowing from Peter to pay Paul, and reached that point where I ran out of credit. (Sounds familiar to many of you I'm sure).

    I had seen the writing on the wall for ages and spent a good 3-4 Months researching IVA's vs DMP's as the best solution.

    Going BR is not an option as I am MD of my own company (self-employed) and a home-owner. Due to long-term illness and childcare issues, my Wife does not currently work. The household income is C£36k p/a.

    There are 2 adults and one child in our household. We are fortunate enough to 'own' a home worth £300K, albeit with a £268K mortgage (nothing flash: a 1950's 3-Bed semi. But that's London prices for you). We also have a flat which we let out, worth £140K, but with a £125K mortgage. (Values taken May 2012). I also managed to put all the debt in my name only to keep the Wife sane.

    I did of course consider selling the flat, but realistically after expenses, I'd still be left with a £25K debt, and £4K per year worse off in lost rent. I knew that I would be back at the same point again soon.

    So, I looked initially at the advice on here on MSE: Did all the right things, spoke to the debt 'charities', read the anti-IVA bias in the outdated IVA Guide, read some of the anti-IVA claptrap on the forums etc and heard similar at my local CAB office.

    (Please don't misunderstand me, there is a lot of great advice to be had here at MSE, and I am an avid fan of the site, but they don't give IVA's fair press in my opinion). They also don't seem to allow the private sector to have their say on these forums. This is a great shame, as it would be nice to hear from all sides.

    Stepchange and others advised that I sell the flat, and take out a DMP at c£250 a Month. I was looking at minimum 10 Years to pay back my debt (I was told realistically 15, due to some of my creditors being notoriously stubborn at freezing/lowering interest). My DMP would last over 20 Years if I was not willing to sell up.

    It really sucked basically. Furthermore, the various charities told me that I earnt too much and had too many assets to be eligible for an IVA.

    In the end, I did what some here consider 'unthinkable'. I approached a private firm - an up-front fee-charger no less! (The £900 fee went on a credit card which went into the IVA anyway, so who cares, right? I stress they took the fee on the contracted understanding that it would be refunded if the IVA proposal, referred to their 'Sister' Company was not accepted). I did not know to google 'insolvency practitioner reviews', instead I was looking for 'debt management company'. Wish I had, got my search terms right from the start, because there are loads of private companies that charge nothing up-front.

    To give them their due, they were excellent: They proposed an IVA for £270 pcm. They even assisted me in 'undervaluing' my car, so that I could keep it. They were helpful as well in advising my creditors that having the second property assisted with my affordability.

    OK, so I'm 14 Months down the line, and coping pretty well. Thanks to continuing research, I took full advantage of every possible expenditure in the 'Stepchange Budget Guidelines' at my annual review (I can generally live within the allowances. I know some people grumble, but compared to what I was allowing us before the IVA, we are comfortable). This effectively cancelled out a significant rise in income, resulting in no increase in my IVA payment.

    I've managed to squirrel away £1,000 as an emergency fund, and was even able to afford a family Holiday (first one in 5 Years), to Spain. (I was nervously anticipating how I would have to explain payments to 'First Choice Holidays' on my bank statements at annual review, but it was not an issue).

    Being self-employed ironically seems to be an advantage: My accountant is very good at 'minimising' my income for tax purposes. These figures of course, are the same ones used in calculating my IVA affordability.

    I have to say though, that managing this is hard work, not least because my IVA firm, once you are trapped with them, are almost useless. Brilliant at getting the thing set up, but offered none of the 'assistance' at my annual review that they did when setting the IVA up. They carry out the day-to-day stuff well enough though, as well they should for their fee!

    In summary, I consider myself very fortunate, having had a lucky escape, and nearly risked losing my home. Providing my business stays profitable, I anticipate paying back c£20k over 6 Years. £15K written off, and saving £500pcm interest/charges. I can live with the inconvenience of a knackered credit rating for the next 6 Years for that. Actually, it's a bargain!

    However, I have read of many other IVA accounts where the experience has been bad or even disastrous: Be it through being ill-advised at the outset, through lack of research into updating expenditure, unforseen changes in personal circumstances - or whatever). It is the nature of things I suppose: People are more likely to take to internet forums with bad experiences rather than good ones.

    Moral of the story?

    If you are in debt DO YOUR RESEARCH. You are the best person to help yourself. Seek several opinions. If you are considering an IVA, don't be afraid to approach private companies (heck, even Stepchange and CAB use Grant Thornton to administer many of 'their' IVA's - rather puts the kibosh on some of the claims of impartiality IMO).

    Good luck and best wishes to all of you.
  • A fantastic post UTMNII as it covers so many of the things that people have doubts about and I think the really important message is to do your own research and not just rely on maybe a few companies or charities for advice. Like you say these do offer good advice but at the end of the day you have to make the decision based on all your circumstances and go with what feels right for you.

    Your whole story is of great help as it covers so many points as I think a lot of people just get to hear the downsides of IVA's rather than how it can make a positive impact and be less "damaging" than bankruptcy especially where assets are involved.

    I can see the reasons for not wanting to go for a DMP because of the uncertainty with them and the long term implications. However sometimes they can be a useful stepping stone when creditors are being demanding, giving you the space to spend the time to do the research I need. I know I used SC to do a 6 month DMP whilst the house was repossessed and I was waiting for the shortfall to come through so I could then decide on the more formal route of insolvency.

    I hope this thread does generate some debate but can also be a place to offer support as I feel IVA's can be a bit overlooked on here and on the internet in general. You sometimes really need to know what you are searching for, however you may not know what information you need unless you have come across someone else mentioning it!

    Wisdom comes from experience. Experience is often a result of lack of wisdom.
  • FTR: The use of a DMP as a 'stepping stone' is worthy of mention. It is a very good use of this product. It gives the customer some breathing space etc.

    Sorry to hear of your house repo. (believe me, I was nearly there myself at one stage, as both mortgages are 'interest only'). As you say though, maintaining a DMP throughout a difficult and stressful time such as that, must have been helpful.

    Hope you are back on track now though.

    I say it time and again on the various forums out there. People must properly research their best route to going debt free.

    Saying that, despite the research I did, I still chose a mediocre IVA firm. Don't get me wrong, for me an IVA is the way to go, but knowing now what I didn't know 18 Months ago, I would have gone with a well-reviewed company.

    These forums are a great support mechanism: We should all make the effort to pass on our experiences, and advice - especially those little nuggets of information that the various charities/companies are afraid to divulge (appreciating that we are not 'experts'). Example: where to find the 'Stepchange Budget Guidelines' - Actually: Anyone know where to find the new ones, applicable from October?

    Have also heard some great ways that homeowners may be able to 'dodge' the equity release clause in their IVA.

    Hopefully, this might assist others having difficulties in their IVA, especially those who like me, encounter a customer services 'brick wall' with their IVA company.

    Excellent thread once again, and I hope all forum members take advantage of it.
  • Some people may think that a house repo and with the shortfalls pushing my debts up to £61K may not be great but in actual fact I think I have been very fortunate. Well ok the debt wasn't great and I would have liked to have avoided the house repo but when you have an ex that won't play nicely you have to make the best out of a bad situation.

    However I was fortunate that once I knew they way things were heading I could take my time to plan all of my steps that lead me to going into an IVA. I appreciate it is not always easy to do that, as quite often things are at a desperate stage for most people and they grab the first option they are given. It is never as bad as you are going to think it is though and I have to say having dealt with all my creditors over 18 months in the end, I never got the heavy handed approach. I think a thing that can make a great difference not to bury your head in the sand and tackle it direct. I really do think it helped me that the other liable party did just that and so my creditors could see that I was doing all I could to sort the financial mess out.

    I have to agree that research is everything, I went with a very good firm who accepted a F&F IVA from the start as I had a kind offer of help from a 3rd party. It is very important to research the advice you have been given, naturally given the house situation I was advised early on just to declare bankruptcy but to me that was the absolute last resort and although most of the debt would have been written off it just didn't feel right for me.

    I've not seen the new SC guidelines floating around but even the old version would give people an idea of what they can claim for. So many times we see an IVA become a real struggle a relatively short term into it and although as much debt as possible should be paid back it shouldn't be a life of poverty over the next 5 years.

    I think a lot of people are not aware of they key facts even when sorting out their debts. I am incredibly glad I found the MSE site (and a couple of others) that gave me invaluable information from the start, but I should imagine it may be a very small percentage that actually do research information further and come across sites like this. I really do think the charities and debt companies should do far more to give ALL the facts to everyone that approaches them.

    Wisdom comes from experience. Experience is often a result of lack of wisdom.
  • FTR: The use of a DMP as a 'stepping stone' is worthy of mention. It is a very good use of this product. It gives the customer some breathing space etc.

    Sorry to hear of your house repo. (believe me, I was nearly there myself at one stage, as both mortgages are 'interest only'). As you say though, maintaining a DMP throughout a difficult and stressful time such as that, must have been helpful.

    Hope you are back on track now though.

    I say it time and again on the various forums out there. People must properly research their best route to going debt free.

    Saying that, despite the research I did, I still chose a mediocre IVA firm. Don't get me wrong, for me an IVA is the way to go, but knowing now what I didn't know 18 Months ago, I would have gone with a well-reviewed company.

    These forums are a great support mechanism: We should all make the effort to pass on our experiences, and advice - especially those little nuggets of information that the various charities/companies are afraid to divulge (appreciating that we are not 'experts'). Example: where to find the 'Stepchange Budget Guidelines' - Actually: Anyone know where to find the new ones, applicable from October?

    Have also heard some great ways that homeowners may be able to 'dodge' the equity release clause in their IVA.

    Hopefully, this might assist others having difficulties in their IVA, especially those who like me, encounter a customer services 'brick wall' with their IVA company.

    Excellent thread once again, and I hope all forum members take advantage of it.

    Hi

    Good post again

    I picked up on the 'dodge' the equity release clause in particular

    Fascinating comment and I wondered if you would not mind expanding on this a little?

    Also on the subject of secured loans in releasing equity for IVA customers has been touched on a few times but seems a little covert at times to me given that the protocol seems to be clear on the 12 month extension (just my opinion of course).

    Is there any conflict with the best interests of the IVAer or financial interest could be fair questions I suppose!

    My take
  • UpToMyNeckInIt
    UpToMyNeckInIt Posts: 884
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    edited 3 October 2013 at 7:52PM
    DC, you make a fair point.

    Sadly, I have read anecdotal accounts of unscrupulous providers (there is a clear financial incentive after all), where the customer is under the impression that they have to accept a 'secured loan' offer where an application to 're-mortgage' has been declined.

    I personally agree with your sentiment on this practice. But worryingly, I don’t think it is as clear as you suggest.

    The protocol quotes:

    ‘where the debtor is unable to obtain a remortgage, the supervisor will have the discretion to consider accepting one of the following alternative proposals:

    • a third party sum equivalent to 85% of the value of the debtor’s interest in the property; or

    • 12 additional monthly contributions (with the aggregate sum paid to the supervisor being limited to 85% of the value of the debtor’s interest in the property).’

    Could you argue that a secured loan constitutes ‘a third party sum’? …Legal fodder for the lawyers to chew over I think.

    I posed this question on another forum a few Months back, and as I recall, consensus from the IP’s that posted a reply was that the intent of the statement is - eg: a gift or informal loan from a friend/relative, or from a redundancy payment for example.

    Assuming then, that protocol-compliant IVA customers cannot be compelled to take out a 'secured loan', they should quite rightly be offered the 12-Month extension where they have been unable to remortgage. Customers need to stand up to any IVA firm attempting to ram a secured loan down their throat (I am aware of one customer, armed with this information, whose IVA firm ‘gave in’ without too much of a fight).

    The only time you would want to consider the secured loan route is IF you are unlucky enough to be offered a remortgage as per your IVA terms: Then, it may be cheaper to take out a sub prime loan for a relatively small amount at say 20% APR, than to remortgage the entire debt on your property at presumably a naff rate (say 9-10% APR).

    In the event of a remortgage offer, the customer cannot then 'opt' for a 12-Month extension, but could theoretically offer to release the same amount of equity by way of secured loan.

    Will be interesting to see how this evolves over the years. History has a tendency to repeat itself: Ultimately, banks are in the business of taking risks to make money. It follows that some will eventually take the risk of routinely offering sub-prime remortgages again soon. When that happens, IVA customers will presumably clamour for the secured loan.

    Happy Days!!!

    PS: Other Equity Release 'avoidance' tips to follow soon. ('Dodge' perhaps is not the best choice of wording on my part)!
  • milliemonster
    milliemonster Posts: 3,708
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    My story then, I have been a member of this forum for quite some time, initially when I was looking at ways to cut our outgoings to get our £45k debt paid off in record time, back in 2008 I was in a job I hated, felt trapped as we needed the money and used this forum for tips etc, 2 years later we had gotten nowhere, the debt had increased to £52k despite meeting every single payment in full every month and even overpaying at times, it hit me we were never going to get it paid off until we retired at this rate and I was sick of living a life of being in significant debt and feeling trapped, I wanted my freedom back, freedom to choose a new job based on what I wanted to do rather than whether it paid enough to repay our debts.

    I made the decision to sack the job in (it was making me ill) and giving up my £40k a year salary to return to nursing initially on nothing for 6 months while I did my return to practice course at Uni, and then a salary of £18k if I got a job part time so I could not miss out on the kids growing up anymore.

    We sat down, crunched the figures and initially thought of a dmp, but longer term knew even on £18k, a dmp would take 20 years to repay, stepchanges advice was a dmp or bankruptcy, hubby couldn't go bankrupt as he'd lose his job, so I started researching other options.

    Like UTMNII, I spent time researching Ivas, fortunately went straight to well reviewed private firm, initially with scepticism, this forum sort of brainwashed me into thinking you should only go to one of the debt 'charities', but after taking those 6 months of having no salary to ask endless questions, go through scenarios, what if this and what if that, once I secured a nursing post, went for the iva.

    Now we are 30 months in, half way there, so how has it been so far? From a mental health perspective, it's been the best thing I ever did, I'm now happy in work, have a great work life balance and don't feel trapped anymore. I still feel happy with the company we chose to represent us, they are very fair, consistent, treat us with respect and have been on our side from the start. Budget wise despite pay rises, we have not had to pay any more into the iva, our payments are still as they were at the start as we have been able to offset the rises against our budget so we are now better off than we were at the start.

    When I think back to how we were when we were overpaying our debt and how little we got to allowing ourselves each month for groceries etc, then we are quite comfortable now. I see this all the time on the dfw thread where people put their soa's up and others reply saying, you can cut your grocery spend down to £100 a month between four of you (extreme I know but you get the picture), well yes you can when you have to, but who can live like that long term?, we are 'allowed' over £500 a month for our groceries in the iva, I manage to save at least half of that each month, many other allowances also allow us to put money away for Xmas, birthdays, stuff that makes life worth living. I would never change that for a life of extreme restriction to ensure we would repay every penny backust to preserve a credit rating.

    Ah the credit rating, that thing we are brainwashed into thinking we must preserve at all costs or life will be unbearable, well yep mine is trashed, have I noticed? No, not at all, is it going to affect us in the future when all this is over? Probably for a time, but one thing the iva has taught us is to save, to spend only what we have and that we have to wait for things if we can't afford them this month, I don't notice in my day to day life that our credit rating is rubbish, I still have a normal bank account with a normal bank with a cheque book and Visa card, I have never had any issues getting a new mobile phone, insurances etc, no I don't feel subhuman.

    I have a brand new car that my iva company totally approved of getting and worked into our budget from the start, not on a high apr loan, but through salary sacrifice through my work, this wouldn't have been possible before the iva as every spare penny, and then some, was needed.

    The downsides? Life does feel on hold, wishing each month away, sometimes I get down about the whole sorry saga but then I remember why we're doing this, to get our financial freedom back, and also I remember what life was like before and I shudder.

    Fortunately for us we are in reliable secure jobs, essential I think if you are considering an iva, having said that, Ivas are flexible and allow for life changes to an extent, the key is picking the right company to represent you from the start, to help you make the most of your allowances and budget and who are realistic, sad to say I don't think a charity fits that bill
    Aug GC £63.23/£200, Total Savings £0
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