I have changed my mind about setting up an IVA. Am I free to cancel and get my money back ?

[Shining]

To the original poster do take the advice of another couple of companies before making any decision would be my best advice.

[UpToMyNeckInIt]

Hi Melanie,

I must stress that I personally have no issue with you - far from it, you clearly devote much of your own time to advise everyone here, and it is hugely appreciated. As you will see, I am equally cynical (more so probably) of the 'debt charities' - and specifically their claim to impartiality, than of the private sector.

I think that when seeking advice on a debt management solution, people should speak to all sectors, sort the fact from the sales patter, and make their own decisions. I would suggest however that most IVA customers have NEVER spoken to their IP, and with few exceptions, if you phone any number of other IVA companies seeking advice, you'll be put through to a 'sales person' (under the guise of an 'advisor' of course).

I say that from experience, and since you ask, this is what happened with me (a classic 'how not to do an IVA'):

After racking up £35,000 in unsecured debt, across 8 creditors. I was attempting to repay £600-£700 pcm, but over half 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 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 (importantly, I had not found this forum by this point, putting all my 'faith' in MSE).

Going BR is not an option as I am MD of my own company (self-employed) and a home-owner with a 2nd rental property. Due to long-term illness and childcare issues, my Wife does not currently work. The household income is C£36k p/a.

I did of course consider selling the 2nd property, but realistically after repaying the mortgage, expenses etc. 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 MSE: Did all the right things: spoke to the debt 'charities', read the anti-IVA bias in their Guide etc...

Stepchange (CCCS back then) and CAB advised that I sell the flat, and take out a DMP at c£250 a Month (both organisations were dismissive of the IVA option). I was looking at minimum 13-15 Years to pay back my debt (Over 20 Years if I was not willing to sell up). Furthermore, I was told that I earnt too much and had too many assets to be eligible for an IVA.

In the end, I did out of desperation, what some consider 'unthinkable'. I approached a private firm (the Debt Advisory Line - an up-front fee-charger no less!) But as the sales patter went: 'Just put the fee on a credit card, because it's all going into the IVA anyway, and therefore won't really cost you anything so who cares, right?'. Hmm, and what if the IVA proposal does not go through? Would I get my money back? ...Doubtful. It felt like a sickening 'gamble' at the time.

Frustratingly with hindsight, I did not know then to google 'insolvency practitioner reviews', instead I was looking for 'debt management company'. Wish I had got my search terms right from the start.

DAL were extremely dismissive of other solutions (to be fair, all things considered, so was I by this point), saying things like: 'With a DMP none of your debt is written off, whereas with the IVA 65% of it will be'. They also heavily downplayed the 'equity release' clause saying things like 'nobody in an IVA is likely to get offered a remortgage, so don't worry about it, your IVA will just go on for another year instead'. Again, given the amount of my mortgage in relation to our current household income, he was probably correct.

To give them their due (sales patter aside), they were excellent at 'packaging' the IVA, helping me organise all the paperwork etc: They proposed a very affordable IVA (maximising the then CCCS Guideline amounts) and supported me in 'undervaluing' my car, so that I could keep it. They were helpful as well, advising that having the second property assisted with my affordability.

I also managed to put all the debt in my name only to keep the Wife sane and out of the IVA.

But then, they referred me to their 'Sister Company', Mitchell Farrar (my actual IVA firm of course).

I have to say though, that 16 Months down the line, 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 my case officer (currently my 3rd) offered none of the 'assistance' at my annual review that DAL did when setting the IVA up. I was sent the paperwork and pretty much just told to get on with it.

I can NEVER get through on the phone, emails go un-answered, and you have to dial a '0845' number. OK, I'm sure they carry out the day-to-day stuff well enough, but customer service is truly appalling.

[MelanieGiles]

It is a real shame that your own experience is giving you an impression of the whole of our profession - and of course I cannot speak for the companies you engaged with, but current research carried out indicates that clients who use smaller, more personalised practices - where the IP is available and very hands on - generally feel that they have received a better service. Although there must be thousands of clients of the larger firms who are completely happy with their outcome.

If sites such as MSE bothered to find out more about my sector, they would not be so dismissive about the very good work done by the majority of practitioners. Sadly the antics of creditors over the last few years has meant that firms have less time to spend with their clients, due to fee income being drastically reduced, leaving some firms leaning towards the cross-selling of other products to fund their cash gap, and other good firms to exit the market completely by offloading their case portfolio to other IPs.

None of this is ideal, to the extent that I - and others - have determined that creditors don't really want to see IVAs much at all. They would rather have you all on never-ending DMPs which they can keep on their balance sheets under the smokescreen of non-toxic debt.

I am grateful for you sharing your points of view - and am serious about you taking a look at my website. I rarely look at other firms websites unless I need to, but if you are comparing sites it would be good to have feedback - good and bad is most welcomed - from consumers.

[Michael Peoples]

I can only agree entirely with Melanie. There are problems within the industry but there are also many genuine, honest, professional firms giving free advice on a daily basis while trying to make a living.

Since the recession hit we have found ourselves giving out more free debt advice than ever before. We are aware of voluntary and charity organisations advising their clients to come to us because they are swamped and have not got the staff or experience to deal with difficult problems. We try and help but more often than not there is little we can do other than advise on bankruptcy.

No firm is perfect and sometimes a different person will find a better outcome so it is always worth taking a second opinion.

[UpToMyNeckInIt]

My opinions are based in part on my own experience, but there are many other similar accounts out there, which help reinforce it.

I agree as well that a smaller firm is likely to provide better 1-2-1 than a larger one, and yes, I am sure that the large firms too have satisfied customers. (Even I am confident that my firm will manage my IVA competently, I just wish they could be a little better on the odd occasion that I need to query something).

I cannot pretend to be an expert, and I appreciate that any private sector business (and indeed all of us) need to earn a profit/living.

No doubt, the recent issues with PPI, VAT problems, and other creditor issues, have complicated things. I am sure that many IP's are doing a good job in the circumstances, but the Insolvency Service figures do not lie:

http://www.insolvencydirect.bis.gov.uk/ ... s/ivas.htm

According to that, 35-40% of IVA's fail. (And what happens to the customer after that? Going BR anyway in many cases I would speculate).

This is a great shame, as personally I think an IVA is an excellent product for many people, and clearly with the proper help and support, they work very well. But something is clearly going wrong somewhere isn't it?

To Mel's credit, her firm and one other boasted termination figures in single percentage points on this forum some Months ago. But then, as 'averages' suggest, that means that the failure rates in other firms must be above average, ie: trully shocking.

Forgive me then, if (as far as IVA's go at least) I beg to differ if anyone believes this represents 'very good work' by the majority of IP's. Until I see evidence of failure rates significantly decreasing, I suggest that a lot more work still needs to be done.

So, I say again, to anyone else out there with a debt problem: Seek a range of opinions form all sectors.

In the same way that some private firms have been accused of all sorts of thing like mis-selling, greed etc, you have to appreciate that the 'debt charities' are sponsored/funded by banks/credit card companies. Hardly surprising then that that is whose interests they look out for, leaning more towards offering DMP's (thus maximising creditor return).

However, if you think an IVA is the way to go, speak to the CAB, the debt 'charities' by all means. But don't be afraid to speak to 2-3 reviewed private companies (especially if CAB etc. try pushing 15-20 years of debt misery in the form of a DMP as they tried to with me). All IVA's (Charity or otherwise) have fees, but these are deducted from your Monthly repayments. Some firms (to be avoided) also charge 'up-front' fees.

If however, you think a DMP is your best way forward, the charities may be your best bet - they won't charge you a fee, their time being funded by a commission from the creditors. (In fairness, private firms have to make a living, so if you go the DMP route with one of them, a proportion of your Monthly repayment is deducted for this, and your DMP will cost more and/or take longer to complete).

Considering going BR or a DRO? I'm no expert, but you can file for bankruptcy yourself, (you will need to find the £525-£700 (BR) / £90 (DRO) fee from somewhere) and CAB / debt charities will help you with the paperwork (and sometimes the funding?) - for free. Again, some people may benefit with help/advice from the private sector, and it is reasonable to expect firms to charge for their time accordingly.

I think that is about as diplomatic and unbiased as I can be from a customer perspective.

Good luck and best wishes to you all.

[Adam Davies]

Hi

We seem to gone off track into a heated discussion amongst the more seasoned posters

Can we go back to the OP who clearly needs to go back to their IP company and clarify what is happening to the money already paid in and when her creditors meeting is likely to go ahead.

I would imagine that the money can be refunded but it will depend on any contract signed

Regards

[MelanieGiles]

No sure about the heated, but it certainly is a good discussion Andy!

I think we have largely advised Natalie of what she is able to do. In today's market, it is highly unlikely that an insolvency practitioner would be able to get away with holding clients monies - regardless of what any contractual agreement says - if the client has decided that an IVA is not the correct way forward. I personally find it very disatisfying that anyone would take money of a vulnerable person, without considering the detriment caused to themselves and their creditors in the meantime, but of course we don't know the full facts of the history here.

If she is concerned about the firm she has chosen, there are many others out there who would gladly take her on as a client.

[Tim Jones]

Just sitting reading this and thinking its good to see an intelligent discussion about how debt is treated. As Melanie, hopefully knows, I am in an iva. It's not my choice and I shopped around and was badly advised by a couple of charity's and especially by some of the companies that apparently specialise in dealing with debt problems?

We are now in an iva and guess what, I can sleep at night, do I want to be tied in for five years,? Of course I don't, but it is what it is, over the last five years we have lost everything, financially!! But if your reading this my kids get fed, we can still give treats, we even scraped through Xmas without debt and,,, at the moment we Are healthyand living life, which is more than we where 12 months ago.

Not a full recommendation for an iva because they don't work for everyone but if it suits go for it. Btw we have 150k debt so it's not like we are dealing with a small amount - But life goes on!,

[MelanieGiles]

Great post Tim, seeing how the IVA has changed things around for all of your family - and displaying the merits of shopping around for the best advice possible.