I was going to do an IVA but have pulled out. Company are trying to talk me back into it.

[Amanda.c]

I was going to do an IVA but have pulled out.
I owe 33K to 7 creditors and earn 25K, I was told that my IVA would be over 6 years so that I didn't risk loosing my house, I was also told my payments would only be £90 a month.
When my proposal came thought it is clear that its only for 5 years and the sixth year isn't decided until month 54 when I see if I can remortgage. The IP has currently valued my house at 117K but 2 identical houses on my street have gone up for 140K I feel its lower so that the creditors will think its pointless making me bankrupt. The example of what things maybe like in 54 months time,house is now 147K but the IP hasn't reduced the mortgage, he's left it at 90K but in 5 years it will be 75K In 54 months I may have £75,000 equity and if I'm right I will owe 85% of it to the IVA.
Could you please confirm if this is correct I can't find anything that says 'I will not pay more than i originally owed'.
I keep getting calls from the company that originally contacted me, trying to talk me back into it. They said the proposal is worded wrong and should have been over 6 years. They also kept repeating time and time again that 'no one with my track record would get a remortgage' but it states on the proposal remortgage or secured loan, I know nothing is definite but I feel confident that if I'm earning a lot more money and have 50% equity someone somewhere will give me a remortgage or loan.

[Foggy]

At the moment your prospective IP is correct -- but, so are you in that things do change over 5 / 6 years.

What they have outlined, although maybe clumsily, is the same as any other IVA with any other firm, in essence.

I would suggest reading around the forum and chatting to a few firms to compare the lie of the land.

[Adam Davies]

Hi

Unless creditors agree to a proposal that excludes your property then it is very likely that you will have to try and remortgage or agree a secured loan in the final year

Talk to several companies but if you want to keep your property out of any solution then consider a Debt management plan but given your disposable income figure v debt level this would be unsuitable unless you expect your situation to improve

Regards

[Shining]

think long and hard it may be that an IVA isn't for you but there are other solutions out there. My one regret of my IVA was going interest only mortgage as now I can't get back on repayment. Only you can decide and it would definitely appear you're doing your homework. Whilst the IVA is an excellent solution it's notvfor everyone.

[Lisa Thomas]

I understand your frustration but it is difficult to know what the market and your property position is going to be like in 5 years time. To protect creditors most proposals will state that if there is equity available at the 'end' of your IVA then you will remortgage to inject those funds to pay towards your debt. If you are not able to remortgage then you pay contributions for one more year. This is a fair way so that you get to keep your house but creditors get something in return for any equity. No-one can give you a guarantee I'm afraid so if you decide to go ahead with an IVA do it with the worst case picture in your mind. If you are not happy with your IP then I suggest you shop around for another one in your area. Do you have any family members/friends that could offer a lump sum injection as an alternative to the equity?

[Amanda.c]

Thank you for all your replies. The main thing I really need to know is "can you end up paying back considerably more than you owed to start with?"
I am trying to get myself out of a mess and I'm hoping to get another job for 10k more a year. There will also be commission so I could pay quite a lot in over the next few years. The proposal also says they will chase any PPI owed and that will go into the IVA. Is there any cap to what I could pay back?
Many thanks.

[size5]

Don't forget that, as a safeguard, any increase in secured payments when the time comes will be limited to 50% of your IVA payment. If that was still £90 at that point then that is seriously going to curtail how much you will be able to release.

Regards.

[Foggy]

The bottom line on maximum repayment is that the IVA will cease when it hits the agreed term or when the amount paid in equates to your full original debt,(£33k) plus fees (very, VERY, roughly £7k ) plus, possibly, statutory interest at 8% simple on the reducing balance. Stat. Interest is sometimes excluded and you would need to discuss this aspect with your prospective IP.

[longslog101]

If the firm cant get the paperwork right for you on day one then I would consider not using this form and getting some opinions from other firms too.

It seem like they are trying to do the "hard sell" on you and get you on their books, again not something I feel particularly fond of.

Have you been to the citizens advice bureau to talk about other options ?

If you end up with lots of equity in your property at the end of the 5 year term they will use the equity to settle the outstanding balance of the debt. The debt will also increase because of the fees of the insolvency frim and possibly the statutory interest.

What situation are you in right now ? If you are paying each creditor each month at the moment, I could suggest the route that I took, that was to set up a debt management plan (DMP) through stepchange charity, they had it in place within a month, one payment to stepchange monthly and they write to all your creditors at least then youre interest is frozen and you're not paying any interest and only paying down what is owed.

They may even say a debt repayment plan isn't the best thing for you and you should do an IVA, just say yes, I'm thinking about it but a debt management plan is all I want for now as not ready to commit to an IVA at this stage.

Then speak to a few companies that don't feature here heavily as companies complained about a lot (that rules out the like of Grant Thornton).

There is no rush then, as your interest payments have stopped and you have breathing space. read my blog for an idea of why I think this is a good idea (link below).

Out of interest £90 over 60 payments is £5040, that is payments would would make into an IVA, the IP would then deduct fees from this so your creditors may only see £3-4K or even less if there were creditor meetings or complications along the journey.

You may find an IP who would be able to help you do a lump sum (single one off payment) IVA that only lasts a year if a friend or relative can lend you that sort of money ? Any asset in the house may also be taken into account at todays value, rather than in 5 years time when value may have increased but so would fees and interest.

blog link below.

ps a further thought, if your mortgage is £90k and property value is indeed £140K could you not just re-mortgage and release the equity in the property ? turn 90k mortgage into a 123k mortgage, on a 140k property this is 12.12% deposit and clears your debts ? there are some good 90% mortgages around at the moment for example quick search http://www.money.co.uk/mortgages/90-mortgages.htm

of course this is no good if you have bad credit history already and have defaulted and might not be able to get a new mortgage, and with an IVA stamp on the credit file rest assured, as I have found from research - no one is going to offer you a mortgage/re-mortgage until it drops off your files in the 6 years plus future.

The reason they are saying no one will give you a re-mortgage is because it seems they are dead scared you will try and clear your current debt problems that way - have you tried that route first ? it must be much more favourable, even if it meant getting someone onto the mortgage with you so your multiple of earnings combined were higher and existing debt didn't reduce the combined amount prepared to loan. 3-4.5 x earnings (less other debt) combined.

[Amanda.c]

Hi longslog thank you for your reply. I'm just really confused I've made such a mess of things I don't want to make things worse. I've always worked full time and had to put the kids in child care so over compensated at weekends with treats and days out. They are now 11 & 12 and they are really going to need support in the next 5 years and I've messed everything up.
I went to the CBA 18 months ago and they were great, they got 3 of my creditors to except greatly reduced payments but like an idiot I've gone and got 2 more creditors. My original post says 7 but 2 are overdrafts and as you know you have to add in everything. I wasn't looking at an IVA until this company called me a few weeks ago, I said I was in mess but CBA had helped, he told me it would take 64 years to clear my debt and that frightened me.
I can't remortgage as I was getting childcare tax credits when I took the original mortgage and these were added to my wages, I don't get them anymore so don't earn enough to remortgage.
The IP has called again and said I definitely wouldn't get a remortgage in 5 years and I'd be silly to miss this opportunity.
I currently earn 25k but work for a small company, larger companies, for the same position are paying up to 10k more basic and possible commission of a further 10k. If I could land a job like that I think I could get myself out of a mess.
Or am I living in fairytale land and should I just do the IVA.
I don't have any family that could lend me money so that's out of the equation.
As you have said the payments are so low I would hardly touch what I owe so why would anyone agree unless they are confident that I will be able to remortgage in 5 years. I don't want to use the house as it's the only way I can give my kids anything in the future.
I think hardwork is my only way out and I have to get another job. The way I'm thinking is I owe one creditor 4K if I could save 2K and then offer them that as final payment do you think they'd except it? If I could do that for all the smaller ones then in a couple of years when my wages are better see if I can remortgage for the biggest dept (12K).
Hope that all makes sense my heads a bit of a mess lol.

[lifenoteasy]

There is no guarantee that the £90 a month would stay at that over a 5-6 year period and the IP will seek to maximise increases if you have pay rises, they can recoup PPI, if you have a windfall etc.

At this stage a remortgage is almost impossible under current lending rules and I don't think that the IP really considers that an option. It's more they are looking at you paying over 6 years.

To be honest I would say look at the maximum that you could pay each month rather than the low figure they are suggesting and let that inform how you make a decision.

If you go into an IVA things will be really tight and your life will not be your own to a certain extent with strict expenditure allowances.

Your thought about paying off your creditors based on saving up etc. depends on whether they allow you the time and space to do that.

Any IVA company that needs you more than they need you (strong sales pitch) is probably not giving you the whole story and once you go into an IVA the options are limited if you change your mind.

[longslog101]

Who are the company that cold called you and pushing you ?

My personal opinion would be to say thanks but not thanks you have engaged the services of another company, just so they go away.

I would then using stepchange.org direct arrange a debt repayment plan, they got all of my unsecured lenders to accept no interest and one monthly repayment.

That gives you breathing space. If I could offer one bit of advice, any company that contacts you and tried to sell you something is a sales company, period ! DO NOT USE THEM.

When I took out a DMP they said it would take 30-40 years, yep that's fine and based on today's incomings and outgoings.

That is your first step and IMHO a no brainer, think about the rest later after the interest is paused, engaging the services of some of the reputable companies. If you're in an IVA and got a pay rise that money would be directed to your debts, but also the IVA comes with costs as said above that increases the debt.

Stepchange freezing interest means every payment you make reduces the debt owed. In the perfect world if you got a job paying 10k more and 10k commission in 2 years that extra money would have cleared your debts if you kept outgoings the same - worth a thought........ If your creditors are happy with a a debt repayment plan and there are no threatening letters I see no reason to dive into an IVA - let stepchange manage a DMP for you in the first instance would be my unprofessional advice,

[longslog101]

Ps. You have said you don't want to use the house, but rest assured if there is equity in the house and you enter an IVA, it is my understanding they WILL use the equity in the house, Or commit you to an IVA for longer for having equity in the house.

Either way it is an asset that will be targeted if you end up going down any official form of insolvency.

As for a company saying you don't want to miss this opportunity, IVA's aren't going anywhere there is no rush, there is no deadline, do not be pressured into anything by this person trying to hit a sales target by getting you to commit to so ething you may not need to.

I am so glad you have said no and stopped in your tracks and found this forum , you will get some sound advice here.

Act in haste and repent at leisure..... You have done the right thing hitting the pause button in my opinion, good for you ![;)]

[Amanda.c]

Thank you.
I have made my decision, thanks to the advice on here, and I'm going to contact step change and start a DMP as soon as possible. I have 2 interviews next week so fingers crossed. I got myself into this mess so I'm just going to work hard and get out of it.
The company that initially called me are Consolidate Me and the insolvency company is Mitchell Farrar. In the paperwork it says Consolidate Me would be paid £1100 +VAT for the initial contact. Not bad eh, I should have gone into that business.
Once again thanks to everyone and I'll let you know how the interviews go.

[Lisa Thomas]

Good luck Amanda.