I’m currently in the process of starting an IVA application, I am currently in around £27k worth of debt and am paying off around £1000 a month for this (some of that getting eaten by interest) my IVA have indicated that I would be paying £356 a month towards my IVA if approved which comes out at £21,000 in total.
Couple of questions regarding this:
Firstly I’ll paying back so close to my actual total debt but a chunk will be going to the fees not my actual creditors does that seem beneficial?
Secondly: I have yet to sign the IVA documents to agree to go forward to the creditors meeting- if it goes through does that mean that my new total debt would be £21,000 (based on monthly payment of £356 for 5 years) would this be a fixed total or can they increase it? If I got a family member for example to pay £5k off the debt would that mean I’d be paying the monthly debt for less than the 5years? Or would they increase the total amount?
Any help would be much appreciated, just want to ensure I’m making the right decisions!
During an IVA you do not 'owe' just the agreed payments. You still owe the full original debt plus fees. If the increased payment hits that amount, the arrangement will end early. If it does not, it simply means that creditors get repaid a little more.
You do not, during the course of the IVA, pay only the agreed regular payment. You will also pay across a share of overtime or bonus payments, along with any windfalls ( lottery wins, inheritance --- that sort of thing).
Out of the £21k you are predicted to pay will come in the order of £5k in fees (Possibly more if you are going with Creditfix). Not beneficial to creditors, but they agree to this upfront. The alternatives are bankruptcy --- which will cost the creditors considerably more and would only be better for them if you are 'asset rich'. Then there is a debt management plan, which, if they agree to freeze interest and stick to the plan ( which is not binding like an IVA is) gets creditors the full debt repaid and, if you use a firm like Stepchange, there would be no fees, as StepChange are funded in part by creditors. A DMP would take around 77 months at the same level of payment as the IVA.
All of this, of course, depends on your full set of circumsrtances, of which I am not aware, so is pretty non-specific and purely thinking out loud.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014 http://foggy.blogs.iva.co.uk