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Just added up our debts. Please come and hold my hand as I embark on IVAs

(34 Posts)
KernowBysVycken Wed 24-Oct-12 21:24:33

Shit shit shit. I have just added up the total that we owe on two loans and three credit cards and it is over £40K blush This doesn't even include the HP that we have just taken out on a brand new car (yes, I know you shouldn't buy new but the old one was dead and we couldn't borrow from anywhere and we didn't even have £100 to buy a banger; I also reasoned that second-hand cars don't come with the 3 MOT free years and I couldn't find a second-hand one that was £0 road tax).

I have just got off the phone to Payplan and they reckon that, with IVAs, we'll be cutting our monthly payments down to about £500 (as opposed to £900) and we'll be done in 5 years as these are the terms of an IVA.

What the fuck am I going to do about Christmas? And how am I going to pay for the MOT on the second (knackered) car in December? I'd be very surprised if that came in under £200. We really do have to have two cars as DH and I work in opposite directions and we live in rural Cornwall otherwise I would happily get rid of it. And the car tax is due this month and we are a month in arrears with the mortgage.

I don't really know how it got this bad; we have just had a whole year of one or other of us being on mat/ pat leave with DD so only one income but the debt is still way worse than I thought it would be sad blush

I know that I have been crap. Are there others of you that have got yourselves out of similar situations? Please tell me it gets better.

kernowbysvycken Thu 01-Nov-12 22:47:30

"You recently took a full year mat leave" - had no choice, we didn't have any other childcare as my parents very generously do some of it for us and they weren't up to looking after a small baby. Nursery costs for both DCs would've meant there was no point in DH working. I guess your reply to that would be that we shouldn't have had another baby, and I guess you're probably right but it's too late now.

We used the credit cards to live off, not to maintain a "lifestyle." They were used to pay for food and fuel primarily. The debt goes back further than that too obviously (we didn't run up £40K in one year!) Amongst other things, it has paid for two second-hand cars (one of which has now been replaced with the new car), vital home improvements and my first maternity leave too.

Re the new car: I said in my OP why we didn't buy a second-hand car. We couldn't get a loan (more unsecured debt) and we had no lump sum to pay for something outright. Our old car was completely knackered. We really honestly do need two cars as we work in opposite directions at different times of day, there are no lift-share options with colleagues and there are no buses. I have obviously explored these possibilities but we live in very rural Cornwall and that is life here. The new car is the smallest, cheapest 4 door that we could find. It has a 6 year warrantee, 3 years MOT free, no car tax and does 50+ mpg. Getting the new car was NOT something we did lightly, we really could not think of another option. If any of you can then I would be really keen to hear it. If we lose the car then one of us will lose our job and income. This is one reason why an IVA is more sensible for us than bankruptcy as it prioritises secured debt including cars that are required for work.

We are also not declaring bankruptcy because we don't want to risk losing the house. But we are prepared to make life-changing decisions. Yes similar has happened to us before but there were entirely different circumstances surrounding that (DH's father had just died, he was horribly depressed, he went a bit bonkers with money and also gave his mum loads to help her out). That was for much much less money, which we actually paid off, almost in full, in less than a year. I don't put any of this down to bad luck, and I am under no illusions about the fact that we entirely deserve to be in the shit that we are in.

Money Saving Expert says that CCCS recommended IVAs to only 3% of people in 2006, that's one company and it's six years ago. The Debtwizard link suggests that Debtwizard themselves get a fee from Payplan if you go to them and they put you onto Payplan. We went direct to Payplan. However Payplan (or any other insolvency practitioner) does get fees of about £7500 for sorting an IVA. I didn't know this so thanks for telling me, Payplan didn't make this clear at all. I have signed the paperwork now though and we've started the process. I'm going to talk to them in the morning to see if a DMP is a better option.

And finally I am not living a fantasy life. My new car is not a lifestyle choice and owning it is not about enjoying life, it is about getting to work which is all I will ever do in it as the agreement restricts the mileage I can do without losing money. I am not a materialistic person and I don't care about cars, or Christmas presents for that matter but thanks for the Christmas suggestions. As some of you suggest, we have plenty of stuff in the house and the DCs will not care about having very cheap presents.

Lougle Thu 01-Nov-12 23:18:58

"However Payplan (or any other insolvency practitioner) does get fees of about £7500 for sorting an IVA. I didn't know this so thanks for telling me, Payplan didn't make this clear at all."

Don't worry, they never do. They say it's 'free' because the creditor takes a lower proportion of the IVA settlement. What they actually mean, is that you pay them, and the creditor, but it's dressed up as one payment.

DMP is no different, either.

I wish you well, but I am really very worried about your plan. Have you read all the small print? Are you aware that creditors often ask for a lump sum payment at the end of the term if you own your own house and it has equity? Have you received specialist advice regarding the equity loan part of your mortgage?

Are you aware that under bankruptcy, you can still normally keep your home if you can buy out the 'beneficial interest' and can afford the mortgage payments, which given your low equity is a potential option?

Please, please, go back to CCCS with your current circumstances, and get their impartial advice as to your best course of action. If they say 'IVA' go ahead, but you can't trust a profit-making company to advise you not to take their product!

uggmum Thu 01-Nov-12 23:36:07

I'm a debt counsellor and I deal with cccs on a regular basis. If they have recommended an iva I would trust them. Cccs are currently unable to handle the iva process, ie they are not currently an iva practitioner, although they are changing their name in the next few weeks and are hoping to facilitate iva at some point. At present they refer to payplan.

If you do go down the iva route you will need to open a new bank ac. Your current bank will probably give you notice to close your account once they find out you are in an iva. Most banks credit search their customers every month and will probably give you 60 days to close your account. If you have a debit balance they can withdraw your banking facilities immediately.

The big five banks offer a 'basic' bank account which is open to all. So I recommend that you look to open one asap.

You will probably be able to keep your car as this will be seen as a priority debt and is secured on the vehicle. Also, iva practitioners are much of a muchness. Although cccs/cab etc will manage a dmp for free. You will be unlikely to find an iva practitioner that operate for free. Payplan are better than some as they have no up-front fees and get a percetage from the creditor as above.

Lougle Fri 02-Nov-12 00:04:00

" If they have recommended an iva I would trust them."

Uggmum, if I am reading the OP's posts correctly, CCCS suggested IVA 7 years ago, and the OP went through Payplan. This time, the OP has skipped contacting CCCS and gone straight to Payplan, so hasn't had advice from CCCS to proceed with one.

uggmum Fri 02-Nov-12 07:34:55

Yep. I did mis-read that.
In that case I would go back to cccs and see what they recommend.

bitsofmeworkjustfine Fri 02-Nov-12 07:39:37

i took out an IVA, after 6 months i lost my job to refundancy and couldnt pay the iva. it failed and i ended up with the orignal debt AND i lost all the money i had paid into the IVA.

this was £149 x 5 = £750 (bad but not enough to make me kill myself)

but what if i had lost my job after 4.5 years? i would have lost £8046 AND still have my oringal debt!

I went on to become bankrupt. not a nice or easy, but i had no other option, i spoke with a charity near me who actually gave me the money for the court.

Good luck with whatever you decide.

bitsofmeworkjustfine Fri 02-Nov-12 07:41:25

oh yes, once you enter into the IVA your new car agreement will be void and they will ask for the whole amount or the car back. read your small print in the car agreement

kernowbysvycken Fri 02-Nov-12 10:22:11

Right, waiting for a call back from Payplan. CCCS can't help or offer any advice as I've signed the paperwork for the IVA. The meeting between creditors hasn't started yet though so I think we could back out of it if we change our mind. Obviously I now can't get any impartial advice from CCCS about what would be best without cancelling the IVA, and it could be that we then decide that the IVA is the best option after all and we're back to square one with an extra month of not having sorted anything. I think our only route is to continue with the IVA and, if it fails, then bankruptcy is our last option.

The small print in the car agreement relates only to bankruptcies.

For the record, it was a DMP that we were on 7 years ago, not an IVA, but yes we did go straight to Payplan this time.

Got a basic bank account set up, direct debits etc all set to go from it this month.

Lougle Fri 02-Nov-12 12:14:58

You should have (at least) a seven day cooling off period under the Distance Selling Regulations Act (2000)

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