My story starts approximately 8 years ago, summer 2009. Like most people I had debts such as credit cards, loans and overdrafts but I had a good income, all my debts were manageable and I had a very good credit rating. I then made the mistake of agreeing to be a guarantor on a loan for a family member. At first all was well, but fast forward 12 months and they had stopped paying for the loan that I was a guarantor for and the loan company began to chase me for the payments.
For a while I managed to juggle payments between companies and later took out consolidation loans etc. but after a while it became obvious that I was beginning to sink under the debt and there was no way I was going to be able to continue meeting my repayments. By this time I had more loans than ever and my credit cards and overdraft were maxed out. Something had to give.
Fortunately for me, I had a friend who had taken some debt advice regarding her debts and she recommended a Company to me. As soon as I spoke to them I began to feel as though someone was sharing the burden with me and they were very informative and patient with me, even though I was really struggling to imagine a way out at that point. After examining my circumstances I was advised that an IVA seemed the best solution to my problems and that if I was in agreement then I could stop repaying unaffordable debts straight away as they would now take over and contact all the creditors on my behalf. Obviously I agreed as this did seem to be the best step for me and within 2 months my case had been passed to an Insolvency Practitioner (IP). As long as my creditors agreed then my IVA would begin!
Once again, I was very fortunate in that the IP’s who were chosen to run my IVA have been very good; you read some terrible stories regarding unscrupulous IP’s but I was put in touch with a helpful IVA Company and they have been fantastic throughout the 5 years of my IVA. They took over my case and they did a thorough review of all my incomings and outgoings and arrived at a figure which I would be required to pay. This figure was admittedly considerably less than I had been expected to pay to my creditors before entering the IVA, but still a substantial amount. I was convinced though that with careful control of my finances I could make this payment every month and begin the long road towards clearing my debts.
The next step was for the IP to make my case to my creditors and wait to see if it had been accepted. Again quite a worrying time as the realisation dawns that if it isn't accepted then I’m back to square one, and more than likely bankruptcy. Thankfully my IVA was accepted by my creditors in January 2012 and I must admit to mixed feelings at the time: on one hand, all the letters and final demands stopped and I was paying a set amount every month, but on the other hand, knowing that I had 5 (at least) very lean years ahead of me seemed very daunting. During my IVA things have been very tight financially and it is quite a challenge, albeit a rewarding one in the long run, to learn to live to a strict budget. As mentioned before, when setting up your IVA the IP will take a thorough look at your finances to see what you “need” and anything above and beyond this will be required to be paid into the IVA. You are allowed to live your life, in that they will make an allowance in your budget for haircuts, newspapers and other day to day things, however the IP’s main job is to collect as good a return as possible for the creditors. So luxuries are not allowed and one of the things I was told at the beginning was to expect Christmas, birthdays and holidays etc. to be very lean times during the course of the IVA.
Also while setting up your IVA assets will be assessed on their suitability; e.g. running a car for the purpose of travelling to work is perfectly acceptable but if you had a valuable car than you might be expected to downgrade it and pay the difference into your IVA. Also, should you receive any windfalls during your IVA then this will also have to be paid in. In my particular case this amounted to several thousand pounds worth of PPI repayments. Each IVA will be worded differently, but mine allowed me to keep the first £500 of any windfall with the rest being paid in. At first I felt that this was a little unfair, especially as the PPI payments had added to my debt in the first place, but after thinking about it I considered that had I not been in an IVA then I would probably have used this money to reduce my debts anyway.
There is also the overtime and bonus elements of your wage to consider. At each of your annual reviews your finances for the year will be looked at and your monthly payment into the IVA will be reassessed which leaves you with a figure that you are allowed to keep. If you earn over this figure then you are liable for extra payments to be paid into your IVA. Again, each may be worded differently, but in my particular case I was given a monthly figure that was mine to live on and overtime or bonuses were split as in the example below: I was required to pay 50% of any earnings which were beyond 10% of my monthly figure. For ease, say I was allowed to earn £2000 per month, any earnings over £2200 (10% allowed) were of interest to the IP. So if I earned £2200, it was mine to keep. If I earned £2500 then the £300 above my threshold were to be split equally between me and the IP and this has to be paid in immediately.
At this point I would like to point out that the IVA is a legally binding contract and your IP can request to look at your bank statements, wage slips etc. at any time. Were you ever to withhold funds that should have been paid in then the IP would most likely fail your IVA and you would be back to square one but in an even worse position as the frozen interest on all your accounts could now be added back on. If you are a homeowner then during the 5th year of your IVA your IP will contact you to arrange a valuation of your property and if you have considerable equity then some of this will be expected to be realised to pay into your IVA. Again, each contract will be worded differently but in my case there was a percentage above my mortgage owed that I was allowed to keep, and over and above that there was a cushion of £5000, any less is deemed not worth doing because of all the charges etc. If you do have equity then you will be expected to re mortgage to pay these assets into your IVA. Should you not be able to re mortgage for a genuine reason (usually mortgage lenders won't touch anyone in, or recently out of, an IVA) then it will usually be expected that you continue making your monthly payments for a 6th year.
Once either of these requirements are met then, subject to your final annual review, your IVA will be completed and your IP will write to you detailing when your final payment will be made. Once this has been done you can then cancel your direct debit and wait for everything to be finalised which will conclude with you receiving your certificate completion (actually just a letter). My IVA was finalised in January 2017 and I received my certificate of completion approximately 2 months later.
I am now on the first rung to rebuilding my credit rating and before ending I would like to add a couple of things that I've picked up along the way: First, it may sound obvious, but your credit rating will take a massive hit. My IVA has completed successfully but it will be a long time, before my credit rating is anything like it was before. I have heard that some mortgage lenders, for example, may refuse to offer mortgages to anyone who have been in an IVA. Second, you are not allowed ANY new debt during an IVA without specific authorisation from your IP. Again this may sound obvious as you are in the IVA because of bad debt but consider what you will do if your washer breaks down? Or your car? Good IP’s will try and help if they can but only up to a point, remember it is their duty to recover as much of your debt as possible. Never consider taking on new debt without consulting your IP as when they find out (credit details are surprisingly easy to view) your IVA will invariably fail and you will have wasted all the money paid in so far and be back to square one anyway.
Third, when your IVA is accepted you will be listed on the official Insolvency Register which can be viewed by anyone. You will stay on it until approximately 3 months after the issue of your certificate of completion. Fourth, and this is probably the most important point I can make, if you are considering entering into an IVA then please seek professional advice. Do not believe the TV adverts that you see stating that it’s an easy way out with a small monthly payment, they only want to take your money. It is a legally binding long term commitment that you are entering into and some of the horror stories you can find on IVA forums still give me nightmares.
Let me reiterate, it is not an easy way out and I implore you to seek professional advice from either a highly rated debt advice centre or official debt charity. I was lucky to be pointed in the direction of a good debt-help company who in turn led me to a well-respected Insolvency Practitioner and although the last 5 years have not been easy, they have both helped to make it as comfortable as possible. Overall my IVA has run quite smoothly and now I feel as though a massive weight has been lifted from my shoulders and I am officially debt free.
As already stated it is a challenge at first when learning to live within a strict budget but it has taught me a few good lessons concerning money and debt and I will never get in that position again. My credit rating will take a while to recover but at least now I can sleep at night and am not worried about envelopes coming through the door. I hope some of this has helped, and good luck to anyone reading.