low return IVAs

[acsn]

Sorry this might sound negative, I've been home ill this week so have too much time on my hands.

But I seem to be seeing a lot of low monthly payment IVA's on the forum recently. I know these must be a huge relief to those who felt crippled by debt but what I don't understand is what the creditors are geting out of these once the average £8000 plus VAT for a 5 year plan is taken out of the pot. By my reckoning the first £135 a month will go in fees so there really isn't much left to share out.

If you build in the cost of all the correspondence and tooing and froing that some IVA's seem to have,or be encouraged to have,which I am sure is charged work, there must even be a risk that the contributions will just be eaten up by costs.

It just seems to me that for such a low return it would be cheaper for creditors just write off the debts or sell it at 10p in the £ to the debtor. Or am I applying too much logic here.

At the end of the day it's the notices on credit files that really do the damage and whatever people might think that isn't the sort of damage that cleans easily. I filled in a reference for someone yesterday that specifically asked them if the had been in an arrangement with creditors in the last 3 years. That would be 3 years after an IVA concluded.

Just curious as to why someone would make a busines decision to wait 5 years for less than 20% of their debt other than because they can or maybe a little bit of well what else do we do.

I'm sure that as part of the damage limitation being driven by the 'credit crunch' there are lots of debts already being bundled up ready to be sold on to risk speculators by our finacial institutions and these aren't even the ones who are in arears or considered likely to default.

I'm actually quite glad now I jumped ship into an IVA when I did. I cannot imagine the stress those who rely on remortgages and card offers to keep their heads above water must be feeling. I endured 10 years of that and it was easy then. I can even remember being sent pre approved credit card applications that only needed a signature.

Scarey.

[MelanieGiles]

The days of those sort of fees being charged are long gone I am afraid - fees these days are largely based on 15% of realisations - so for payments of £400 per month, the IP will receive £60.

You make some good points about the commerciality of IVAs from a creditor perspective, and the long term effects these can have into the future - but really it is the fact that people are in debt which cause the after-effects and not the debt solution itself.

[acsn]

Agreed.

[ianmillington]

I echo Melanie's sentiments, the days of high IP fees are well and truly gone although there are those with an alternative agenda that will lose no time in saying otherwise.

With the new voting regime, the IP fees will depend entirely upon who your creditors are, and not who the IP is. Wherever you go for an IVA, the fees should be the same, with no upfront fees and no win no fee being the order of the day. This means that the IPs must now compete on service levels and quality alone.

Ian

[Adam Davies]

Hi
Also remember that you may start with a low monthly payment but this may,and can,increase over the five years,netting the creditors more
Regards