I was badly advised

[yewtree]

Hi,
I was badly advised to enter into an IVA when a debt management agreement would have been a far better choice, however, at the time I was not aware that this was an option; it was either IVA or bankruptcy. The reason that I believe a DMA would have been the best option is that I had never missed a payment and was not in severe financial trouble, I was simply finding it difficult to keep track of 5 different creditors and wanted to consolidate payments (but was unable to get a loan for this as my personal debt was already £17,000). I was also aware that with interest payments I was making no headway in the clearance of my debts. At this time I was earning £25,000 and the IVA was agreed (Aug 2006) provided I paid 42p in the £1 to the creditors (which included student loan of £10000 on top of the debt mentioned before).

I am now 6 months into my IVA with no missed payments and I've recently been doing some calculations and have worked out that my monthly payment of £350 will be used to pay the IP fees for just over 2 years of the arrangement (£8880). Thereafter the creditors will receive their dividend from the £350. My calculations have shown that if I were able to get my original student loan agreement reinstated I would be able to pay my remaining creditors off in full within approx 3 years, whilst maintaining control of my finances (salary increases etc.) instead of spending 2 years paying off the IP – for what??

I am angry about the advice I received and upset that I cannot take control of my finances. The IP has advised me that if I approach my creditors individually and arrange something to this effect with them then they will issue a statement of non-compliance and my IVA will have defaulted, however they will not petition for my bankruptcy.
I was after some advice. I want to pay my debts off as early as possible and in full. I am in a position to do this but I am restricted by the IVA. If I do approach them individually how bad does a default on an IVA on my credit file (my guess is as bad as it gets?). Also is there anyone I can complain to or anywhere I can get some legal advice on this issue, or anywhere I can discuss getting out of the IVA and my rights? My IP has been very unhelpful.

Sorry this is so long.
Regards
Davina.

[Help-Is-Here]

Davina,

I am very sorry that you feel you have been badly advised.

First of all, if you can afford to increase your contributions, you could see whether or not you could arrange a shorter term for your IVA. An IVA is not stuck at a five year term. I have drafted IVA's for one & three years before now. Also, your IP cannot just take extra fees. You need to get your proposal and look at a break down of all the figures and contributions you will be making. Also you mention that you are paying 42 p/£. You are paying back near enough 67 p/£. You need to speak to your IP and get him/her to clarify what you are paying and break it down for you.

With regards to complaining, I would ask your IP to explain it properly first but if you are still not happy you need to find out what the IP's licensing body is. This should be on any letters you have from him/her. You can get information on how to compain at the following link.

http://www.insolvency.gov.uk/guidancele ... plaint.htm

I hope this all works out for you. x

[yewtree]

Hi,

thanks for your help with this. I will speak to them to clarify how much I am paying. They haven't increased their costs this is the original proposal. If I could get a reduction in term of the IVA then surely they would ask for 100% debt repayment - the total debt is 28,000. This would mean with the IP fees of £8880 that the total payable could be £36,880 + statutory interest if they wanted it. As I have already paid £2100 this would be total payment of £966 a month over 3 years. This is obviously way too high for me.

Alternatively if I reinstated student loan and paid normally through PAYE then my total monthly payments to pay off the debt in 3years (longer for S/L) would be £600, which is manageable.

Do you see my predicament?
I have spoken to the S/L co. and they are happy to reinstate but have warned me to try to get agreement from the individual creditors that they won't petition for my bankruptcy...I have spoken to the only one of them I could get through to and they said they could offer no indication of what they would do until the IVA fails.

I don't know whether to do this as on the 1 hand I could end up virtually debt-free in 3years time with manageable payments, or on the other I could end up with creditors petitioning for my bankruptcy which I don't want, and know very little about except that I couldn't work (as an accountant).

Any help would be appreciated.
Thanks again

[MelanieGiles]

Hi Davina

I am afraid that I am not entirely convinced that you were badly advised. You say that with ongoing interest you were making no headway into your debts - therefor a DMP would not have been a sensible solution for you as that interest would have continued to be charged. I do agree, however, that you ought to have been advised that this was an option.

It appears that you have now reappraised your finances and have realised that perhaps with some more thought to budgeting, and careful monitoring of your expenditure, that you could have struggled through. Surely your IP did not tell that you needed to do an IVA, but gave you that option and you decided to choose that route. If he did tell you that was your only alternative, then perhaps you do have grounds to feel disgrunted.

The advice to seek a reduction in the overall term of the IVA will not work unless you are offering to pay 100p in the £, so I would not even suggest that to your IP. I also do not undertand where that 67p in the £ in the previous post comes from. Your IVA is set to return 42p in the £ over a five year period, and all creditors are bound by those terms.

In essence you have an IVA which you now feel that you did not really need, and object to the costs of that IVA which are actually being borne by your creditors in agreeing to accept a reduced dividend to accomodate the costs.

You can walk away from the IVA and deal with your creditors directly, but will still have an IVA on your record and generally will not improve your credit rating by paying a higher return to creditors, or stick with it. In essence I do not believe that you have a complaint of substance against the IP, and are probably better off sticking with the IVA you signed up to.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[yewtree]

Hi,

I was never given an option as to a DMP though this is not necessarily the fault of the IP as I was referred to them through Thomas Charles & although very nice they never discussed any other option with me.
The additional funds did not arise through re-budgeting but through an expected pay-rise of £4000 a year which I got 2 months into the IVA. I was told not to worry about this.
Maybe I don't have a complaint but it certainly was the wrong thing for me to have done. You say that the creditors lose out as they are paying my IP but this is not the case. With my pay rise and my annual pay rises I will end up paying 100% anyway as I have an annual income review.
Davina

[MelanieGiles]

Hi Davina

Did you make your IP aware that you were going to get the expected pay rise of £4,000, and were your IVA contributions geared on that basis? If he/she was not aware of the increase then they could not have predicted that you would be in your current position.

No IP worth their onions would have put you into an IVA knowing that you would be paying back 100p in the £, and your creditors would not have accepted. If your IP was aware of the anticipated pay-rise, and still proceeded then you will need to ask him to provide you with a detailed explanation of the basis of his advice.

All IP's should keep a written record of the options they discussed with their clients and the reasons which led a client to choose a specific route. You should now ask some direct questions of your IP if you feel that you have grounds for complaint. And ask him to confirm his decision note for you in writing before you decide to proceed further.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[neverending]

I have to agree with Melanie in the fact that you have a fair deal with your iva.Why not let it run its course and just pay more into it,producing a higher dividend to your creditors[the earlier post of a 67p dividend did not take into account the IP fees].
At least you will know where you stand with no worries once the five years are complete.