IVA Case Studies
Thousands of people each year apply for an Individual Voluntary Arrangements (IVA) because it offers a quicker and affordable way of getting rid of their debts, as well as allowing them to avoid bankruptcy.
Here’s how PayPlan have helped other people who were once struggling with their debts.
Paul – works as a fire-fighter. He is 37 and divorced from his wife last year. They have three children. Paul now lives with his parents and pays maintenance of around £400 a month via an order from the CSA.
Paul was experiencing problems with managing his debts following the divorce and found that he was borrowing more and more just to keep up with the minimum payments. This was his financial situation when he first contacted us.
His total unsecured debts were £30,000. These were a mixture of credit cards, personal loans and bank overdraft. Things were complex because a number of the loans were still in joint names with his ex-wife and they were both liable for the repayments.
His income was £1,200 a month after tax and his living expenses (including the CSA payment) around £950 a month. This meant he had £250 a month left over to pay all his creditors. This was nowhere near enough to meet his contractual payments but was an amount he felt he could afford.
Paul found our details on the internet and called our helpline. We carried out a full assessment of his situation and discussed all the options that were available to Paul.
Paul had considered declaring himself bankrupt but he was not aware of the alternatives. Having considered these he decided to try for an IVA(Individual Voluntary Arrangement). This was because he felt that although he could no longer make the full payments to his creditors, he wanted to offer them as much as possible and feel that he had done his best to pay back his debts.
Paul decided to opt for an IVA from our sister company, PayPlan Partnership. They drew up proposals for his creditors outlining his situation and the offer he could afford to make. After consideration the majority of his creditors accepted the offer. Paul was very pleased to finally have his finances in order and draw a line under what had happened before. His offer of £250 a month meant a total payment of £15,000 towards his £30,000 debt.
Phil and Anne have been married for eight years and live in a mortgaged property with their baby daughter. They bought the house quite recently and there is a small amount of equity.
They both have well paid jobs with combined incomes of £3500 a month net but their living costs are high including the running of two cars (necessary for their work) purchased on HP and child care costs. Their total combined unsecured debts were over £100,000.
After all their living costs, including their mortgage, they had an amount left over each month of £850. Neither wanted to consider bankruptcy as it could affect their employment (they both work in the financial sector*). They were also concerned about being able to keep both their vehicles even though the running costs were quite high.
They could have made an offer to their creditors via a debt management plan but with the amount that they owed, and assuming that all creditors agreed to freeze interest and charges, this would have taken nearly 10 years to pay back. As an alternative they were both willing to consider an IVA.
Proposals were put forward to their creditors who then accepted for a combined regular monthly payment of £850 over five years. A combined payment of £51,000 for their total unsecured debts of £100,000. Phil and Anne felt that this was the best solution for them as unsecured creditors were then prevented from taking any legal action and securing any of their debts on their mortgaged property due to the protection of the IVA.
*If you are worried about whether an IVA would affect you we advise you check your employment contract.
Helen – is single, lives at home and has no children. She works in customer services and earns about £19,000 a year. Although she is only 23 years old she has already run up debts of around £34,000 mainly to her bank through loans and credit cards.
Helen was concerned that she was only making the minimum payments on some of her debts and could see no end to the situation. Also Helen was planning to return to college at some stage and knew that there was no way she would be able to pay her debts back then.
Her parents were concerned about her situation and wanted her to take steps to resolve it. They were prepared to assist her financially with her plans to return to college.
It was agreed that an IVA would provide the best way forward as it would ‘ring fence’ her debts and with the help from her parents Helen would be able to keep up the proposed payment of around £300 a month for the period of the arrangement.
Kevin – is single and lives with his parents. His debt of £50,000 had built up gradually over the last few years. During this time he had taken out loans to consolidate and buy a car but he was finding it hard to make the full payments on his net income of £850 a month.
When he realised he was using his credit card to pay his other debts he contacted a debt management company he had seen advertised on TV. He agreed with them to pay £350 a month to include £62 in fees and the first month’s payment going to the debt management company for their administration fee.
He made the payments for a few months but soon realised that his debts were still increasing because interest and charges were still being added and it was going to take well over 15 years to pay them back as his creditors were only receiving £290 of his monthly payment. Not happy with this situation he found our details on the internet.
We could have helped Kevin to transfer his debt management plan to a PayPlan DMP who would not have charged him fees thus reducing his debts at a quicker rate. However Kevin was keen to see a quicker solution and opted to try an IVA.
He also considered bankruptcy but was concerned about the effect this could have on his parents. PayPlan Partnership assisted Kevin in drafting his proposals based on an offer of £310 a month that were accepted by his creditors a couple of months later. £18,600 was offered over a 5 year duration to settle debts of £50,000.
More Information on Individual Voluntary Arrangements (IVA)