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IVA Case Study
The following is an account from a client that was referred to us for advice:
“I have always managed to juggle my finances one way or another. However, over a period of time my debts had spiralled to a point where I was no longer able to meet the monthly minimum payments. Creditors were harassing me and threatening to commence legal action. I sought advice and it was recommended that I should enter into an Individual Voluntary Arrangement “IVA” with my creditors. This seemed like a sensible thing to do at the time as it would get my finances back on track and I would be able to make an affordable payment over a reasonable period of time in full and final settlement of all my debts.
The proposals I put forward to creditors were based on my paying monthly voluntary contributions from my disposable income of £350 per month for 5 years and creditors would receive a dividend of 34 pence in the pound as opposed to nothing in the event of bankruptcy. However, at the meeting at which my IVA proposals were considered I was told that creditors would not accept my offer unless I paid monthly voluntary contributions of £400 per month and a minimum dividend of 41 pence in the pound. At the time I was under a lot of pressure so I reluctantly agreed to their demands. Only a few months into the arrangement I started to realise that I simply couldn’t afford to pay £400 as a result of various factors including rising fuel, utilities and food costs. I concluded that creditors had made an unrealistic assessment of what I could afford to pay. I approached my Supervisor who wasn’t available but a member of his staff advised that the amounts I had paid into the IVA so far did not even cover the initial fees for setting it up in the first place. He said that if I got into arrears this could result in my IVA failing and I would be back to square one as creditors were unlikely to consider accepting reduced monthly payments at such an early stage. The IVA was supposed to be a solution but I simply couldn’t afford the payments that creditors insisted I must make. Furthermore, the equity in my property had disappeared as a result of the house price crash. Debt collection agents were still writing to me and phoning me at home and at work. I was at my wits end and really feeling the pressure.
On the recommendation of a friend, I contacted Debt Restructuring Solutions who reviewed my financial position including the IVA. They came up with a recommended course of action which I followed and I am very pleased to say that my financial headache has now been completely resolved.”