by admin on 13 November 2009
One of the great IVA myths is that the IP fees are paid completely by the banks and the indebted individual should therefore not worry about them. It is true that the IP fees are written into the arrangement but this means that part of the money used to pay back monthly to your creditors is allocated towards the IP professional fees. These facts have a number of important effects:
1. The size of the IP fees may effect whether your IVA proposal is accepted at all. Most creditors require a return on the original debt owed them of at least 25p in the pound. Very large IP fess will affect the return the bank will get and may even put you below the 25p minimum threshold.
2. If your IVA fails in the first year (or in come cases two years) most of the original debt has not been paid. In some cases you owe even more money because you still haven’t paid off the professional fees. However, in such cases of IVA failure it doesn’t matter too much as you will almost definitely be going bankrupt anyway. This leads many people to wonder why they didn’t just go bankrupt in the first place and avoid all the hassle. In any case, just make sure the IP pays for your bankruptcy (they are obligated by law and have already collected fees from you for this eventuality).
3. If you are fortunate enough to come into a windfall that exceeds your debts, you will be liable for all your debts plus interest and the IP professional fees. Further disproving the myth that those “nice folks” at the bank like to pick up the tab for the IP fees!
IP fees could therefore be a big issue for you, if you expect to receive a windfall during the lifetime of your IVA or the fees amount to 20% – 30 % of the amount you will pay back. In such circumstances you will want to put some effort into reducing the fees.
by admin on 18 August 2009
I wanted to start by giving a one page overview of what to do to tackle your debt problem. The main actions of the Information Gathering Stage and of each solution are depicted below:
INFORMATION GATHERING STAGE
Actions
1. Read the articles in the debtsecrets blog once through
2 Gather information, complete your statement of affairs and determine your disposable income.
3 Read the solutions section to get an idea what debt solution best fits your situation.
4. Prior to choosing a solution, do these things immediately including reducing your expenditure and reclaiming your bank charges.
5. Get independent professional advice
6. If you are not skipping (thinking of leaving the country due to a debt problem) then choose a solution
Having determined whether you fit into the solvent (applicable debt solutions will be in the left column of the table below) or the insolvent (applicable debt solutions will be in the right column of the table below) choose the solution approriate to your situation and get professional advice as required.
| Solutions for the Solvent | | Solutions for the Insolvent | |
| DEBT CONSOLIDATION | | BANKRUPTCY | |
| 100,000s take out DC loans every year | | Bankruptcies in England & Wales in 2006: 62,955 People | |
| No. | Actions | No. | Actions |
| 1 | If possible, transfer balances to 0% credit cards. | 1 | Complete the online forms |
| 2 | Find the lowest interest rate loan possible on a principal that covers all your debts. | 2 | Visit the court and pay fee of £495 per person. |
| 3 | Choose the best deal (lowest interest rate, lowest fees) | 3 | Meet with Judge and sign the petition. |
| 4 | Pay off existing debts, starting with those with the highest interest rate. | 4 | Interview with the Operating Receiver |
| | 5 | If applicable, pay the income payments order for 3 years. |
| | 6 | After 12 months discharged from bankruptcy. |
| DEBT MANAGEMENT PLAN | | Individual Voluntary Arrangement (IVA) | |
| Experts Estimate approx 100,000 DMPs in existence in 2006. (CCCs alone had 55,000). | | IVAs in England & Wales in 2006: 44,331 People | |
| No. | Actions | No. | Actions |
| 1 | Decide whether you are going to do a DMP on your own or use a company to set one up for you. | 1 | Decide between a lump sum IVA and a monthly payment IVA. |
| 2 | Contact a reputable company from the list in resources section. | 2 | Obtain a fee quotation from a list of Insolvency Practitioners (IPs) |
| 3 | Or, if you are going it alone, write letters to your creditors (the letters can be edited from templates you can download these templates see the resources section for further information. | 3 | Choose an IP and request a free initial meeting |
| 4 | Start paying into the Plan. | 4 | Attend Initial free meeting with your IP |
| | 5 | Attend creditor meeting where creditors will vote on your IVA proposal. |
| | 6 | If your IVA is accepted you make monthly payments for 5 years. |
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Continue with more financial questions and checks to ask prior to choosing a debt solution