Real Lives Changed for the better
Based on IVA real cases. Some details changed for privacy reasons and to make the cases more typical.
Joint Case, tenants with £12,000 of debt
Stock image - not actual clients.
Mr S & Miss B were relying on credit for several years which steadily increased to an unaffordable level. They obtained a consolidation loan which stretched their finances too much. They have one child who is disabled.
An IVA proposal was put forward to creditors who were accepted. Unfortunately, their daughter’s health worsened, which meant Miss B had to give up work to look after her permanently. The clients’ reduced income meant the IVA was no longer affordable, and so need to review their options 18 months into the IVA.
All possible options were looked at. Miss B’s parents advised that they would be willing to provide a lump sum towards the IVA in full and final settlement of the arrangement.
The offer was put forward to creditors who accepted the proposal. The clients’ case has now closed with Mr S Miss B, happy in the knowledge that they are debt-free with no further payments to be made towards their IVA.
Single health professional
Miss O is aged 42 and lives in rented accommodation. She has £14,794 of liabilities. Her monthly payments totalled over £400.
Miss O had no problem maintaining payments to her creditors until she was made redundant three years ago. She was unable to secure work for four months, and during this period she had no choice but to rely upon her credit facilities. When she did secure alternative work, her salary was significantly lower than it had been previously, and she was no longer able to maintain payments to her creditors. Faced with late payment charges and mounting arrears, she attempted to set up repayments plans with her creditors, but with little success.
Realising that her debt level was increasing despite paying all she could afford, Miss O decided to seek professional assistance. Having been advised of all the options available to her, she decided to propose an IVA to her creditors. Miss O now pays £153 per month under her arrangement and all interest and charges have been frozen. She will contribute a total of £9,180 in its 5-year term, after which the remainder of her debts are written off.
Family with one child owing £36,703
Mr and Mrs H live in their jointly owned property with their 3-year-old son in Greater Manchester. Between them, they have debts totalling £36,703 which is made up of store cards, credit cards and loans. Their monthly payments were over £750.
Mr and Mrs H had maintained payments to their creditors until such time that their son was born. The additional cost of childcare placed a significant strain upon their finances, and they soon began using credit cards to service loan repayments. Soon their finances had reached breaking point as they were unable to obtain further credit.
Having considered all the options available to them they decided upon an Individual Voluntary Arrangement. They will now contribute just £122 per month to all of their debts for a period of 5 years, paying a total of £7,320.
One income and on benefits
Mr & Mrs S are 27 and 30 years old and live in Manchester. Mr S works full time, and Mrs S cares for their children. They live in rented accommodation, and their income is a mix of a full-time salary, tax credits and housing benefit. Mr S was made redundant and found it hard to find employment but eventually got work at a lower salary. This was when they began to struggle to maintain their repayments to loans, credit card and catalogues.
The family car, which was on hire purchase also had to be returned to the finance company, leaving a shortfall which they could not afford to repay. After trying debt management for two years, they decided that an IVA would put an end to their worries within five years rather than the 12 years estimated for their debt management plan to run.
An offer of a five year IVA was accepted by their creditors and Mr & Mrs S are repaying £120 per month to the IVA which is affordable for them. They will be writing off 84% of their debt.
Working family with large mortgage repayments.
Mr & Mrs B both work full time and live in the Midlands. They are in their fifties and have a teenage son.
Over the years, they have accrued £75k of unsecured debt, and due to the large monthly repayments, they have struggled to maintain payments to their mortgage company and have built up arrears.
Their main priority was to keep their home and repay as much back to creditors as they were able. Their creditors accepted monthly payments of £200 for 6 years. The creditors will receive 11% of the debt back and the Mr & Mrs B will have 89% of their unsecured debt written off and be debt-free in 6 years.
Their mortgage arrears and repayments were accounted for so they are comfortable with the amount they will pay into the IVA.
After such a long time worrying about losing their home, they are now delighted that they can just concentrate on work and family life without the burden of their debt. Towards the end of the IVA, if they have more than 15% equity in their property, they will be required to attempt to re-mortgage in release funds to pay into the IVA. For more info on this – see IVAs and Homeownership.
Joint IVA – retired homeowners
This couple are both in their 60’s and own their own home. Their only income is from pensions and PIP (Personal Independence Payments).
They had accrued £20,000 debt over the past ten years, supplementing their income and purchasing items for their home. They tried a debt management plan but felt that, at their age, they needed to think about finding a way to clear their debt, in full, in a shorter period.
They are homeowners with some equity in their property but, at their age, and on their low income, releasing equity from the property was impossible. Once the IVA had been accepted at £100 per month for five years, they were delighted and felt they could move forward with their lives knowing that their home was protected. They wrote off £13,000 of their debt.
Single mother – Self-employed owing £40,000
This is a 34-year-old single mother of two running her own cleaning business, who rents her own home following the breakdown of her marriage. Her income is made up of self-employed income and benefits
She had £40,000 debt made up of credit card and catalogue debts. She was on a debt management plan and had considered bankruptcy but wanted to pay back as much as she could afford while knowing that in five years’ time she would be free of debt.
She had worked for her for two years, but the creditors had started to add interest and charges and the client felt it would take her the rest of her working life to repay this debt in full. After a visit from a bailiff for council tax arrears, she knew more positive action was required.
Her offer of £285 per month was accepted by her creditors and meant that she pay back just over £17,000, about 40% of the debt.
She can now concentrate on her business and raising her children safe in the knowledge she is protected from any legal action in respect of her debt.
Single professional with debts of £38,000
A 58-year-old accountant working in the city. She rents her home in London and was finding it difficult to maintain her high rent and monthly repayments to her creditors.
She has accrued £38,000 debt over the years supporting her three children and supplementing her income. Retiring in 7 years, she knew that she would not be able to pay the debt off before then. She felt that an IVA was the perfect solution to her problem, and meant she could repay as much as she could to her creditors, while still being able to cover her living expenses.
An offer of £230 was made to creditors, which was accepted and she will repay £13,800, which is just 36% of the original debt. She feels that now she can look forward to her retirement knowing she can spend time with her family and be debt-free.
Couple – Benefits and Self-Employed Based IVA
Mr and Mrs C have two teenage sons, one of whom is disabled, Mrs C is a full-time carer for him. Mr C is self-employed. They rent their home in Leeds following the repossession of their mortgaged property.
Their debt level was £92,000 which included credit cards and loans, but the bulk of it was shortfall from their repossession.
They have successfully entered into an IVA paying £200 per month for 47 months to their creditors, which then increases when their car hire purchase payments have finished for the remaining 13 months. In total, they will pack back about £15,000.
They are happy with their new arrangement; having been on debt management they could not see an end to their financial problems. Due to Mr C being self-employed, it was in the family’s best interests that bankruptcy was avoided.
Retired couple – Paying only £100 per month
Mr and Mr A both in their seventies, living solely on benefits and pensions.
They rent their property and have approximately £24,000 of debt mainly from catalogues, store cards and credit cards.
They will pay £100 per months into their IVA, at a total cost of £6,000 over 60 months.
There are happy with their IVA and feel better knowing they would be debt-free in five years. They had considered bankruptcy but did not want to suffer what they felt was a stigma attached to bankruptcy and felt it very important to pay as much as they could to their creditors.
Joint IVA for employed homeowners
Mr C and Ms R aged 29 and 38 own their property and both full work time as a Manager and Retail Assistant.
They have £47,000 debt mainly due to Mr C’s marriage breakup and helping to support his young child who lives with their mother.
They have no equity in their property and have two vehicles on hire purchase. The payments start at £295 and rise during the IVA to take into account their hire purchase payments ceasing. In total, they’ll be paying back about £24,000.
They were delighted to have had their IVA accepted as they had begun to be very concerned about the future. They feel confident knowing that they will be debt-free in five years, while also managing to retain their property.
Joint IVAs for retiring homeowners
A married couple aged 56 and 53, had to relocate due to their employment and rented property while letting their own to a third party. They have an 11-year-old child, and both work full time. They both have vehicles on hire purchase.
Their combined debt level was £72,000 and they were able to offer a monthly contribution of £1,212 due to their level of income. The contributions increase when the vehicle hire purchase has been repaid. They had been on debt management but saw no end to their problems by continuing with this.
As they are nearing retirement, they feel confident knowing that they will be debt-free by that time, while also managing to retain their property.
Full And Final Settlements
Examples of where an IVA has been bought to an early conclusion by means of a lump sum injection of capital.
Debts of £71,000 cleared with a full and final settlement
This person had an IVA approved based on 60 monthly repayments of £513.
He had found himself with unsecured debts over £70K. A period of sporadic income compounded his problem, and he soon found he was unable to meet the repayments on his debts as they fell due.
Only nine months into his arrangement, a family member offered £18,000 as a gift to help settle his debts early.
With creditors’ agreement, this lump sum was accepted as a full and final settlement. The IVA was formally concluded, and over 60% of his debt has been written off.
Over £100,000 of debts written off with full and final settlement
Following drastic changes Mr and Mrs K’s personal and financial circumstances and after having his home repossessed, they had £142,000 of debt and could not see the light at the end of the tunnel.
They obtained an agreement with his creditors to pay an affordable amount of £575 per month for five years to settle his debts. A family member offered £24,000 to settle the IVA early, which was duly accepted.
Debt Management to IVA, then full and final settlement
At 58 years of age, Ms R was subject to a debt management plan with her creditors with the balance of debt reducing steadily but very slowly.
Still owing £40,000 she looked at other options and obtained an IVA based on 60 monthly payments of £324 including a requirement to attempt a release of equity towards the end of the arrangement.
Following retirement, Ms R offered £10,000 to creditors as an early settlement of the IVA, representing a share of the lump sum received from her pension. the IVA Supervisor obtained creditors’ consent to the offer and by doing so have agreed to write off over 76% of his debt (as compared to just 48% in the original agreement).
IVA Example with Variation
The terms of an IVA have changed at the client’s request during the agreement. This called a variation, and in case of major changes to the agreement, creditors must approve the modification.
Loss of partner makes IVA payments unaffordable
Mrs P was in an IVA accommodating debts more than £34,000. Based on her circumstances, creditors agreed a repayment plan of £396 for 60 months, with the remaining balance being written off at the end of the arrangement.
Following the loss of her partner, she could no longer afford contributions at the agreed level. Creditors were asked to approve a reduction in contributions to £296, who approved the agreement that the arrangement is extended by 12 months.
Two years later due to unavoidable changes in her circumstances, she found herself no longer able to afford these monthly contributions into the arrangement. An offer of a reduced payment of £200 per month for the remaining 36 months was drawn up.
This offer was accepted by creditors, and the IVA was able to complete.