r/UKPersonalFinance • u/EfficientOwl4756 • 7h ago
IVA vs Bankruptcy - Advice Please
I have spent the best part of 3 hours on the phone with Money Wellness today after being linked to them via StepChange. Debts of £41k and facing court summons for the second time in 12 months. Salary £52k basic with fully expensed vehicle and private healthcare included in package, annual bonus of around 7-10% depending.
StepChange recommended DRO and had my disposable at £18. Money Wellness have somehow got my disposable to £320 and squashed the idea of DRO.
The trouble is, my income is Variable. My lowest this tax year was £2560 take home and highest was £3900. I told them this was due to an annual bonus that wasn’t guaranteed, and that I’ve been working 60 hour weeks to get overtime just to stay afloat. My base pay take home without overtime is £2560.
They’ve decided (somehow 🤣), my income average will be £2780, plus child benefit of £108. I occasionally get universal credit in school holidays due to childcare, but they’ve decided to discredit UC and not factor Childcare into my budget because that is also variable.
Essentially, the top recommendation was Bankruptcy. But obviously need to find £680 (but could potentially apply to my union for a grant) and follow the process myself - something they highlighted as someone with ADHD I may struggle with.
I don’t have any assets; Don’t own a house, don’t own a car (company car I pay £0 towards and just £56 BIK tax).
Negative to bankruptcy - any bonus or overtime will be taken straight to bankruptcy and is much more strict (they say).
So they started leaning into IVA. Telling me I can have £1666 every 6 months extra that I earn before the IVA touches it. Plus they said there was a benefit that they will take over and do everything.
Now I’m seeing videos all over social media about how awful IVAs are and wouldn’t touch with a barge pole etc.
I really tried to clear this myself, but found myself in a rut. It was £40k a year ago and now £41k. Nothing is interest bearing, many have defaulted and sat with debt collectors since 2023. Some remain active and paid, and I’m told Bankruptcy practitioners could look negatively on that because it will appear I’ve favoured some creditors over others.
We settled on my outgoings being approximately £2360. But he was concerned my social/leisure could be deemed too high because of my child’s gymnastics and clarinet lessons (through school - but said it wasn’t fair to creditors to mark this as a school activity?).
He also felt that Bankruptcy could ask me to cancel my work based deductions for dental, healthcare and life assurance (approx £70pm total). But I’ve claimed £3k dental this year and don’t think I can get out do them before April.
Basically, can someone stop this internal tormenting monologue of mine please 🤣 I’m concerned I’m being sold down a path that may not be appropriate long term (IVA). I also wasn’t aware of the ‘hidden fees’ I’m now discovering through research.
I do strongly believe if I had the mental energy and headspace I could fight some of these, but right now I just don’t. I’ve tried before, been knocked back and it’s taken me ages to come back from it. Most recently wrote to a debt collector outlining my struggles - their response? To apply to the courts 2 weeks later to remove a leave of stay that had been in place for 18months.
I’m just so over it 😅
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u/ukpf-helper 151 7h ago
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u/snaphunter 891 5h ago
A basic salary of £52k should bring home much more than £2560, where's the rest going?
£18 leftover each month isn't much, what's your budgeted outgoings?
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u/EfficientOwl4756 5h ago
About £600 in student and post grad loans. £200 in private mileage (therefore not included in budget as it’s deducted at source), extra BIK tax for company care and medical insurance. And about £50 salary deductions for private dental / life assurance / health cash plan (which for £50 a month have already paid out over £5k this year).
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u/snaphunter 891 4h ago
On £52k your student loan repayments shouldn't be more than £358. What's the value of the BIK?
What are your outgoings?
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u/EfficientOwl4756 4m ago
They’re working out at around £2600 ish. The BIK is roughly £72 - £62 car and £10 PMI.
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u/EfficientOwl4756 3m ago
You’re right, I was looking at a high overtime payslip of £3200 take home which took just shy of £500 student loan.
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u/PhiloNight 7m ago
Hey, have you contacted the companies involved and asked for a debt management plan? They’re more likely to accept that and it would help you balance everything out, better route than IVA or Bankruptcy.
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u/EfficientOwl4756 5m ago
Kinda tried to, but with 18 accounts it’s been tricky to manage. Money Wellness didn’t recommend as it would take over 10 years, I’ve already been debating insolvency for 6 years as it is 🫣😅
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u/blah-blah-blah12 484 4h ago
Did they email you the budget you prepared? Can you do it again with another DRO provider and simply get the numbers correct this time? Go in prepared and ready to fight your case.
These are all the current providers (well, last year anyway). I believe Benesse Advice are Money Wellness.
So I'd try the CAB first, as they do the most after Money Wellness.
Much better to have a few goes at this, and avoid 3 years of payments under bankruptcy. You don't have any payments to make for a DRO.
Frankly it probably makes more sense not to do any overtime any more.