IVA? Be very wary!

A question about : IVA? Be very wary!

If you are considering entering into the IVA process you'll need to be extremely careful if you have children who may wish to attend University during the course of the agreement. You will find that they are discriminated against by the Government and may not be offered the same opportunity as other students to the extent that they are excluded from any prospect of a University education.

I have discovered the hard way that there are major shortfalls or omissions within the IVA regulations that can lead to you living in extreme poverty whilst within the IVA process.

Firstly there is no allowance for insurance/warranty of essential items. Under the terms of the IVA you are left with scant living money and no disposable income. As we found out when our central heating boiler failed (un-repairable), with no credit sources available it is extremely hard to find the money for a replacement. Following this experience we have taken out breakdown/mechanical repair insurance upon our car; cover for our major kitchen appliances and electrical goods and 'Home' cover for the heating, electrics and plumbing. We absolutely have to do this because we could never afford to immediately replace the fridge, washing machine, cooker or the TV etc. let alone a major mechanical bill for the car or household problem within the heating/plumbing/electrics/drainage systems etc.

We cannot afford to repair/replace any of these things if they breakdown and yet the cost of insuring them is not an 'allowable expense'. We need to insure these items but it must come out of the allowance that is specifically allotted to feed and clothe a family of five.

The government should allow for you to buy breakdown insurance upon those essential appliances you could never afford to replace in an emergency without any disposable income and without credit facilities.

Saving up for eight months by going with reduced food and clothing in order to replace the boiler so as that you can have hot water for showers and baths and central heating is no fun, especially during the winter months.

The biggest problem that has affected us is a life-changing issue. Not so much for us, but for our daughter.

My daughter worked hard at school and sixth-form College and was offered the University placement and course of her dreams and aspirations.

My wife and I both work full-time but because of a failed business venture during the banking crisis recession along with poor investment, we are now within an IVA process. Despite our healthy joint income, this leaves us with absolutely no surplus money; we barely scrape by every month. Our house/mortgage is in a negative equity situation.

The Government's Student Finance department offer loans and finance to the students (who are adults in their own right) based purely upon their parents household income. In our situation the income is decent but with the IVA situation the outgoings are total and we actually have no disposable income.

However, Student Finance will not consider individual cases and do not consider financial commitments and outgoings. The finance offered to a student is calculated purely upon the parent's household income. There is no appeals process or adjudication.

The system is completely unfair. If the parents were on welfare or imprisoned or were a non-UK citizen having just entered the country with low or no income - even if the parents are on a low wage but with low financial commitments and thus a decent disposal income - then their child, the adult student, would receive adequate or ample funding from the government.

My wife and I work and pay tax, and have done every working day of our lives since aged sixteen. Whilst our tax payments go towards funding the University education of other people's children, the Government won't offer our own daughter adequate funding to attend University because of our income. We cannot afford to subsidise my daughter's university attendance because of the IVA allowance and conditions set by the Government leave us with no disposable income.

As I mentioned, my daughter is a twenty year old adult in her own right. Technically/legally what has she to do with us, her parents? The government will loan one twenty year adult adequate funding to attend university but not another. This is pure discrimination. Where is the equal opportunity?

The Student Finance unfairness is only half of the problem because whilst on the one hand the Government will not make allowance for the lack of the parent's disposal income when offering the student an adequate loan for University (they obviously expect the parents to fund the student) - the same Government don't and wont make any allowances within the IVA finance agreements for the 'expected' funding or financial subsidy of that same student. Any financial subsidy the IVA family make towards the shortfall in Student Finance funding must come out of the money allowance that is specifically meant to feed and clothe the rest of the family.

Say good bye to all hobbies and leisure pastimes. Ignore Christmas, Birthdays and anniversaries. Get used to being hungry, repairing clothes, having your shoes resoled and the inside of charity shops - is all I can say.

Get used to the anger you will feel at a Government that takes your tax money to fund other people's children in University and yet won't offer the same degree of funding and opportunity to your own child.

Best answers:

• I am so sorry your IVA is proving such a disaster. 5 years is a very long time to live on a restricted budget and it sounds as though yours was drawn up too tightly at the start.
  How long is it until your IVA completes?
• The Government has nothing to do really with what you pay on an IVA, that is based upon your disposable income, as calculated by you and your provider.
  There is certainly a lesson for onlookers in what you say as regards to what should or should not be viewed as reasonable living expenses, and my own advice for what it is worth is to stick to your guns right at the beginning re allowances. If you don't like the deal, you can always refuse it and find a more friendly provider. Too late for you of course, but that may help others.
  I think it is also only fair to point out that expenditure allowances are pretty much set for IP's as creditor voting representatives tend to veto any proposal that does not fit within guideline allowances laid down by Stepchange. There are exceptions of course, but as a general rule, those guidelines are not to be broken or exceeded.
  From a creditor point of view, it is likely that within your proposal there is an amount offset against your income for contingencies/emergencies. Again, that may not be the case, but the odds are that it is. Why, therefore, from their point of view at least, would they be happy with that, and insurance costs for the emergencies as well?
  As for the rest, well, it seems that your alternative to IVA would have been Bankruptcy. Is it not safe to assume that you would have had an IPA or IPO anyway? Don't automatically assume that the OR would have been more generous in assessing your affordability because that is not necessarily so. You may by now, of course, finished your payments, but if not then you still would have the same problem with student finance as you seem to have now wouldn't you?
  You would also have lost control of your assets, although in negative equity that may not be too much of an issue of course.
  You may have considered a free DMP. You may have had more disposable income available, but would that have been any better for you considering all?
  Only you can answer of course, but to blame all your ills on the IVA process itself is probably a little unfair overall.
• Hi.
  I can totally empathise with your situation, I am in exactly the same boat but a single parent. My IVA is in the process of failing for this very reason. My son is just finishing his second year at Uni, I have only managed to fund him by working a huge amount of overtime, which due to health issues I can no longer sustain.
  I have been in my IVA for 3 and a half years but that will all have been for nothing and do you know what? I don't even care. I am a mother first and notwithstanding having to live frugally (what my kids call 'austerity measures') I will not have their future opportunities hampered by my financial circumstances.
  My daughter will be starting at Uni next year and I will help her as much as I can too. Sorry creditors, you can have every penny you lent me back but not at the expense of my kids fulfilling their potential.
  I am hoping to do a self managed DMP and will probably be paying it til the day I die but it will have been worth it. The people that matter most in the world to me come first, money-lenders are not going to cost them their future.
  I think the IVA companies are keeping deliberately tight-lipped about this type of scenario, all they care about is their fee.
  I'm not advising anyone to follow my course of action, at this point I have very little left to lose but my kids will have their education/decent food/roof over their heads if it kills me.
  Good luck with your daughter and well done for raising the issue, the more people who are aware the better.
• Richard,
  Thank you for an excellent piece of insight into how the IVA is adversely affecting you in ways not imagined at the outset. I wouldn't have been aware of the affect on an offspring's university funding.
  It's all very well for the naysayers to advocate 'check the small print' on such arrangements, but I doubt whether any reference was made to this. And frankly, the creditor and the IP are not going to venture to the ends of the legislation spectrum to pin-point every potential issue and pitfall.
  I can't offer anything tangible in advice or help but I do understand the harshness of the situation you are in and can only empathise. It's certainly not fair that your daughter has been penalised in this scenario.
  I wish you well.
  Max
• I don't know much about student loans but my understanding is that the tuitition loans are not related to the parents income - so presumably your daughter is eligible for a tutition loan.
  The I believe that 65% of the maximum maintenance loan is available to everyone regardless of parents income - so presumably you daughter could borrow that? Or a bit more if your combined incomes are less than Ј62,500.
  So the issue is just how to fund any living expenses she has above that level of loan?
  Could she apply to a Uni near enough to home to commute and reduce living costs? could she work through the summer in temporary jobs to help fund her living costs? can she get a parttime job or 2 during term time to help fund her costs?
  If she moves out from home will some of your costs reduce a bit (less groceries for example) that would mean you may be able to help her to some small degree?
  Obviously money will be tight for her, but hopefully she shouldn't need to give up on her goal of a university education.
• "The finance offered to a student is calculated purely upon the parent’s household income."
  Surely that indicates that whatever solution you had pursued in this case would have still meant that finance was never going to be available? Stepchange DMP, self managed DMP, IVA, Bankruptcy. They would all have made no difference to the outcome of that decision. You may have been able to help more, but that isn't necessarily true either. Your point therefore seems to be more political than financial, as you seem to resent others with less income than you being able to access finance. "The system is completely unfair. If the parents were on welfare or imprisoned or were a non-UK citizen having just entered the country with low or no income — even if the parents are on a low wage but with low financial commitments and thus a decent disposal income — then their child, the adult student, would receive adequate or ample funding from the government."
  Why shouldn't people with less income than you get funding? Is your point that because they may be on benefits that is unfair to you? Is it your point that because they have less debt than you and have managed their finances more responsibly than you did somehow mean that they should not get funding and you should? I doubt you meant it that way, but that's how it could be interpreted if you look at it closely.
  At least you did something to address your mistakes of the past, and good on you for doing so, but you are clearly regretting it now. If you are still in your IVA then you should insist on speaking to your IP to have a review if you feel you are paying too much. That is your right, and as supervisor he or she should work with you to achieve a resolution. If you feel strongly enough about it, you could always breach your own IVA and pursue an alternative solution if you wish. Given that the issue with funding will still be the same irrespective, is it worth doing that? I say again, blaming the debt solution, whichever you went either then or now, for the lack of funding available is not a correct assessment of your situation.
• In my case my IP made more from his fees than my creditors did from my payments, funny old state of affairs really, but, on a more positive note, I am now debt free, so it had the desired effect in the end.
• I'm really sorry to learn about your situation. IVAs can be very inflexible - although recent changes have made them a little better than they used to be. In my work I have come across countless callers that have taken out an IVA - and often without having impartial, independent advice. Don't get me wrong, I think an IVA can be a very powerful solution but for a relatively narrow proportion of those with unmanageable debts. Although it isn't as bad as it used to be, the industry still (unfortunately) has a number of firms that expect their customers to live on very small amounts of their outgoings. I personally speak to a handful of callers each week that are about to fail their IVAs for one reason or another, and I'm sure that my colleagues here and at the other advice agencies have similar experiences. It's never easy to learn about the difficulties some people face - and although it is possible to modify an IVA we often see unreasonable extensions being demanded.
  I think it's really important that the pros and cons of all debt options are made clear to an individual when they're investigating the best route forward. It's only then that they would be able to make an informed, objective decision about the best route forward. Most IVA firms (certainly the four we refer our callers to) adhere to the 'common financial statement' guideline figures for housekeeping and so on, these are pretty reasonable.
  I feel bad that IVAs have had a bit of a bad time of it over the years due to some unscrupulous firms. Luckily, things do seem to be improving but I would still urge anyone planning on having an IVA on doing as much research as they possibly can.
  Best wishes,
  David @ National Debtline.
• "I don't think that is a reasonable comment here. The poster plainly isn't right at the start of the IVA. Bankruptcy payments (if any) only last 3 years, so they would probably have been out of the way by the time his daughter went to uni. In a self managed DMP you could reduce your payments. And I suspect Stepchange would have been a lot more reasonable than whever the IVA company was..."
  Can't agree with that. The household income would have been the same, so the finance from the Government was never available regardless. The OP may have been able to help, or not, and I take your point that an IPA/IPA may have been finished by now, but that would have made no difference to whether his daughter would have received funding from the Government or whether she wouldn't, which a major thrust of his post.
• My mum had an IVA and it never affected me or my sister when we applied for finance.
• I don't understand how your daughter is being denied the change of a university education? It can be done, I know as I've done it twice now whilst being in an IVA.
  Our daughter got her student loans for tuition fees and applied for and got a maintenance loan. She actually managed to get a small bursary as well. The overdraft on her student bank account remained untouched throughout her education but was there for emergencies only. She supplemented her income with a Saturday job and we used allowances from other areas to help her out. So we went without so that she wouldn't suffer.
  I am living proof that your child can go to university whilst you are in an IVA
  Even if we were not in an IVA we still wouldn't have got any additional help. We got ourselves into this mess and we are sorting ourselves out, we are the only ones to blame.
  Can she apply for a university that she can travel to so therefore still live at home to reduce costs?
  On another note we have boiler cover that is accounted for in our expenditure and we also took the decision to rent a washing machine prior to the IVA which is also covered, we argued the case at the original creditors meeting and it was added to our proposal
  When our freezer decided to pack up we purchased a second hand one to see us through. Everything else we just hope and pray will last (but we only have a couple of payments left to make now)
  I hope everything works out for you
• Your daughter is far from alone is being in the situation where her parents cannot or will not contibute to her living costs when at University but are still unable to get the maximum loan/grants.
  It is not just students who have parents are in an IVA who are in her situation.
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