DMP, few questions if anyone knows the answer please.

cherrypie556

Myself and the hubby are seriously considering going onto a DMP. The qwuestons we have are.

How long after your debts are cleared does it stay on your credit rating?

Is it a long term thing as long as you keep up your payments, by that I mean do you stay on the DMP as long as it takes to clear your debts even if it takes 10 years?

What are the main benefits over a DMP instead of an IVA, as with an IVA is that only for a set number of years i.e 6, or is that a long term thing too?

Many thanks

Deep_In_Debt

Hi

A dmp will take as long as it takes to clear the debts although with payrises, bonuses you may receive, you could reduce that term.

Your credit will be shot for the term of the dmp and for 6 years after you make your last payment.

An IVA is much more restricting in terms of budget. You are pretty much stripped back to the bare minimum. IVA's are usually on suitable if you have property to protect that you may lose in BR and you are often expected to release equity in year 4.

A dmp is much more flexible generally.

Good luck.

dancingfairy

cherrypie556 wrote: »

How long after your debts are cleared does it stay on your credit rating? I believe it's 6 years

Is it a long term thing as long as you keep up your payments, by that I mean do you stay on the DMP as long as it takes to clear your debts even if it takes 10 years? Yes

What are the main benefits over a DMP instead of an IVA, as with an IVA is that only for a set number of years i.e 6, or is that a long term thing too?

The main differences is a DMP is an informal arrangement with the creditors - you ask them to stop charges and interest, which many will but not without some hassle. With a dmp you pay what's left after your bills ie rent, water, electric, gas ,food etc and split it fairly between the creditors - ie the one you owe most to gets the biggest share, the next biggest the next biggest share etc, etc.
Also with a dmp if your situation changes you pay more or less depending - ie you get a pay rise you pay more , you lose your job - you pay less.
Often your debt will be sold on to Debt Collectors - this can be a good thing or a bad thing, often they will have bought each debt for a few pence in the pound- this means that eventually hopefully you can cobble together enough to offer a full and final settlement and they will often take a lower percentage of the debt than the original creditor - for example if your dmp has gone on a bit and the debt collector only paid a little bit they may accept 50% as a full and final settlement and your debts woudl be settled.
An IVA is kind of a halfway house to bankruptcy (I think) - it is a legal process and lasts for 6 years. I believe at the end of the 6 years that's it but obviously your credit rating will still be affected for a while (another 6 years). If an IVA fails then I think your creditors can petition for bankruptcy. There are also certain conditions to be met for an IVA in terms of spare income etc after bills and I know they are only suitable for a small section of the population. I do not know very much about IVA's but that is the gist of them I think- there is a seperate board about them so maybe they would be able to advise you better.

Also whatever you do get FREE advice from one of the debt charities/organisations Martin recommends- ie CCCS, National Debtline, your local CAB etc. Often private companies will try and sell you solutions that will line their pockets and do you at best no good and at worst leave you in a worse mess so get the right advice.
Hope that helps a bit.
df

dancingfairy

Deep in Debt's reply was much more succinct. Lol.
df

cherrypie556

Fantastic, thats answered everything. many thanks to you both!!

Deep_In_Debt

dancingfairy is pretty much there with the response.

Remember that a lot can happen in 5 years, and if your circumstances changed, and you could no longer afford the IVA it could result in BR and you find that the first few months are not actually clearing your debts but going to the IP which is why a lot of companies go for the hard sell on these.

Creditors are not obliged to freeze interest whilst on a dmp although most will for a period of time.

Just also to echo dancingfairy, please do seek advice from either CCCS, Payplan, CAB or National Debtline. They will recommend what's right for you and not what will line their pockets.

dancingfairy

Also with a DMP as it's an informal arangement then there's nothing to stop you going down the IVA/bankruptcy route later if the situation deteriorates ie no work/disability/long term illness etc.
Plus with whichever you will need to budget well. Although I am not sure how strict an IVA budget is a DMP one can be quite flexible I belive.
df