IVA or DMP

sitchey

Hi Everyone
After so long burying my head in the sand, I am now determined to try and solve my large debt problem.

Due to a recent relationship breakup I have been gradually getting further and further into debt. I had to borrow to buy my house from my ex and each month I have been getting further in debt to just pay my bills and live. Aresult I am now in 35k of debt.

I had a look at a number of posts on the forum and had looked at the CCCS. After taking their debt management test I can see that my options are either a DMP or a IVA.

I have tried to look into both options as much as I could but I thought it would be best to ask guys with experience how the felt about their own DMP or IVA, the drawbacks they have experienced, how life is either during of after a debt.

All your comments, experiences, messages are must welcome.

Thanks for your support!

sitchey

What I am really looking is people's input with their experiences with DMP or IVAs, the positives/negatives, what they would personally recommend, how has their credit rating been affected etc.

I really hope there are some people out there who can reply to my post

thanks

Nargleblast

Whichever solution you choose, your credit rating is shot to pieces for at least 6 years, but as you won't be looking to take out any more credit cards, loans or mortgages then why should that matter?

I started out with a DMP through CCCS, which worked well for a few months before I and the OH reviewed our situation and decided to enter into an IVA - the DMP would have taken at least 12 years or so to pay everything off, and we were getting grief from creditors all the time. With the IVA, we know it will be all done and dusted in 5 or maybe 6 years, and we no longer get hassle from creditors. However, as an IVA is a legalised arrangement done through the County Court, we have to be very strict with ourselves and not allow it to fail through not sticking to our agreed budget - the alternative would either be go back to a DMP and resign ourselves to paying off our debt for many years, or alternatively go bankrupt. Also with an IVA you are expected to try and release some of the equity in your property in the final year to finish it off.

Which is the better solution? Some folk find a DMP works for them, some are happy being in an IVA, whilst some take the plunge and go bankrupt with no regrets. If you take professional advice (from one of the companies recommended on these forums, that don't charge you upfront for advice) then you can decide which solution will work best for you. Don't be put off by horror stories about bankruptcy or IVAs because they can be a good solution for some people. In the end you have to speak to different companies, compare their advice, and come to a decision that is right for you.

Nargleblast

Welcome on board by the way, and well done for finally deciding to tackle your personal debt mountain!

sitchey

Hi
many thanks for your responses. Just a few more questions.

You mention an IVA is set up through county court. Doe this mean you have to attend a public court session were you finanes are discussed?

I think and I hope that at present my credit rating isn't bad. I have been making payments on time but recently have missed two as the inteest is mo building up. In the future I would be looking to move house. Would entering either of these completly ruin my chances of a new mortgage even a joint application? Also is there anyone who has ever rebuilt their credit score after a DMP or IVA

Slighly concerned about the release of equity in my house to make a lump payment at end of the IVA. At present like most in the country I am in negative equity and don't think in 5 or 6 years there will be much equity if any at all. Do they agree a figure that you must pay at the end from your equity?
And do they make you pay it even if you have no equity?

Finally if you enter into either does your employer know or have to?

Thanks

alibongo54

You would struggle to get a decent if any rate to borrow if your credit rating has been affected. No lender will loan to anyone that is bankrupt. The Subprime market that was would have leant to people with CCJ's to some extent but I dont think you will get a mortgage with an IVA or a DMP as the credit score will be affected. To obtain a mortgage you have to have a good credit score or the lender is left at risk and if you are in negative equity and you sell your still liable for any shortfall and lenders will pursue you for this.

alibongo54

If you work in the financial industry your employer does need to know not sure about other arears of employement though.

fiveyearplan

If you are in negative equity then BR would be a better option over an IVA. An IVA is a form of insolvency and does just as much harm to your credit rating as bankruptcy. Before this current economic downturn you could have easily obtained a mortgage with bankruptcy in your credit history, things are tough at the moment but I'm sure before long discharged bankrupts will be able to find mortgages - in fact one person on here recently obtained a mortgage so things could be looking up.

If you are looking to sell your property and you are in negative equity any shortfall would go into your bankruptcy. I believe if you have a DMP or IVA you would still be liable for the debt.

One more thing about IVA - I have seen many, many people with an IVA go bankrupt anyway and wondered why they didn't go the BR route in the first place.

fiveyearplan

alibongo54 wrote: »

If you work in the financial industry your employer does need to know not sure about other arears of employement though.

It depends what your job is, you could work in the financial industry at a job that isn't regulated therefore you wouldn't need to tell your employer.

alibongo54

Im not regulated in my role but my employer is a Building Society and I have to tell them, dont agree with it but they have put it into our contracts!

Nargleblast

Sitchey - you do not have to attend any court hearings with an IVA, it is all dealt with by your Insolvency Practitioner.

Chances of getting a mortgage are like your chances of getting any other kind of borrowing - if you are in a DMP, or an IVA, or bankrupt, then you are not considered a good risk. Once your debts are gone, then you can rebuild a good credit score but it will take time - I think there are one or two threads on here about rebuilding your credit score and how to do it.

Equity - part of the terms of an IVA is that you try within that 5 year period to pay back as much of the debts as possible, and that includes releasing equity. No choice in that I am afraid, but that's no different to extending a mortgage to pay off credit card debts, which many people do. Of course we don't know what the housing market will be like 5 years ahead, so it is possible that you might not have any equity to release, or you might not find a lender willing to advance you any money secured on your property. In that case, the IP would discuss other ways of finishing the IVA, such as maybe extending the payments for another year if feasible.
When IVAs fail it is usually either because the debtor has been unable (or unwilling in some cases) to stick to their budget for the five years and has not been able to make the agreed regular payments, (in which case they would probably have the same difficulty sticking to a disciplined DMP) or because some major life event has occurred (death, divorce, birth of child, loss of job etc) which has thrown the whole IVA scheme out of the window. Things happen, we all know that. I am not pushing you towards an IVA as I am not a financial expert, just saying that it is a perfectly doable way of sorting out big debt problems. So is a DMP and so is bankruptcy. You really need to speak to one of the companies recommended on this site and find out what is right for you.