confused dmp or iva

jules42

Hi i will apologise if this is a stupid question.

I have £30,000 worth or credit card and loan debt and am strugling with payments although at present am up to date with all minimum payments,
I have realised i can no longer continue to pay debt with more debt, I can reaslisticaly afford to pay £450 a month instead of £850 a month that it is at present and have been recommended by cccs to try a dmp, but yesterday i was called by a company who said an iva would be best .

I dont know which to choose ?

Julie

Tixy

Hi Julie

If you are thinking of either of these solutions its best to get a advise for a several different sources. Did you actually speak to CCCS or just fill in their online form? Did the company who rang say why an IVA would be more suitable for you? How much did they know about your financial situation? Even if you do go down the route of an IVA I would research and find your own IP, not go with someone cold calling you.

Have you read this guide to IVAs? is worth reading through I think, and may help with your next steps
http://www.moneysavingexpert.com/loans/pdf-iva-guide.pdf

Charco_2

See this would be kind of a border line one.

Taken on the face of it
- a DMP with contributions of £450 would take you 5.5 years to pay
- an IVA would take five years

(However, your IVA could be increased by a year depending on whether you have equity in a property or not and your DMP will most likely last A LOT longer than 5.5 years because of Interest and Charges - 8 years would be more like it!)

The IVA is a FORMAL ARRANGEMENT and offers more protection than the DMP which is INFORMAL. Once the IVA is agreed all you need to do stick to it, you'll know what is expected of you each month, a DMP can change at any time and regularly does.
Some creditors (like MBNA i think) insist that if you can repay your debts within 10 years in a DMP then that's the solution you should go for.

No-one on here could possibly say whether a DMP or an IVA is better for you based on the information so far provided (has anyone discussed Bankruptcy with you also?) so i'll move on to what i can see is the only other point to be made here:

WHO IS THE COMPANY THAT CALLED YESTERDAY?
Did they call out of the blue? How could they have known that an IVA suited you better?

I would certainly look into an IVA if I was you.
Contact an IP/IVA Company and go through the details with them to see what they suggest, come back here to double-check the information you've been given.
Post more of your information on these boards to see what other have to say
(Homeowner/renter? Couple? Joint debt's? Type of job? Self-emplyed? Kids? Number of creditors? Debts to each? Assets -car/home/shares?)
as a matter of interest, did the company go through your finances in a detailed fashion before recommending that an IVA was best?

DO NOT PAY MONEY TO TALK TO ANY COMPANY... you can get reliable advice for free, reputable companies will only take fees for the solutions they provide (so stick with the DMP for now until you truly decide what's best for you)
DO NOT PAY MONEY TO A COMPANY THAT PROMISES TO HAND YOU THE KEYS TO NARNIA... some companies will collect two months fees before sending your details to another company to provide a solution, they'll also collect a referral fee for passing your details on




(PS - no harm to that IVA guide Tixy but, the last time i read it, it was littered with inaccuracies)

Choo_Choo_4

Jules - you're right ... if you are using your cards to pay creditors each month then it won't be too long before things spiral out of control.

With no real information at this stage it's hard to say whether a DMP or IVA would be best advice for you but you should seek advice from a few different firms before making your decision. Most of the advice you receive should coincide with what each company tells you.

In a DMP with £30k debt and if you say that you can afford £450 per month then it will take 5.5 years to clear the debt IF creditors stop all interest and charges (I would hazard a guess though that the term would be much longer...)

It would also be best to do out an SOA (Statement of Affairs) to confirm what you can afford to pay creditors each month - you're saying £450 but is this just a rough guess or have you already worked this out. First and foremost Jules you MUST be able to meet the cost of living (everyone is entitled to this ...) then look at what you can afford to pay your creditors ... there's no point in giving yourself £120 per month for Food & Household Goods for a family of 4 when you'll rarely go into Tesco / Morrisons etc and spend less than £70/80 in one go ... there are guidelines - the flip side of this is that you wouldn't be entitled to give yourself £200 a month for "night's out" - this is a luxury that you wouldn't be able to afford ... (these are just examples - not saying this relates to you in any way)

Are you a homeowner or renting? This will have a significant bearing on which option you should go for (obviously depending on equity level in property and if this would still mean that you're insolvent) ...

There are lots of initial questions that need to be asked first to see which MIGHT be best for you ...
It would be best when seeking advice to go to an Actual Insolvency Practitioners OR CCCS OR CAB OR a Debt Solutions Company who are able to offer advice on ALL solutions and SHOULD EXPLAIN all solutions to you ... this way it will be less likely that people would say that are dressing up an IVA/DMP as this is the only solution they can offer you.

Tixy

Charco wrote: »

See this would be kind of a border line one.

Taken on the face of it
- a DMP with contributions of £450 would take you 5.5 years to pay
- an IVA would take five years

(However, your IVA could be increased by a year depending on whether you have equity in a property or not and your DMP will most likely last A LOT longer than 5.5 years because of Interest and Charges - 8 years would be more like it!)
Of course if could also be less that 5.5 years for a DMP if you manage to get some decent reduced F&F settlements, or your circumstances improve (payrise or similar).
The IVA is a FORMAL ARRANGEMENT and offers more protection than the DMP which is INFORMAL. Once the IVA is agreed all you need to do stick to it, you'll know what is expected of you each month, a DMP can change at any time and regularly does. Which can be a good thing, if your circumstances change, either short term or permanently.

(PS - no harm to that IVA guide Tixy but, the last time i read it, it was littered with inaccuracies)

Thats interesting Charco, I admint do not have enough knowledge to know what these many inaccuracies are but if there are genuine false statements (as opposed to just opinions that you don't necessarily agree with;)) I would suggest you let MSE towers know. One thing they do consider important is for their literature to be accurate.
I still think the article gives a good basic understanding of IVAs for people who may know nothing at all about them except a very basic idea that they help get a huge percentage of your debts written off- and we all know many more people lurk than post.

(Sorry to hijack your post Jules with that last bit - hope you do some more research and come up with the right option for you)

Charco_2

You are of course right Tixy, IF the OP managed to negotiate a £400 pay rise the 5.5 years would remain roughly the same... if she managed to find MORE than £400 extra a month the 5.5 years would decrease (the £400 is a rough estimate give or take £50). If she won the lottery outright she could probably bring the 5.5 all the way down to a week or a month.

Yes, the INFORMAL nature of a DMP can be a good thing as it remains flexible and allows it to change as your circumstances change. But usually it just means there's nothing to stop your creditors from continuing to hassle you for more money.

jules42

thanks for your advice guys,
i am a home owner with about £90,000 equity i am a single parent of 4 and would be keen not to have to sell my house.
i recognise i need help but dont not what to do for best realy,
the company cant remember their name did a detailed over the phone qeustonniare and recommended iva, i stupidly didnt ask them what their charges are, but havent signed anything yet, they made it sound very easy but i am sure it isnt,
cccs - i did the online form then someone rang me asked a few more questions then recommnded dmp.
My circumstances may change in future and my income is variable on overtime although have based my projection on basic wage, so some months i could pay more off.
I really just want to work hard and pay off my debts without being hassled by creditors but realise that i am just treading water at the moment.
Julie

Choo_Choo_4

Hmmm .. if you have a property with £90k equity and only £30k debts then I'm afraid that on paper you are not insolvent and an IVA wouldn't be for you anyway.

I presume that the property is in your sole name then and that the total equity is therefore also yours?

You're right to work out your affordability on basic wage as overtime not guaranteed so this will give you and your creditors a more accurate picture of what is likely to be paid towards debts.

Don't worry about not asking the company about charges - as you say you haven't signed anything yet so you won't owe anything for a phone call ... anyways it doesn't look like they've done their homework properly because if this information that you have provided is accurate and is the same as what they've picked up then you're not insolvent and cannot do an IVA - it's not best advice.

Well you can do an IVA but you would be paying back 100% of your debts plus IVA fees - any genuine company would advise of this and discuss other options.

Remortgage sounds like an option but may prove hard to come by given current climate.

The other option then is the DMP which has already been advised but you need to know that this will not provide any protection against your creditors looking to secure a debt on your property down the line if they're not happy with the arrangement.

I hope you don't mind me saying either that £450 is a rather high disposable income for a single parent of 4 ... if you do arrange a DMP then make sure your monthly contribution is realistic and doesn't leave you struggling just as much as before you went into the arrangement ...

jules42

Choo Choo, i think the company was moneyexpert, the man did saw i would have to pay back all my debts which is fine, i dont want them writing off they are my debts and i am prepared to pay them off, i just want to see light at the end of the tunnel, I feel stupid for not asking what their charges are as am guessing they are quite high.. doh.
moneyexpert said my disposable income was 450 and to be honest it does seem high but compared to the 850 i am paying at the moment i guess not.
Not sure i could remortgage coz my credit rating is rubbish, i know i struggled when my fixed term ended last year so have just reverted to companies normal mortgage.
Looks like a dmp may be my best option base on your advice thank you

Tixy

Hi Jules

I'd suggest that you might want to write out a detailed statement of affairs (this link is a good format - http://www.makesenseofcards.com/soacalc.html) to work out what you think is the amount available for debt repayments. Remember to make allowances for items that don't happen every month (such as car tax/ repairs, christmas presents, school trips etc) for these type of costs you can try to estimate the annual cost and then budget 1/12 of this each month. As Choo choo suggests don't leave yourself short so you can't keep up with payments. The overtime you earn could be put aside for emergencies, be made as extra payments to your DMP, or put aside ready to make reduced full & final settlement offers after a while.

You might want to post the results on the DFW board here on MSE and people may be abe to make additional suggestions as to what changes you could make.
Then if it still looks like a dmp is the best option you could either go back to CCCS or look at one of the other dmp providers who also won't charge you fees http://forums.moneysavingexpert.com/showthread.html?t=2077631

jules42

thanks tixy,
did statement of affairs and no way can i afford 450 a month would be looking at 250 a month in reality.. thanks for all your advice guys x