DMP, is it the right thing!

notsolucky89

Hi All

I'm new to posting so bare with me!

Me and my husband have recently started a DMP to pay off £23k of debt, most came from my husband when we got togther 5 years ago (a not so nice ex gf and he has 2 kids and endless battles with the CSA) and the rest is from when we bought our first house just before the recession, plus my husband lost alot of overtime and over the past 3 years his income has fell by £9k. We also have a 1yr old and I work part time!

We are paying £251 a month for our DMP with CCCS but have now started to struggle, we have a mortgage which is interest only paying 6% fixed rate (2 years to go) and our house is negative equity of about £20k, a few times I have wanted to walk away from the lot of it and declare bankrupsy!
We have mortgage arrears which is why we chose a DMP, plus received various threats from Natwest, (most of the debts are with Natwest) and they have been the worst people to deal with, our overderfts and loan are still having interest charged on it and i'm getting nowhere getting them to stop it so the money we pay is having a nearly zero affect!

What options could we look at next?
* Should we change DMP company, there are many who guarantee to get interest frozen but CCCS have said I need to make Natwest stop charging interest
* Should we look at an IVA- apparantly after DMP CCCS have said bankrupcy, but that seems a bit drastic!

Any help would be lovely right now!

dancingfairy

Hi. A couple of points to help get you started:
1) no dmp can guarantee to get interest frozen. A dmp is an informal agreement between you and your creditor (often obtained with the help of a third party such as CCCS etc) and no creditor has to stop interest and charges. Many companies will do eventually when they realise that all you can afford is all you can afford but they don't have to. CCCS should be sending letters and pushing Natwest on your behalf but I guess they are snowed under right now so are hoping you can do some ofthe pushing.
2) If you are struggling with the dmp then speak to CCCS and they can review your payments accordingly - if you've lost 9k in income then it's understandable that your creditors will get less.
3) Regarding bankruptcy/IVA it's really a personal choice - normally they tend to be for people whose debt will take longer than about 6 years to pay off. In terms of an IVA you pay a set amount to your creditors over the term - I think it's 3 years with a promise to attempt to remortgage and release any equity - as you have no equity then this is not reallygoing to be a factor. With bankruptcy the Oficial Receiver has until 2 years 3 months to make a decision on the house but with substantial negative equity it is likely they will not be interested in forcing a sale or anything anyway (if you want to keep the house that is). You may have to pay into your bankruptcy for 3 years depending on income. Personally there is not a lot to recommend an IVA over bankruptcy - normally an IVA is best suited to someone who wants to protect their house but this is unlikely to be a problem in your case anyway. With an IVA you don't have to pay any fees upfront but the fees will come out of your monthly contributions but with bankruptcy you do have to find the bankruptcy fees up front.
Certainly bankruptcy is worth exploring for you although it should not be undertaken lightly. You may want to post/lurk on the bakruptcy board to get an idea of what it entails etc.
Best of Luck
df

dancingfairy

Basically in an IVA you have to stick to the terms for 3/4 years and then all remaing debts are effectively wiped but if circumstances change and you can't give your creditors a decent return then the IVA could fail (and you'd have wasted the payments) and you may have to go bankrupt.
With bankruptcy all the debt is written off up front and then you have to pay into it afterwards.
In terms of the effect you have on your life I think bankruptcy and an IVA will have a similar effect in terms of limiting career options - ie accountancy, law, finance positions etc and probably trash your credit file similarly. Perhaps an IVA is seen as slightly less bad but I'm not sure there's much in it to be honest.
Best of Luck
df

System

Hi.

An IVA is usually 5/6 years and it really depends on your personal circumstances if this is the best solution. An IVA is a form of insolvency similar to bankruptcy.

As dancingfairy has said if you are struggling with your budget please call our client support team and we’ll be able to discuss your situation in more detail.

I hope this helps.

Kind regards,

Mat

Max_Maxwell

Personal circumstances have a bearing on your options but as a general rule of thumb, for large debts that are going to take many years to pay off, an IVA has to be a better option.

As long as creditors accept the IVA you have the reassurance of knowing it's for a fixed term - 5/6 years - it's for an agreed, affordable amount each month - so no hidden surprises along the way - and your creditors can't pursue you for any further monies during or after the IVA.

OK, each case is different and there may be additional clauses written in, especially if you are a property owner, but at least this is an agreed, fixed term plan that gives light at the end of the tunnel.

I'm sure others have said this, but a DMP is not legally-binding so your creditors can do as they please, even if they agreed to the arrangement in the first instance. You need to consider how many years it will take to clear your debt under a DMP, assuming your creditors play ball throughout, compared with a fixed term of 5/6 years under an IVA.

dancingfairy

I think that the allowances in bankruptcy are stricter than in an IVA but I can't really see why someone would pay into an IVA for 4 or so years with the potential risk that if circumstances changed then there is a risk that the IVA might fail (o.k it may only be small but it's a risk non-the less) when they can go bankrupt and have to pay up to 3 years into their bankruptcy. O.K sure your creditors get more money back through an IVA but at least with a bankruptcy you can make a fresh start sooner?
The OP needs to assess the situation and see how long realistically a dmp will take, whether there is an opportunity to make full and final settlements (if it is possible to scrape togeth a settlement) and whether to pursue a formal complaint with Natwest or take them to the ombudsman in the hope that they would at least stop interest and charges.
I would also be exploring things with regards to the mortgage etc - does the OP wish to remain in the property or would they actually be better off giving it up and moving into rented - obviously it depends on how much local rentals are and whether the OP would then qualify for housing benefit etc. If the OP was looking into giving up the property then that would add the now unsecured house debt into the mix and would probably mean that bankruptcy would look more favourable.
This is of course assuming that the OP has no problems career wise with going bankrupt - ie they don't work in finance, law, etc and that there are no other things that could cause an issue in bankruptcy (cars always seem to be a bit of a problem in bankruptcy - although it is not insurmountable it is worth considering carefully before going bankrupt).
df

notsolucky89

Thanks for all the replies, I will speak to CCCS tomorrow and see what I can do, I've just looked at my budget with them and I think I have underestimated some of it and the Mortgage payments have increased as whilst sorting out the DMP I missed another payment... must of forgot to update the budget plan afterwards! At the moment though my estimated debt free date is June 2020
I think bankrupcy would affect my job as I work in a local government finance department and we do not qualify for HB CTB etc (we are on the basic working family tax) RBS who I have the mortgage with have offered £10k for fees for solicitors, estate agents (as long as I use theirs)
the information you have given about my house has been intersting, if I sold up and rented I would need £650 ish for rent and our mortgage is £750 (but currently £840 with arrears) all for a house now worth £140k and 35yrs left on the mortgage!
Car wise we would be ok, we have one car worth £800 and a motorbike worth £300 as it is currently in bits- husband is a mechanic and likes 'projects'
if we were to go bankrupt can't really see the car and bike being much of an asset!

I've been drafting a letter to Natwest, they have stopped interest on both credit cards but that is only £5k of what we owe but it is a start.
Also looked at bank charges and using the templates on this site will send that letter off as we have been charged nearly £2k, so this could be used to wipe off the overdrafts

dancingfairy

Hmmm. It's a difficult one. I'm not sure selling up would help you - yes you'd be better off per month but it would mean then having an extra 20-30k unsecured debt (that's if the bank would even consider it).
Given your job I think an IVA/ bankruptcy may cause you problems. You might find the relevant info on your HR website/ or a union website to check this?
It does appear that a dmp may well be the best thing for you at the moment from what you've said.
However:
1) sort out the issue with the mortgage - your mortgage should be a priority debt and you should be prioritising this - if it means you have to pay less into your dmp while you sort out the mortgage arrears then so be it.
2) You need to make sure the budget is realistic - there's no pont cutting it so close to the bone that you're living off beans on toast for the week before payday and are absolutely miserable, you also need to build a small amount of slack into the budget for emergencies as well. I know you probably want to pay it off as quick as possible but you will need to have some quality of life as well.
I think I would be inclined to press on with the dmp - push Natwest hard to get them to stop the interest and charges -you may want to consider a formal complaint - one would hope then that it would at least be dealt with by the right department/possibly someone who can help and they do have to follow procedures then. If you are still not happy that they are treating you reasonably/fairly then you can go the ombudsman and get them to investigate as well.
Also it probably feels like a life sentance but with a 1 year old things can change quite quickly - hopefully when they get to 2 or 3 they will get some free nursery time and when they are at school you may find that you are able to work more hours ,also things may well pick up for you other half in this time. Also when the mortgage arrears are dealt with this will free up more money to go towards the other debts so don't despair. Certainly reclaiming bank charges and also perhaps selling the motorbike may well start to make a dent in things. Depending on the size of the debts the 2k may well be tempting enough for a creditor to take as a full and final settlements towards one of the debts.
Have a chat with CCCS and start the new year afresh.
Best of Luck
df
P.S CCCS is one of the charities that Martin recommends so unless you have a really good reason I would stick with them (if you're not sure you can probably always get a second opinion from your local CAB or via National Debtline). I certainly wouldn't touch the 'we can do miracles'/ 'get all your debts wiped off' type companies with a barge pole.
P.P.S It sounds like most of the debt is probably in your husbands name? If this is the case then depending on what he does for a job and what (if any) debts are joint there is always the possibility that he could go bankrupt and you not. I have to confess I have no idea how being linked to a bankrupt person would affect your job but it's worth considering - something else to ask CCCS
P.P.P.S - yes I know - something else. I do hope that you are not getting your wages/any child benefit etc paid into an account with an overdraft on it or connected in any way to Natwest. Sadly they have the power to take that money and pay off your debts which means that your proirity bills might not get paid. If you haven't got a new bank account away from Natwest then I suggest you do this before you enter into any further correspondence with Natwest (I'm sure CCCS will have told you this already though).

notsolucky89

Thank you soooo much everyone, especially dancingfairy.
I've finally finished my letter compalint to Natwest, hopefully this will sort it out.

Yes I have changed bank accounts, CCCS told me to do this before letting Natwest know I am going on a DMP, I had a letter sent to me from Natwest recently saying they will be using my savings to put towards my debts (A whole 9p!!!)

I have thought about my husband going bankrupt only, but the largest debt of £18k is in a joint name. I've written out a list of questions to ask CCCS and will bring everything up. Looks like for the moment our DMP payment will reduce quite alot for the interim, hopefully our creditors will except this.

Thanks again

dancingfairy

Hi. I've just caught up with your thread. In terms of whether your creditors accept a lower monthly amount in a dmp there's not a lot you can do. You're going through a reputable charity and frankly the credit cards/loans can only have what you have 'spare'. They can't have what you haven't got. They know deep down that your mortgage and priority bills come first (even if they don't like it). O.K they may get grumpy and they could go to court but a judge has no more ability to magic money out of thin air to pay the creditors than you do and your creditors may well be wasting their time.
Stick with it.
df

thinkpositive1

Dear Notsolucky

I feel for you as I was in a similar predicament...not the personal / family situation but regarding a DMP.

I started one 3 years ago (with more than double your debts) and was paying over £400 a month. The good news was that it felt like I had a solution albeit one that would take 12 years or so to pay back all my creditors but I did start to feel on top of things compared to when I was juggling a series of credit cards with mounting debts and me not being able to pay just the min amounts.

Then after a year my income dropped (I am self employed and had to take less of a regular draw down from my business). This led to a readjustment of my DMP payment - I paid what I could afford but then looked ahead realising it would take 30 years to clear the DMP at that rate!!

Another year on DMP and I changed to an IVA and am so glad I did. Morally, to start with, it felt a bit "wrong" not paying back every penny I owed but reading posts on here and getting lots of advice made me see that an IVA was the right plan for me (it may not be for everyone). The main thing is knowing that there is an END DATE for the debt repayments. 12 months into now so I have 4 years to go and whilst it has been hard going (to balance budgets) I am much happier knowing I can see light at the end of the tunnel.

I did contemplate bankruptcy but for me anyway that seemed a step too far but again, that can be right for some people.

All I am saying is there will be plenty of us who have had to consider their options just as you are now. I am not one to hold regrets (apart from ever having a credit card!!) but I wish I had sorted an IVA at the time I started my DMP. Then I would be 3 years down the line with only 2 to go. It feels like the 2 years on a DMP were "wasted years" but it was certainly preferable to the situation I was in pre DMP.

Now on my IVA at least I know I am getting there TO AN END POINT...unlike the DMP which would have been hanging over me to the grave!

Take time to get advice, read things through and think clearly and good luck.