DMP of IVA?

thegazp

Morning Forumers

I posted in another thread, but rather than hijack theirs with my questions, I thought I'd start my own. Basically, I've accumulated £10,000 of unsecured debt (credit cards, overdraft, payday loans). I finally accepted I had a problem, when I was skipping two meals a day because I had no money for food at the end of the month. I went to PayPlan after reading about them on this site and they offered me a DMP or an IVA, paying back between £110-150 a month. The DMP would be over in a little over 6 years if interest was frozen, or 10 eyars if it wasn't. Where as the IVA was only 5 years and I was told that in 6 years it would be as though I never had any credit. That sounded great, so I asked to proceed with that. Now a couple of problems have arisen.

1) I started a new job and will get a bonue of between 10% and 20% every year. I was very excited about this, as it meant I could treat my family to a proper holiday each year, rather than "£9.99" Sun holidays (no disrespect, we've been unlucky with the quality of ours) Discovering that under an IVA I'll have to hand over 45% of this made me feel physically sick, as I feel like I'm letting my family down yet again.

2) The big selling point of the IVA was having a clean credit file in 6 years. We want to our own house eventually, and this seemed like a real chance for us. Howeverm I've since been advised by a forummer that a prospective lender will want to know about a spent IVA and further research suggests this will mean a huge deposit (not the 10-15% I was hoping for) and a high rate of interest. I'll be honest this deflated the bubble of optimism I've been feeling for the past week.

In short, I don't know what to do for the best. I don't want 10 years of defaults through the DMP, but the IVA seems pointless if it is preventing our chances of homeownership indefinitely.

I probably sound like I want everything, but all I want is a good life for my son, in his own house and a nice holiday for him to enjoy and remember. I don't want anything material for myself.

Thanks forummers

G

wannabee_in_credit

I'm sure that someone will correct me if I'm wrong, but I think that defaults will drop off your credit file after 6 years whether or not you're in an IVA or a DMP. Depending when you're defaulted will depend how long your file is affected rather than if you're DMP or IVA.
I've been in a DMP for 2 years - every creditor has frozen interest except for one, and I've found them to be very flexible when I've had to reduce payments, or been able to increase payments.
My credit file is shot, but I hope that in a few years time it'll look better again, but only so I can get a better mortgage deal rather than more credit.

thegazp

Thanks for the reply Wannabee!

That's my understanding too, but I was led to believe that once teh IVA was signed, no further defaualts would be applied, providng the monthly payment was made. Where as, with the DMP, creditors could keep applying a default every month since the sum they receive would be less than the minimum amount under the original agreement, so in theory all creditors could issue a default every month for the next few years (until the amount they receive was greater than the minimum. Happy to be corrected on this though.

I'm also concerned about teh Payday loan companies not freezing their interest. I've not read of anyone having any luck with that.

Cheers

Gimpsdad

There are only choices here and there are pros and cons to both. Do you want the legal guarantee of interest freeze and a definite end date that an IVA brings (very strong plus point) or do you wish to take a chance on DMP? In fairness, creditors are usually very good at doing that but it isn't a guarantee.

The bonus issue is a concern and if you cannot stomach it then you have ruled yourself out of the IVA. Before you do that though, if by a combination of bonus, overtime and any naturally increased payments you can finish the IVA early (you cannot pay back more than you owe, plus IP fees) then you must also bear that in mind when you make your decision. On balance the IVA would probably be the most definite route, but why not give the DMP a chance for, say 4 months? If they have frozen and it is working then happy days. If not, then IVA becomes much more attractive.

National_Debtline

Hi gazp

Re: your concern that defaults can be registered by your creditors month after month - this is not the case, whether you are in an IVA, DMP or simply negotiating with them yourself, for that matter. A creditor can only record one default on any given account - this is generally defined as the point where the relationship between borrower and lender has definitively broken down. The default, like any other piece of info recorded on your credit file, has a shelf life of six years.

Once the IVA is "spent" as you put it and off your CRF, prospective mortgage lenders will focus primarily on what is on there from the past six years. They will certainly ask you whether you have ever been the subject of a bankruptcy order in the past - but not necessarily whether you have done an IVA. It is unlikely to be the old IVA which affects your scope to get a good mortgage deal, so much as the difficulties of raising a deposit and the fact that your CRF will show very little/no evidence of a recent ability to take out and repay credit punctually.

Other than that, Gimpsdad makes some sound points above. The clause re: bonus payments is a standard feature of any IVA agreement and whatever choice you make, you will have to accept that there will be some aspects to it which are less easy to digest.

Hope that helps

NDL

thegazp

Thanks very much guys.

I wonder why I didn't come here for advice initially. The above information is very useful indeed. I'm going to follow Gimpsdads advice and speak to Payplan today about opting for the DMP for now.

I think that the IVA fees are around £5k, so my bonus payments wouldn't really lead to any early repayment unfortunately.

I wish I'd started this process two years ago when they ebcame unaffordable. Oh well, I suppose once you've hit the bottom it all becomes much clearer.

Thanks a lot guys, it really is appreciated!:beer:

Time_to_face_the_music

thegazp wrote: »

I wish I'd started this process two years ago when they ebcame unaffordable. Oh well, I suppose once you've hit the bottom it all becomes much clearer.

You've hit your lightbulb moment and suddenly you think why didn't I do this before, oh for hindsight! So many of us have been there, never think you are on your own.

Good luck thegazp and if you do go for the DMP, come and join us on the DMP Support Thread Part 8. You will plenty of advice and experience there