What is my best option? 25 November 2013 at 12:20PM edited 30 November -1 at 1:00AM in IVA & DRO 9 replies 1K views

mark_quinton

Hi all

I wonder if I could ask some advice.

I am likely to be taking a new job which will pay me 25k plus montly bonus which will range from 0-£1000 per month depending on whether we hit targets.

I currently have around 20k worth of debt and have been struggling to meet the minimum payments. As a result i have started the process looking at an IVA with Stepchange and have sent off all of my details. In the IVA you are required to pay 50% over the first 10% of any bonus to the IVA whereas with the DMP you do not need to. As a result I am starting to consider the DMP. This is appealing as I could use the bonuses to shortern the DMP term of keep it if we need the money. Also it is quite possible that I will be due some inheritance during the DMP/IVA period which I could then use to pay off the debts, whereas with the IVA I would need to include fees.

However in light of this the downsides witht the DMP are that obviously the creditors do not need to freeze the interest and the credit marker on my record will be on for 6 years from the last defaulted payment but an IVA will be 6 years from the start of the agreement.

Please could people with experience of either please recommend the better solution?

Thanks

Mark

Foxy-Stoat_3

Can you not alter your lifestyle and reduce your outgoings to clear your debt down quicker?

Whats the debt breakdown and interest rates?

£20,000 debt when you earn £25,000 a year doesn't seem enough debt to me to make an IVA worth while, especially when you may get monthly bonuses.

Find_The_Real

Considering the bonuses and possibility of an inheritance, for the level of debt first of all I would look at any outgoings to see if there is any possibility of reductions to throw as much at the debt without going into any arrangement to pay, then I may possibly look at a DMP which would be more flexible with the monthly bonus situation.

However if you would like to post a SOA we may be able to advise a bit more on the best way to tackle the debt with the new earnings.
http://www.stoozing.com/calculator/soa.php


I would certainly do a bit more research into all your debt options first before committing to an IVA.

Good luck

National_Debtline

Hello there.

The other posters have already highlighted the key points. its worth bearing in mind that any inheritance is likely to classed as a 'windfall' - and this means that it is likely that you would need to give it to your insolvency practitioner. If you decide that the IVA route is right for you, do check to see if there is such a clause within the terms and conditions.

As you already know, the DMP is likely to be the more flexible option although there are no guarantees that the creditors will freeze interest and charges (although generally there is a high success rate). As you've mentioned yourself you could offer your bonuses to your creditors on a sporadic basis - some may even consider accepting a 'full & final settlment', there is more info on those here.

Your financial statement should show you how much you can afford to offer your creditors on a monthly basis. From this you should be able to calculate the potential length of time a DMP will take. If it is significantly longer than an IVA then please do not write-off the IVA idea. The key aim with any debt option is to allow you to be debt free within a reasonable time period.

As Find The Real has mentioned it's worth researching all options. The best way to find out what might be the best route is to calculate how long each option will take - and to then make an informed choice.

Best wishes,

David @ NDL.

UpToMyNeckInIt

Hi Mark,

...Good to see that you are researching all options.

Just to add to the other posts, and as a useful reference as part of your research, it is worth looking at the 'Debt Camel' website (set up by a CAB debt Adviser) which in layman's terms, compares the various options open to you:

http://debtcamel.co.uk/hard-choices/long-dmp-vs-bankruptcy/

and

http://debtcamel.co.uk/hard-choices/iva-vs-bankrutcy/

Good luck.

mark_quinton

Thanks for the responses. I completely agree that the best way to try and get out of this is to pay it myself and reduce my outgoings however as I was going with an IVA stepchange told me to cancel my credit card direct debits and pay them what I could afford. As a result some of the creditors have removed my promotional rate of 0% and put me on their standard APR. This now means I will be paying off mainly interest each month which is a huge shame and in hindsight if i'd of known about the new job I wouldn't of cancelled the direct debits. Hence why I'm now considering the options available to me.

Thanks

Mark

UpToMyNeckInIt

...trully shocking advice from Stepchange. It's the type of advice I would expect from a private company, not a debt charity.

In effect, this has forced you down a more drastic course of action than you otherwise may have had to take - a tactic used by some unscrupulous firms I'm sure, to 'trap' customers. (Albeit that the 0% rate would of course end at some point anyway, but missing or being late with payment is a notorious deal-killer for these promotions).

Personally, I would advise anyone considering an IVA to try and meet their minimum Monthly creditor payments, until after the IVA has been accepted, to avoid this type of situation. Otherwise, in the event that the proposal fails (an apparently rare problem though), the customer is back to square one and having to attempt to repay even more.

Hope you sort something out soon.

mark_quinton

Having just read the debt camel website link above it may still be ok to manage on my own as long as I set up a fixed payment to my cards each month as the 'snowballing' guide suggests and then pay any bonus/commision into the cards to clear them quicker.

I hadn't missed a single minimum payment with my creditors until Stepchange told me to cancel them and just pay them what i could afford each month. Ok I might of been robbing peter to pay paul occasionally but atleast my credit rating was decent and I was being offered promotional rates.

Thanks

Mark

National_Debtline

Hello again Mark,

Do have a go at completing a financial statement, this way you can ensure that you can meet your minimum payments. if you can, then always try and avoid going down the route of using a debt option (formal or informal) as there can be significant effects on your credit file. You should only really consider offering lower payments etc. if there is not a viable alternative.

How likely is in the inheritance? Have you an idea how much it might be?

David @ NDL.

dancingfairy

hmmm. well if you were going down the dmp or iva route then your credit file would be affected anyway. It's a shame that you didn't know you were going to get a new job and subsequently afford the repayments but I guess StepChange (just like you) had no way of knowing what was around the corner.
I'm assuming from what you've said that you can now meet the min repayments again? In which case you can look at snowballing and try and knuckle down and pay as much as possible off the highest rate debt first.
Good Luck
df