DMP or IVA

cmcavon

We've been in discussions with payplan about our debts. Yesterday I was fully expecting to end up on a DMP, however today payplan have recommended an IVA.

The DMP would take 13-22 years whereas the IVA would be max 6 years (I believe).

It seems like a no brainer but I'm scared! We own a property which we rent out and we rent another privately. Would an IVA prevent us renting somewhere else? One of many questions I've got swirling round my head!

I've heard negative things about IVAs so I'm really nervous but it sounds so good to be debt free in six years and start again.

I recently found out I'm pregnant which has triggered all this.

Tixy

A IVA would be visible in a rental credit check/lettings agency check so yes it could make it much harder to move to a new rental property.

Other things to consider are whether you will still be able to meet the IVA repayments whilst on maternity leave. A DMP has a greater flexibility to reduce payments if you need (without needing formal approval from your creditors).

Before deciding on an IVA, or deciding on which IVA firm to use then I would definitely recommend a second opinion from one of the debt advice charities.

Do you have much equity in your property?

cmcavon

There is some equity but if possible we really want to keep hold of the house.

The problem with the DMP is the length of time it would affect our credit rating and how long it would take to pay back.

It does appear the IVA is the best option. As I'm self-employed though its not easy to prove my income.

National_Debtline

Hello there,

A key issue is absolutely the property that you rent out. Although an IVA typically lasts 5 or 6 years, there *may* be an equity clause. Generally this clause is exercised in the final year of the IVA. When deciding on the best option please factor in the potential extra cost of a remortgage/secured loan. In addition, do also bear in mind that an IVA is more rigid in nature. If you are self-employed and have fluctuating income an IVA has the potential of failing if you have a few particularly bad months. There are safeguards, however, and people can take a repayment break. In addition, IVAs can be modified - although it may require a creditor's meeting.

There are very important benefits with an IVA. Whilst you're within the arrangement a creditor cannot take any action against you. Interest and charges will be frozen and it may be that you end up paying less than the actual amount you owe in total.

We've a couple of fact sheets that outline the key aspects of both options:

Debt Management Plans
IVAs

Very best wishes,

David @ National Debtline.

cmcavon

It's a pretty horrible situation, whilst we are just coping with minimum payments now when I go on maternity we won't. Payplan are taking my current earnings which are pretty low but may improve in the next few weeks. When I'm on maternity I will get around the same as I do now with maternity allowance and extra tax credits and child benefits so this should mean we are still able to maintain payments.

The IVA worries me as its got so many implications but at least it's shorter term than the DMP and we can start to rebuild our lives.

I understand the equity clause, we will have to accept that and deal with it.

It's been such a stressful few days since reality hit Im finding it all so hard to accept.

Has anybody had good/bad experiences on an IVA?

longtermplanner

cmcavon wrote: »

I understand the equity clause, we will have to accept that and deal with it.

Has anybody had good/bad experiences on an IVA?

The problem with asking people about their IVA experiences is that the IVA contract terms have changed at the start of this year, so other people's experiences may not be that relevant.

You need to read up about the new secured loan clause that is now included. Because there are some horror stories around about people being made to take secured loans at 15%, 20% or more interest. Getting debt free in 6 years sounds good, but not being saddled with a secured loan for another 10 years or more afterwards!

The other property you have, is there any equity in it? If there is, you should consider selling it and using that to clear as much as possible of your debts. This isn't 'getting off the property ladder' it's a sensible use of an asset that you have.

sourcrates

My experience, was on the whole, good, but as mentioned above, there have been radical changes to the equity clause now.
It would not of affected me anyway, as I was not a property owner, I had to do the full 6 year stint, looking back, and knowing what I know now, I think I would of chosen Bankruptcy instead, for the simple reason that it would most likely of all been over in a year, rather than 6, but that is not a serious option for you, especially with two properties, it may be best to sell one of them and clear as much of your debt as possible, so eliminating the need for another solution.