What path to take..?

Ojay

This is my first post, so hi everyone

My situation is nothing new, Initially got a credit card to cover some living costs, then all of a sudden a couple years passed and I'm +£10k in the hole struggling to keep on top of everything. My debts aren't massive compared to some, but it's all relative I guess, & I am struggling to cope.

I work for myself and income is up and down. I start to get things paid off then times get lean and I'm maxed out again. It's been going on and on and it's really getting me down, I really want it put to bed.

So, I've gone through various debt advice avenues to figure out the best way for me to help myself. I've worked out my average monthly income over the last 2 years. Then gone through all my expenses & I find that I've about £92p/m surplus. This is on average, and certainly not always the case, often I'm negative.

As far as I can see, I've 3 options...
Write to my creditors and ask to pay what I can afford each month, hoping they'll put a freeze on my interest. Or apply for an IVA / DRO.

At £92 surplus (pre tax) I'm slightly over the DRO requirement of £50, but I'm sure that could be met, if I averaged my monthly income over the last year instead for example. Is there any guidance on working out salary for self employed by chance?

Looking at it objectively, in all situations I'm going to end up with a terrible credit score.
negotiating with my creditors may yield one that's not quite so terrible, but it'd still be pretty bad. If I do manage to negotiate that, I'll have to pay £92 pounds a month for 130 months to clear my debt (roughly).

An IVA would be affordable payments for however long was agreed upon, then the remaining debt would be written off, correct?

With a DRO, my entire debt would be written off in one fell swoop, right?

Leaving morals aside, and considering I'll end up with a terrible credit score whatever avenue I take, would it not make sense to just go straight for a DRO if I'm eligible?

Obviously I know a DRO isn't some magical solution, I know it's a serious thing & that my life is going to be impacted hugely by it. I'm just trying to break my options down to the bare bones.

Any thoughts, past experiences with it all or advice would be really most welcome.

Thanks!

National_Debtline

Hi

Welcome to the forum.

As your income fluctuates I suggest that you contact my colleagues at Business Debtline as they specialise in advising self-employed people. They’ll be able to advise you on the best way to complete a budget, and also on the most suitable option to deal with your debts.

www.businessdebtline.org

Both DRO and IVA could potentially be risky options if your income is likely to change over time. With an IVA it’s a legally binding agreement to meet certain payments for 5, sometimes 6 years, with the outstanding debt being written off. If you find that you can’t meet the payments due to a drop in income you risk the IVA failing. In that scenario you would probably find you had initially been paying the insolvency company fees, rather than your debt balances.

With a DRO you have to meet the criteria for a full year. If your income increases in that time you might find your monthly surplus increasing over £50pm, in which case the DRO could be revoked and you would be back to square one.

James
@natdebtline

laineyhen

ive not posted on this subject before
however i would like to offer you a little bit of our experience in an Iva
weve recently completed a long 6 and a half years


as we were working our way through
as a family
we watched the banks get bailed out of their troubles without question , and speedily by the good of the UK
then the same banks get rewarded with huge bonuses

we were busy learning how to live and shop without
if we had our time over again, it would not be an Iva
i would suggest you put you and yours first
if the quicker route is available
then take it without guilt
curb your lifestyle, live within your means , and think yourself lucky you made a quicker escape than what could have been

remember all of the ways offered to get out of debt will be lining someone elses pockets
not yours
so why should you suffer from any guilt

fatbelly

10k in debt and struggling...

I suggest you talk to stepchange or your local CAB as these are the two organisations that do most DROs. Get an intermediary to look at your income and discuss the pros and cons with them.

Technically, your debts are frozen for a year in a DRO and then written off after 12 months if your situation stays within the criteria.

wba31

In any debt advice situation with someone who is self employed with fluctuating income, i always advise to take an average salary over the past period of normal working, a year preferably if there have been no major events (birth of child or broken leg - having a few days off for flu etc is normal!)

Ojay

Thanks everyone...

@laineyhen - I couldn't agree more.

I went and saw my local CAB and they suggested writing to my creditors to try and work out some manageable payments. I saw someone originally who was very pro organising a DRO. It was that which got me really into the idea of getting one. They changed their tune at the second visit though.

Is an IVA usually in place for around 5 - 6 years then? They insinuated it would be in place for about a year, then the debts written off.

I'm absolutely sure I could present an eligible case for a DRO. My workings were based off of pre-tax earnings, so using post tax records would have me qualify easily.

Now that I've seen my CAB, I either go with them and try to work out a payment plan with my creditors, or I guess organise a DRO off of my own back. Is that something I can do? It looks like you can just apply at the Insolvency Service, which I can't link to as I'm a new user.

Thanks again for all your input

wba31

Ojay wrote: »

Thanks everyone...

@laineyhen - I couldn't agree more.

I went and saw my local CAB and they suggested writing to my creditors to try and work out some manageable payments. I saw someone originally who was very pro organising a DRO. It was that which got me really into the idea of getting one. They changed their tune at the second visit though.

Is an IVA usually in place for around 5 - 6 years then? They insinuated it would be in place for about a year, then the debts written off.

I'm absolutely sure I could present an eligible case for a DRO. My workings were based off of pre-tax earnings, so using post tax records would have me qualify easily.

Now that I've seen my CAB, I either go with them and try to work out a payment plan with my creditors, or I guess organise a DRO off of my own back. Is that something I can do? It looks like you can just apply at the Insolvency Service, which I can't link to as I'm a new user.

Thanks again for all your input

You cannot apply for a DRO off your own back, it has to be done via an intermediary (a debt advisor who is authorised to do DRO).
Try StepChange or NDL for a DRO. they will deal with you over the telephone and get you to post/email in the bits they need, then they will communicate how to complete the process, then they have to submit it for you.

fatbelly

Why did the CAB 'change their tune at the second visit'? Was it surplus income? Or something else?

Ojay

I'll give those guys a shout, see what they say, thanks.
Well I saw two different people... the first wasn't as specialised as the second. During my second visit I got the impression that they have a step process though. The first being writing to your creditors, the last being a DRO with an IVA lurking in between.

I had a slight surplus, but as I say, that was using a 2 year average of pre-tax earnings. If I drop to my last years earnings post-tax then I'm absolutely within the DRO criteria.

fatbelly

The CAB couldn't do an IVA - they would have to refer you on. However they could have done a DRO if that person was an Approved Intermediary. It sound like it was the surplus income that spooked them.

Hope you get on better with StepChange or NDL

Ojay

So just got off the phone from StepChange, very good advice... similar to that from the CAB but a lot more informative about the whole system. First thing's first is to get these letters sent off asking for some breathing space.

To be honest, this is all off the back of my father passing. His medical & solicitor bills are stacking up fairly high, I have to take time off work to travel to Cyprus to deal with it all and it's all going to impact on what I'm able to earn. Keeping afloat through it all seems like an impossible task and so I guess some kind of insolvency felt like my only option.

Lets see what the banks say & take it from there I guess...