DMP, IVA or is there another alternative

katkins22

I've just joined and wanted to get some experienced opinions on my debt.

I've been trying to dig my way out for well over 10 years - the last 5 years have been particularly tough with my OH having redundacy/mental health/gambling issues. Essentially here is my SOA, my OH has been advised to go down IVA route and his credit rating has been shot through so I firmly believe that is for the best for him but I'm not sure if it's right for me - our accounts are in no way linked so I haven't included him on the SOA.

Many of my problems are because i am helping him get through the month with and covering all the household expenses on my own so as his IVA hits in I'm hopeful that this will change (hopeful in a realistic way!)

I have nearly always paid my bills on time (a few hiccups last year but no more than 2 payments behind and then i caught up and paid my minimums since then) so my credit rating has historically been good. At the end of last year i approached Capital One and went on a short term repayment plan - 6 months @£260 with no interest and fees added and then a lump sum payment of £949 in April - this is coming to an end and I'm now considering looking at something longer term a) because my interest charges for all my credit are astronomical as are the minimum payments and b)I can't get any cheaper credit because I'm so maxed out. I can't pay any more than minimum and I'm reusing the credit card i have room on to get petrol for the last few days of the month so it's a vicious cycle.

My loans have about 3 years left on them (nearly half way through) and my credit cards have been maxed out for about the last 8 years, any leeway i make gets swallowed up by car/boiler/house move expenses. We need both cars as we both work 30 miles away from home (unfortunately in the opposite direction to each other!) and we are fairly rural so no public transport links.

Mentally not getting anywhere is pulling me down now and i just want to make some decent headway to pay off this debt - i'm happy to pay back the money i borrowed but I just want a reasonable interest rate so I'm paying more off the balance. At this point an IVA seems like a nice 'easy' option but it's too 'easy' for my mind, I'm not sure if a DMP would be better or if there's another option to consider. I'm happy to contact my lenders directly.

sorry for the essay - TIA for any advice!

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 2

Monthly Income Details
Monthly income after tax................ 2834.48
Partners monthly income after tax....... 0
Benefits................................ 82.8
Other income............................ 0
Total monthly income.................... 2917.28

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 1150
Management charge (leasehold property).. 0
Council tax............................. 154
Electricity............................. 35
Gas..................................... 40
Oil..................................... 0
Water rates............................. 55
Telephone (land line)................... 20
Mobile phone............................ 16
TV Licence.............................. 34
Satellite/Cable TV...................... 50
Internet Services....................... 30
Groceries etc. ......................... 150
Clothing................................ 50
Petrol/diesel........................... 120
Road tax................................ 16
Car Insurance........................... 55
Car maintenance (including MOT)......... 0
Car parking............................. 20
Other travel............................ 0
Childcare/nursery....................... 200
Other child related expenses............ 50
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 15
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2260


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 2500
Other assets............................ 0
Total Assets............................ 2500

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
capital one....................12800.....450.......23 ish
halifax loan1..................7633......324.......13.56
halifax loan 2.................3250......130.......19.16
halifax overdraft..............2700......60........0
halifax credit card............7800......240.......27
Total unsecured debts..........34183.....1204......-


Monthly Budget Summary
Total monthly income.................... 2,917.28
Expenses (including HP & secured debts). 2,260
Available for debt repayments........... 657.28
Monthly UNsecured debt repayments....... 1,204
Amount short for making debt repayments. -546.72

Personal Balance Sheet Summary
Total assets (things you own)........... 2,500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -34,183
Net Assets.............................. -31,683

National_Debtline

Hi Katkins22 and welcome to MSE,


It is very difficult to say which options are going to help you and your partner without a few other key pieces of information please. One thing I would note from your message is that you say you have been helping him with monthly expenses but you have kept your budgets separate. There is nothing on your SOA for 'helping him out' - so the first query would be - is he working full time or part time?


With your SOA there are some potential savings, such as, the cable and broadband (£80 combined), water (if you are on a meter could be reduced) and TV Licence (should be £12 per month, and £37 per quarter). However there is no emergency fund and the food budget looks very economical (unless your partner also contributes).


The next issue would be, how much does he owe? This is a crucial consideration in an IVA. I actually think looking at things jointly could be an option if your debt level is approx. £35,000 then perhaps a joint (interlocking) IVA/ DMP could help. Or, could bankruptcy also be on the table (for one or both of you)?


One of the key differences between at IVA and a DMP is that an IVA runs for a set period of time (normally 5-6 years) and any remaining debt is written off at the end - as long as you stick to it. Whereas a DMP runs for as long as it needs to in order to clear the debt in full. Please post more details and we will be able to offer you more guidance.


Laura
@natdebtline

katkins22

Hi Laura - thanks for the response.

So my partner works full time and earns fractionally less than me - £2700 a month. He has just got so behing with his debts that he is facing a mountain of back payments.
He has debts in the region of £40k so together we have £70k of debt.
I haven't listed any of the 'helping out' money - often he contributes to food and pays part of the rent. So in fairness i pay £575 of the rent and help him out with around £450/500 a month.
I have looked at savings on broadband etc - i have a sky bulk package with my phone, internet and tv package for just under £100 a month with savings on each element due to the offer that was on at the time i signed up - the knock on impact of dropping sky is that currently OH stays away from gambling/going out/pub as he can watch football/box sets at home - ) I have dropped the expensive movies package as that was inflating the bills too much. Dropping the whole lot will cause a huge expenditure somewhere else!
Landlord is not happy to have a water meter so we're a bit stuck there
TV license is £37 a q, not per month. I didn't work it out correctly.
As you point out we have zero emergency fund - the bank of mum and dad is supporting that currently
Food is tight and adds to the stress - yellow label shopping tends to fill the freezer with meat/fish etc and we stock up on essentials from basic ranges. We tend to cook from scratch so no expensive ready meals or going out!

National_Debtline

Hi again katkins,


Thank you for the extra information. So, you have a combined household income of approx. £5600 which means you should be able to create, together, a very realistic and sustainable SOA. I appreciate where you are coming from with some of the expenses, but the higher bills (like sky) may be queried by creditors. If reducing the channels is less practical, you could considered reducing the broadband speed to lower the bill.


To tackle the collective debt effectively, it may mean changing the current plan of approaching this as individuals, and recognising that, unfortunately, you are both in arrears with the debts and neither situation is sustainable.

katkins22 wrote: »

I have nearly always paid my bills on time (a few hiccups last year but no more than 2 payments behind and then i caught up and paid my minimums since then) so my credit rating has historically been good. At the end of last year i approached Capital One and went on a short term repayment plan - 6 months @£260 with no interest and fees added and then a lump sum payment of £949 in April - this is coming to an end and I'm now considering looking at something longer term a) because my interest charges for all my credit are astronomical as are the minimum payments and b)I can't get any cheaper credit because I'm so maxed out. I can't pay any more than minimum and I'm reusing the credit card i have room on to get petrol for the last few days of the month so it's a vicious cycle.

If you use the credit cards each month, are only able to pay the minimum payments, and even that is becoming a struggle, then refinancing is not going to be the answer. Your debt will never decrease like this. It is a case of finding a debt option to really make an impact on the balances of your debts (either separately or together).


If you tried a joint SOA and you had, for example, £1000 per month spare as a couple (ensuring you have allowed enough money for food, emergencies etc.). That means that you could clear the debts (in full) in approx. 6 years. In that case, I wouldn't suggest an IVA, but actually a DMP. If you can afford more than £1000 per month on the collective debts you will be debt free even quicker.


I think you should speak to one of the free debt charities. You will have options that suit you both and if you are both starting to feel the pinch, it may be easier to tackle this together. If nothing is in joint names then there still won't be a financial link between your files.


Laura
@natdebtline

nkkingston

I think if you both have debts and you're sharing expenses, you need to work out a shared budget. Otherwise there's too much guesswork in the little bits of money going back and forth to help each other out, and one of you inevitably reaches the end of the month short (as you're finding), and then the other helps and leaves themself short, and you're both in a weird cycle where you're going into more debt to keep the other out of more debt.

It just makes sense to sit down together and formalise it. That way, you can set up an account to pay all the priority bills from with direct debits and be confident that no matter what, rent and electricity and so on are covered. You figure out what your petrol costs are, your food costs, your clothes and toiletries and entertainment costs, your emergency fund, and allocate those funds accordingly. You find ways to cut down, but you don't hold yourself to an unrealistic standard of living. You look at your debt repayments and figure out if they're sustainable based on what's left - if they are, keep paying. If they're not, DMP or IVA, depending on how unsustainable they are (even bankruptcy, if you're really stuck).

You may find it doesn't work out 'fairly' at first - one of you may be paying more in and the other taking more out. 'Fair' isn't necessarily 50/50: fair is working as a team to meet both of your needs. Somehow both of you sharing each other's burdens is so much easier than each of you carrying your own, you know?

katkins22

Thanks for the responses, appreciate the time and direction and it seems it's time for us to work out where we are jointly, going to be a fun Friday evening - conversations on cash don't go smoothly in our household!

angelpye

I can imagine it might be tough but if you think of the option above, the both of you could be debt free in 6 years whilst still having everything else paid on time and small pots of money put away for emergencies etc. Maybe its worth starting the conversation off in this way. Focusing on the positive. I know 6 years seems a long time but it really isn't and by the end you will both be in a position to save for the future.
I know some people set their budget with room in some pots to cover the bits that the plan wouldn't allow for. So food set much higher to cover sky? Plus any savings you make as you live more frugally people put aside for a little treat or to pay off a lump nearer the end to get it over quicker.

Good luck, facing up to it is the hardest bit and once you are informed as to what is available and what your partner wants you will be able to move forward