Debt Management Plan or Bankruptcy

Daddio70

We are currently going through some financial difficulties and are just ending up digging ourselves deeper and deeper into the hole of lifelong debt.
Currently we are in debt of around £17,000 as well as having a car on PCP.

After consulting with a debt councilling service they have advised that we go on a Debt Management Plan rather than bankruptcy. They have said that if we file for bankruptcy the official receiver will more than likely not let us keep it and carry on paying the monthly payment.
The plan will probably go on for 6 ish years depending on circumstances and if the creditors don't carry on adding interest.

I'm just wondering if the DMP is actually the best way forward if it means paying it all of for 6 or more years and also having a very restrictive budget for food etc. Or would bankruptcy be a better option, even if it means losing the car. The budget the official receiver allows seems more generous. I also realise that any excess amount goes to the official receiver for 3 years.

Any advice would be very appreciated please.

Steven_from_scotland

Can you post up your soa? 17000 doesn’t seem like a lot of debt for a we unless you are on extremely low income

middleclassbutpoor

Very difficult to say with no real information about your situation. Your comments would indicate you have good surplus income as I have read your comments as being that the bankruptcy would bring an IPA with it.

Have you posted on the debt free wannabe board?

If not, I would post a SOA on there where you may get some further guidance.

ToxtethO'Grady

having a very restrictive budget for food etc.

Why do you say this? A DMP is a voluntary debt solution where you set your budget and your creditors have no say on what you spend...so what if your food is a above the recommended guideline all it means is you have less to go towards the creditors. There is not much they can do as it is not legally binding however bankruptcy is and it doesn't matter what the OR says about your car most HP contracts have an insolvency clause anyway. Some car finance companies will automatically cancel your agreement and repossess the vehicle if you go bankrupt.
What's the monthly payment? Anything less than £200 is usually allowed and the value of the car comes in to it as well (second hand value of car minus how much left to pay on agreement = less than £1K OR may allow you to keep it)
You need to post your SOA and maybe check your budget and options with the free debt advice agencies.

StopIt

Many questions here.


1: Are you a homeowner? If yes, BR puts you at risk of losing equity, or the house itself.


2: Could you post an SOA? A DMP is a good tool for those who may have never set a proper budget before. Laying out everything will make your choices more stark


3: Did you go to a debt charity, or a company that would charge for the DMP? If the latter, STOP. Contact StepChange or the Nationa Debtline and they can advise accordingly.

patman99

Even if you go the DMP route, you will be advised to hand back the car (voluntary termination). The PCP payments would have to be included in the DMP as they would in br. So expect the finance co. to want the car back (unless they are happy to potentially loose the interest they would have earned from the point of entering a DMP and the debt finnally being cleared).

With a DMP, you do at least have the option to amend how much you pay each month as your circumstances change. For instance, if you/your other half is in a job whereby one of you get a promotion with a higher salary, you can then up the monthly amount and clear off the debt quicker.

With bankruptcy, you are given a much tighter set of restraints. Get a work bonus?. Well, that will go to the OR. Win the Lotto and that becomes the OR's (well, enough of it to cover all your debt and their fees anyway).

With either solution your credit rating will be screwed for 6 years after discharge/final payment anyway.