What’s difference between DMP and Bancruptsy to your long term credit score?

Rosebud38

I was planning on DMP but mortgage advisor said I’m better off with bankruptcy as the affect of a DMP still lasts long my after the 6 years when it leaves your file. I’m devastated to be in this situation, my partners like vets/hates me and I don’t know what’s best to do. If I do either then we can’t sell house for ten years and he will resent me. So we have to sell the house and split up? I lose him but debts are paid and I don’t have terrible credit when trying to buy a house in next few years. Or I stay with him, go bankrupt and he resents me cos we can’t move, so we split up anyway. Great options.

fatbelly

As usual there's something in what your adviser said but it's more complicated than that. If your lender defaults you then the entry drops off 6 years from that date. But an Arrangement to pay marker means the entry stays until 6 years after the debt is paid off. So if you're going down the dmp route, make sure you get defaulted early.

With bankruptcy, the default date should be aligned to the bankruptcy date so the whole mess disappears together.

You shouldn't choose your strategy just on the credit file mark, though. You haven't posted any details so it's difficult to advise. Do you jointly own the property? If so the advice to go bankrupt was very dangerous.


Edit: checked your earlier post. You are a joint owner. Ask the adviser why he thought the Official Receiver in Bankruptcy would not seek to realise your beneficial interest in the property.


My earlier advice was

All of your debt is non-priority. As long as you don't do anything stupid the house is safe, and it sounds like you have some surplus income, though not enough to continue with the contractual payments.

Bankruptcy would involve valuing the house in 3 years time and the Official Receiver would want half of the equity, by a forced sale if necessary.

National_Debtline

Hi there,


I agree with Fatbelly, and if you are a homeowner, bankruptcy is very unlikely to be a suitable option. In bankruptcy, your assets are at risk of being seized - this can include savings, shares, vehicles (but the value can be considered) and property. Although the level of equity is considered as well, they do have up to 3 years to make a decision about whether or not to sell the property to release the equity. If the OR does decide to sell the property to release the equity the only way to stop it would be for a third party to 'buy out' your share (in other words, pay the OR your value of equity instead).


With a DMP the default will show on your credit file for 6 years from the date of default or, if no default it registered, the debt will show for 6 years from the date it is settled. So, it can have a more long term impact on your overall rating, but it is not really as bad as bankruptcy and, as stated above, bankruptcy has other draw backs for you to consider.


Laura
@natdebtline