On a DMP, StepChange offering IVA/Bankruptcy - Uncertainty!

MrJester

Hey,

Would like some advice, maybe even some support - from those who have had experience with any of: IVA, Bankruptcy, DRO's, been on a DMP - etc.

I've around 26k total debt, approximate breakdown as follows:

• £17.5k loan
• £4k credit card
• £2k credit card
• £900 course fee debt
• £1600 owed to family/friends

I've been on a DMP with StepChange for I think nearly a year now. Originally I was paying around £400, but had to lower that to £200 earlier this year, and soon will have to lower it again to around £90 per month under a new budget from September onwards - as my work goes part-time so my earnings decrease.

I've talked this over with StepChange, and their primary suggestion is an IVA. I'm dubious to this, as from what I've read that is largely useful to homeowners, and it seems that they would perhaps raise their suggestion priority of an IVA because they take a fee in the process.

In the meantime, we've submitted the DMP budget change and hopefully the creditors will continue to agree to it as I am still making consistent payments.

I'm not a homeowner, I don't own a car, I don't own anything substantial (assets) at all that is worth anything.

From what I can see, my options are:

• Hope the DMP can continue as it is with the new lower budget, and work towards improving my circumstances - more income.
• Do an IVA, and I guess if my circumstances improve I'll end up paying more but it'll write it off at the end of 72 months
• Do a bankruptcy, all over within 12 months
• Somehow pay off 4-6k of debt so the amount comes underneath, and look at a DRO (later on down the line)

I'm not massively fussed about the effect on my credit score, it's shot to sh* anyway and from this whole experience of debt I only buy things I know I can afford, I don't want credit in the foreseeable and the only point I would need it is if I need a mortgage at some point, but I don't have any plans for that at this time.

I'm leaning towards bankruptcy, because of the clean slate within 12 months. Then I can move on with my life and not make the same (youth) mistakes again. Only things are is the unknown affects it might have on my life that are yet unseen, things like insolvency affecting agreements e.g. with health insurance, or being able to work for myself (I might want to try get freelance work over the next year), I need to go abroad soon also and would it affect things like travel insurance? It shouldn't affect my current employment, but I will check.

What option would you go for? Taking into account your own experience from any of these options?

I thank you for your shared experience.

National_Debtline

Hi MrJester


How long do you expect to be on these reduced earnings i.e. 12 months/2-3 years/even longer?

Dennis
@natdebtline

MrJester

National_Debtline wrote: »

Hi MrJester


How long do you expect to be on these reduced earnings i.e. 12 months/2-3 years/even longer?

Dennis
@natdebtline

I expect to be on these reduced earnings for the next 12 months. Unless somehow freelance work kicks off and additional income becomes regular in that, but realistically probably not likely.

After 12 months, I'd expect to be on a higher earning again. But this is all hypothetical guesswork.

And by looking at my history, I'd give more weight to the side of uncertainty. Trying to be realistic, less hopeful.

System

If Stepchange do get a fee for IVAs it doesn't alter their advice and they don't suggest it unless it is the best option for you. They also mentioned bankruptcy as well and they get no fee from that.

Personally not owning your home I would say bankruptcy is a better option. Both will stuff your ability for credit and a mortgage but bankruptcy would improve the situation years quicker than an IVA.

MrJester

Tarambor wrote: »

If Stepchange do get a fee for IVAs it doesn't alter their advice and they don't suggest it unless it is the best option for you. They also mentioned bankruptcy as well and they get no fee from that.

Personally not owning your home I would say bankruptcy is a better option. Both will stuff your ability for credit and a mortgage but bankruptcy would improve the situation years quicker than an IVA.

It appears their counterpart, StepChange Voluntary Arrangements, handle the IVA process and take a fee. The StepChange advisor couldn't tell me what the fee was, but assured it was irrelevent because I'd pay the same amount. But even so, not sure it's actually showing me the best deal in the situation, so I feel like they weight it above other options (because they get a fee - regardless their service is excellent and very much appreciated and needed)

Thanks for your input.

In both IVA and bankruptcy, does the duration of the insolvency on your credit record appear for 5 years as of the date of the insolvency beginning, or ending? If ending, IVA would be like a 10 year sh* show.

sourcrates

Stepchange are directly funded by the big banks, they do not receive payment dependent on what debt solution is recommended for you, so there advice should still be impartial, they do have different parts to the company who act as insolvency practitioners, who administer IVA `s, on the charities behalf, there fee is an industry standard fee.


https://www.stepchange.org/debt-info/iva-costs-fees-and-charges.aspx


All insolvency solutions show on your credit file for 6 years.


The only person who benefits from an IVA financially, is the insolvency practitioner who sets up your arrangement, that is how they make their money, from fee`s associated with setting up, and administering the arrangement.

OP i have had an IVA, it lasted 6 long years, with ups and downs, and it was a very long drawn out process, you are not really reminded of the arrangement to be honest, contact with your IP was just once a year at annual review time.

The problem you will have with an IVA, as you are finding out with your DMP, is your fluctuating income, your IP will have certain discretion to alter your payments in an IVA, but unlike in a DMP, those reduced payments must be paid back when things improve, that is unless it is going to be a permanent reduction in income, in which case a creditors meeting must be called to accept or refuse the motion.

And they could, quite easily refuse, leaving you with the real possibility of a failed IVA, and going back to square one.

If i had my time again, i would opt for bankruptcy, there are no what ifs, or maybe`s, in bankruptcy, all your debts are covered, and there is little or no chance of it failing.

After 12 months, new start.

MrJester

In a bankruptcy, does that affect things I already have like a bank account?

sourcrates

MrJester wrote: »

In a bankruptcy, does that affect things I already have like a bank account?

Your current bank account would be frozen yes, that is why you would have to be proactive, and get a new basic account opened, with a bank with whom you have no debt, and is bankruptcy friendly.


Move all your essential payments over beforehand, and keep a quantity of cash at home as you may not have banking access temporarily.

MrJester

sourcrates wrote: »

Your current bank account would be frozen yes, that is why you would have to be proactive, and get a new basic account opened, with a bank with whom you have no debt, and is bankruptcy friendly.


Move all your essential payments over beforehand, and keep a quantity of cash at home as you may not have banking access temporarily.

When you say "frozen" what does this mean exactly? I just keep reading it but what happens if there is money in it, where does that go? Does every penny get given over outside of a proposed budget or something?

Apparently, my bank already said, it could continue without having to be closed and they've had bankrupt people previously - which is good. It's one o' them fangled newish digital banks.

sourcrates

MrJester wrote: »

When you say "frozen" what does this mean exactly? I just keep reading it but what happens if there is money in it, where does that go? Does every penny get given over outside of a proposed budget or something?

Apparently, my bank already said, it could continue without having to be closed and they've had bankrupt people previously - which is good. It's one o' them fangled newish digital banks.

You would have to ask a bankruptcy advisor that question, or over on the bankruptcy board, as others have been through the process.

fatbelly

MrJester wrote: »

Apparently, my bank already said, it could continue without having to be closed and they've had bankrupt people previously - which is good. It's one o' them fangled newish digital banks.

Then that's your answer.

Provided your bank account is not overdrawn and does not have a huge balance the OR will have no interest in it but will inform the bank of your bankruptcy. It's what happens then that differs but in your case you have the answer.

I do believe stepchange advice is swayed by the fees they receive and that are built into IVAs, regardless of how much that is and how it gets split up. Please ask them why they made that recommendation and post it here.

The big difference to you is that with an IVA you pay your surplus for 5 years, with a bankruptcy it's 3.

With bankruptcy you apply yourself, it's an online process and it costs £680.

There's no difference to your credit file - all forms of insolvency get a mark and it stays there 6 years