29K debt advice please

Owllover

Hi, I'm looking for some advice with my debt please. My situation is potentially changeable so I haven't done a full SOA.


I have £29K unsecured debt, across credit cards, overdraft and store accounts. My take home pay is £1500. My repayments on the debt are £850 per month and one of the creditors has just increased the payment by £70 so it will be £920!



I'm paying a massive amount of interest and it is just unsustainable.


I'm currently living with my parents and my outgoings are around £950 per month. Here's the thing...I want to move in with my partner. If I do we estimate my outgoings would be around £1250-1300 per month.


I've spoken to a debt advice company and they suggested with my current situation, getting an IVA and the payment would be £400 per month. BUT, they said if I intend to move in with my partner, doing that first, then getting an IVA (with a lower payment amount).


I know nothing about this stuff. Does that sound sensible? What other options would I have with my situation? I also have some specific questions


1) What do I do about my mobile phone? I'm currently in a contract and paying off the cost of the handset. Can I keep this or does it get included in the IVA? Will I be able to get a new contract?
2) I need to sort myself out so I can budget properly. Am I ok to spend for the next few weeks on my cards to ensure I don't run out of money the first month my credit isn't available? At the moment my pay just pays off the overdraft each month then I'm back into it and getting deeper...
3) If I move into private rented accommodation with my partner, then get an IVA, will this affect the tenancy? Will it affect his finances at all or will they be taken into account?



Any comments or thoughts very much appreciated. Thanks

sourcrates

Hi,


An IVA is an option for you, but is likely to last 6 years, as a none homeowner, you would have to make an extra year of payments in all likelihood. (homeowners who take out IVA`s have to try to remortgage in year 5, if they can`t, then its an extra year of payments also).

There is a certain degree of uncertainty with IVA`s, creditors do not always accept your proposals, there may have to be compromises, IVA`s are usually taken out by people who have massive debts, and cannot go bankrupt due to being property owners.

To answer your specific questions, your phone can be listed as an essential outgoing, as long as the cost is reasonable, otherwise, in the IVA it goes.


You can take credit from anywhere if its also going in the arrangement, your credit is affected for 6 years with any debt solution, however many people are still able to rent with few or any problems.


You asked about other solutions, your only other realistic choice is bankruptcy, which is what i would choose in your position, no ability to repay your debts within a reasonable time scale, and no assets to protect, i would take bankruptcy every time, the budgeting required in an IVA can be very constrictive, and it goes on for 6 long years, added to that the uncertainty at first if the arrangement will be accepted or not, its all a bit of a gamble.


Bankruptcy includes all your debts, and there is no uncertainty, it lasts one year, then you are discharged, you would have an income payment arrangement for 3 years (IPA).

There is a £680.00 fee though.

You need to decide if you can live within the constraints of an IVA for up to 6 years, if the answer is no, take the bankruptcy option, if yes, go for the IVA, bankruptcy will impinge only slightly more on your life than an IVA will, its all done online and by phone and post, no requirement to attend a court anymore, and is a very simple and straightforward process that allows you to start again afresh after a year in most cases.

Owllover

Hi sourcrates


Thanks so much for the detailed reply. I'm quite intimidated by bankruptcy, I don't really know how it works. Would the payment amount for the IPA by similar to what I've been advised for the IVA? Would a bankruptcy affect my partner if we lived together?

sourcrates

Owllover wrote: »

Hi sourcrates


Thanks so much for the detailed reply. I'm quite intimidated by bankruptcy, I don't really know how it works. Would the payment amount for the IPA by similar to what I've been advised for the IVA? Would a bankruptcy affect my partner if we lived together?

Anything over £20 disposable income, you will get an IPA.


You would work out your budget with the official receiver, there are set limits for budgets in bankruptcy, whatever is left over would go into the IPA.


Bankruptcy would only affect you, as long as you had no joint financial products together.


It is a lot to think about, take your time and don`t rush into anything, i`m not wanting to downplay anything, as both options are a serious life choice, but an IVA will be easier to live with, the overall effect will be less, in bankruptcy things are a little more intrusive, but it will be over quicker.


Can i ask where you got your initial financial advice from ?


As we recommend using one of the free debt advice services, such as stepchange, payplan, or national debtline.


Debt management companies should be avoided when taking advice, as all they are really interested in is selling you something, these companies can make big money from selling you an IVA for example, all IVA`s attract fee`s, but some cost more than others.

Owllover

It was The Debt Company

sourcrates

Owllover wrote: »

It was The Debt Company

Always get advice from one of the debt charities i mentioned before (see below).


Although an IVA may be right for you, and can only be administered by an IP, lots of them are mis-sold all the time, debt management companies can make large profits from selling you an IVA, and that is why you should never rely on there advice alone.


If you take the IVA route, always check on the fee`s they charge, and if the IP concerned follows the IVA protocol or not, all the charity sites have a list of approved IP`s.



https://www.stepchange.org/


https://www.payplan.com/


https://www.nationaldebtline.org/


For example, stepchange via Grant Thornton, charge you 2k over the life of your arrangement, plus 15% per month from your payments per month as well.


Other companies charge a lot more, so be wary and do your research.

Owllover

I'm thinking about doing the IVA. I've completed the 20 minute advice guide with Stepchange, based first on my current figures and then if I were living with my partner. First of all, it suggested a DMP, followed by IVA and Bankruptcy. The second time, it suggested IVA, followed by Bankruptcy and DMP. The main advantage I see of the IVA is just that it's not bankruptcy, and that I wouldn't have the initial fee.


Any further thoughts would be much appreciated.

National_Debtline

Hi Owllover and welcome to MSE,


From the situation you have described, I would agree that all 3 options seem viable, plus the option to negotiate yourself with the creditors. It is a big decision, and you obviously need full advice about the implications of each option, but it breaks down into some basic ideas.


If you continue to live at home, you would have an approximate surplus of £550. If you paid all of this towards your debts, then you could be debt free in around 4.5 years in a DMP (assuming all interest and charges are frozen). An IVA would be less suitable as the fixed term is longer than 4.5 years, and bankruptcy feels unnecessary (but is still an option). However, this would mean not moving in with your partner to keep your surplus as high as possible.


If you move in with your partner and have a surplus of £200 - £250 per month then it would take you between 9.5 years - 12 years to be debt free through a DMP and this is when an IVA or bankruptcy become the better options. As long as you don't have anything in joint names, such as a joint bank account, then whatever debt option you choose won't impact your partners credit file. If he updates the tenancy into joint names, you will need to check it carefully for an insolvency clause. This means, if you declare insolvency, which is either an IVA or bankruptcy, there is a risk of eviction.


I hope that helps,


Laura
@natdebtline

System

Can I ask why your out goings would be circa £1300 if you moved in with your partner? Assuming you are both contributing 50/50, your estimated out goings would be £2600, which is eye-wateringly big.


Do you live in London? Are you sponsoring your partner? Either way your spending is out of control, your budgeting skills need refreshing or you cannot afford to move out of your parents house until a good chunk is paid off. Even if you rent, you'll struggle due to the credit check.

Owllover

Hi, I've been reading a few threads and a bit confused about student loans. I'm about to start a masters part time, and I'll be getting the postgraduate loan to pay my tuition fees. Does this change anything at all?


Re the question on my expenses. I roughly work out that if living with my partner my half of the bills would be around £450, and my personal expenses around £800.


I understand we'll struggle with the credit check, that is a concern at the moment.

jimbo747

I had a similar amount of debt after leaving uni in 2003. I did it the hard way and paid it all back over the following 12 years with the full interest, must have paid £50k back, I've not wanted to work it out. I didnt know about IVA, bankruptcy and what it entailed back then and didn't want my parents to think I was struggling so never told them. If I knew then what I knew now I would have just gone bankrupt, and waited 6 years. Don't be an idiot like me trying to do 'the right thing's when the banks don't give a toss if it was the other way round and can now legally use your money to bail themselves out.