DMP or IVA

GottoHop

Hi,

I am trying to resolve my debits. Following talks with Stepchange I was recommended to go for a Debit Management Plan which would take around 8 years to pay off my loan and credit card debits. Today after another call with Stepchange they suggested that IVA would perhaps be better as it is legally binding and would be only for 5 years with what every still being owed being written off. I am confused which would be better to do. I am currently applying for a new bank account with a new bank while deciding which way to go. I have talked to the bank and they have cancel the loan payment and direct debit for 30 days, still trying to get through to the credit card company.

Any advice appreciated.

mwarby

we need to know a bit more really.

An IVA is typically not a good choice if you rent, as the main advantage is that it protects the family home. It's worth bearing in mind that an IVA can fail (if income drops enough), the payments can go up(if wages go up or expenses go down), any windfalls will be taken to pay debts, and finally you can pay more (2-3k) than your original debts as there are fees. The upside of course is once the agreement completes your remaining debt is written off.

If yiu can do an 8 year DMP that has the advantage of it being easier to get a mortgage in future (although the 8 years will mean less deposit). The other option is bankruptcy, which would see you being debt free in a maximum of 3 years, an IVA and bankruptcy are seen by most lenders as being very much the same

fatbelly

Yes, the plan to get a new bank account not linked to your debts is a good one
As is the plan to stop paying the unaffordable debts.
If you want to post a statement of affairs we could advise better. - until then all the options are on the table - dmp, iva, dro, bankruptcy
https://www.lemonfool.co.uk/financecalculators/soa.php

GottoHop

Hi,

I owe 34,000 mixture of loan and credit card. I rent so am concerned about how either the IVA or DMP would impact on any future renting, if I have to move house. I don't own any property. The DMP plan worked out with Stepchange seems good as I would have some freedom to pay more when I can, but 8 years is a long time. The IVA due to the 5 years sounds better but I am concerned about its impact of my credit rating and also how restrictive the payment plan would be. I expect that that payments would be higher that the DMP.

fatbelly

It'd still be useful to have a soa.

However, with  34k debt a DRO is ruled out - just leaving  dmp, iva, bankruptcy. The latter two are insolvency and so create a fresh mark on your credit file - and not one that a rental agency would want to see.

Most people entering into a dmp have defaulted on their debts already and so are some way down the  line to the entries dropping off the credit file. I don't think you are.there yet.

The payments should in theory be the same as in a  dmp, iva, or bankruptcy as you are expected to pay your surplus income.

It's just that the length of time is different - 8 years, 5 years, 3 years in your case - and if payments have to stop then the first two fail.

Might be best to bite the bullet and go bankrupt.