Dmp or Dro? Help!

Helloht

Any and all advise is welcome please! 

sourcrates

Hi,

The eligibility criteria for a DRO is as follows -

Debts of no more than 30k
assets owned no more than 2k
car owned no more than 2k
Cannot be a homeowner
Must have £75 or less disposable income at month end, not including any debt repayments.

Basically if you can tick those boxes, you will be accepted, been silly with money is not a criteria for eligibility that is looked at fortunately, although preferential treatment to one creditor over another, or large amounts of borrowing prior to applying for a DRO may be grounds for further action.

You do need your income to be stable for the full 12 months though, otherwise you run the risk of the arrangement failing.

If your income fluctuates, or goes up significantly, then the DMP option may be better, save up for settlement offers further down the line, that too is a good plan, your immediate circumstances should tell you which option will be best.

The fallout from any debt solution will be on file for 6 years regardless of what it is or what you do, but your credit file will heal with time.

Helloht

Thankyou for replying I have seen you give tons of helpful advice to others - my current situation definitely meets those requirements - how far back do they look into your bank statements, as I want to be able to continue paying my sister back the loan she gave me. And with regards to fluctuating income is there a rule of how much you can earn over the limit? As in if 1 month I had more than the £75 spare will they revoke the whole plan?

Alternatively with a Dmp (the option I'm favouring towards) is there a limit of how much extra income I can earn (I would rather keep the lump sum commission payments and make future settlements rather than over commit monthly as my basic salary won't increase)

Am I more likely to get a mortgage in the next 3-4 years with an active well managed Dmp or with a dro that has been settled for that same time period? I am happy to pay this for the longest time possible and allow me to try and live a fairly normal life without scrambling around every month trying to make ends meet. Who decides how much I pay each month to begin with? 

If I go the dmp route is the general advice just stop paying all my creditors now, let them default then contact stepchange in 6-8 months? Is there any reason I wouldn't be accepted onto a dmp? 

ratrace

Hi Just in case you have not looked at this but can your OH sell his £17K as the prices are high now

that would get rid of the most of the debt, and then if so wish you can pay him back with the all payments yo are making now and it wont take long as you will be paying no interst as the debts (most) would be paid off in go

that way you dont have to wait 6 years to buy a home etc... its better for you and him just thought i would give you another way at looking at things as you are planing to use his car as a deposit in the future the only problem there is that his car may not be worth much then as oppsed to what it is now. hope that helps 

sourcrates

With a DRO its a sliding scale depending how much over the lump sum asset limit you are, usually if your income leaves you with more than the £75 on average, then you risk your arrangement being revoked, however it would have to be self reported as there are no further checks done on you once accepted.

With either defaults from debt management or a DRO on your file, a good broker should be able to get you a mortgage, it will cost you more obviously, so may be better to wait for the fall out to clear before committing to that.

Debt management is a very informal arrangement, your monthly payment is decided by the amount of your disposable income, according to your budget.

If you go with stepchange they will do a formulised arrangement for you for free, I say formulised, there are no hard and fast rules with a DMP, however stepchange will expect you to treat creditors fairly, so as long as they all get similar treatment you will stay within their guidelines.

Things like overtime and bonus can be emitted from budgets, and saved in a rainy day fund, you don`t have to declare them to anyone, as debt management is not a formal arrangement, but they will expect you to do things there way.

You may want to consider self management if the stepchange way is too stringent for your needs.

You are correct about the general advice on getting defaults first if possible, most creditors accept whatever DMP payment is offered, if any don`t do that, then you keep paying that creditor anyway, they will still accept your money, all that will happen is they will most likely sell your debt on earlier than was planned.

Helloht

So for a Dro if I received a 1500 commission one month for example then another 6 months later but spent both on general living is this OK? Or could I include an expected amount of commission in my original expenditure/income discussion so if I said my expected income was £30k for example instead of just my basic of £27k but still meeting the maximum of £75 spare income. With a dro is it best to get started straight away with no missed payments or let my accounts default for 6 months first? (would I need to build an emergency fund like the dmp advise?)
Also is the net income figure after pension and student loan deductions or just after tax deductions? 

sourcrates

With an income and bonus structure like you describe, I`m not sure you would be in DRO territory.

A DRO is for those with very little income, few assets, and completely unaffordable debt, although you are allowed an asset level of 2k, so you might get away with it that way.

See what Fatbelly may think on that one, he`s a DRO intermediary, so will know the answer.

You don`t make any payments in a DRO, and as its a regulated debt solution, there are set rules on how accounts should be marked after completion etc, so yes, you just go ahead and apply.

DRO`s last 12 months, so considerably less that your average DMP, so an emergency fund, although nice to have, is not always necessary, plus you have to think of the 2k asset limit rules.

Helloht

Thanks for your help here. I decided as I'd already told my partner and he surprisingly was fine I would speak to some more family members and see what the general advice was.
Well long story short my dear grandma has gifted me £12k, unbelievably and eternally grateful, she helped my other siblings with house deposits so she is just considering it that
The rest is now manageable and hope to consolidate it to lower rate loan or 0% CC ASAP once my score settles 

Grumpelstiltskin

Right think carefully how you will use the £12k

You could decide to pay off the debts with the highest interest rates first, you could decide to clear some smaller ones first, just don't rush in and think carefully.

You want to try and not get another loan that is not clearing them just shuffling them around.

Helloht

Yes I have so far cleared the aqua at £5000 (I was paying £150 a month and 100 was interest ugghh) and the Vanquis at £2200 - again crippling interest payments were about 110, and the longest loan which was 119 a month and had just under £4000 to run.

I have actually had another win that my work have offered to give me a draw on my salary of £1000 a month extra for the next 12 months based on my future commission earnings (so far I have made about 3.5k this year so on track for this anyway) but the payments can take normally 3-5 months to clear and were sometimes 200,  sometimes 2.5k. There is no time limit on how quickly I have to make this back for them but they would assume I will comfortably surpass that within the year (especially now I will be in a good headspace). So after tax pension student loan I would imagine it will be an extra 700 a month 

I have worked out the remaining for now I will be paying about 400 towards debt, 132 is still interest, but my thinking is once my score settles I could move it to a 0% balance and still pay 400 off monthly. In January I will be 200 a month better off due to childcare will be getting 30 hrs free (he turns 3 end of the year) then I will continue paying 600 a month for the foreseeable

In my budget I have allowed monthly:
£200 food (partner will pay the same)
£150 petrol (I wfh but we use my car as the family car) 
£100 savings (into my htb isa) 
£100 miscellaneous

We have a 17k deposit ready for a house, so we anticipate being able to buy this time next year. Of course my earnings then I won't be guaranteed the extra £1000 a month but I do expect to continue doing well commission wise and that does come with future base salary increases, plus childcare will be significantly cheaper and a mortgage will be cheaper than our current rent

I feel incredibly lucky that this unbearable situation has turned on its head in 48 hours and I know not everyone is so lucky, but I still feel I owe it to myself to be incredibly happy that there is a light at the end of the tunnel after dealing with this alone for 10 yrs. I must say I regret not telling any family or friends about this sooner

My next question- do I keep my unused accounts open? I have a credit limit of about 21k or do I close the high interest ones (Vanquis and aqua) which would mean I have a total credit limit of 13k?

Grumpelstiltskin

Personally I would close the evil high interest rate cards.
If they are gone you can't be tempted to use them.