£25K Unsecured Debt - Options - SOA Included

lixhul

Hi guys,

I have posted here a few times. Long-story short, I owe £25,000 in unsecured debt to a number of lenders. I applied for a IVA but was rejected on the basis of my personal loans being less than 12 months old (all of them are).

I gambled the entire lot and lost it within months. That part of my life is sorted, on the basis I lost everything.

My question is, while I wait for the loans to be 12-month old, what would you recommend? My options are:

- Set up a DMP and pay something towards them each month
- Pay nothing and wait

I am opting towards paying nothing for the 7 months I need to wait until all of my loans are at least 12-months old before reapplying for a IVA. Any help is greatly appreciated. My statement of affairs are: (Thank you in advance).

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 1

Number of children in household......... 0

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 1590

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 1590[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 350

Secured/HP loan repayments.............. 0

Rent.................................... 0

Management charge (leasehold property).. 0

Council tax............................. 84

Electricity............................. 50

Gas..................................... 50

Oil..................................... 0

Water rates............................. 18

Telephone (land line)................... 0

Mobile phone............................ 12

TV Licence.............................. 0

Satellite/Cable TV...................... 0

Internet Services....................... 28

Groceries etc. ......................... 160

Clothing................................ 20

Petrol/diesel........................... 120

Road tax................................ 2

Car Insurance........................... 21.6

Car maintenance (including MOT)......... 20

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 210

Other child related expenses............ 75

Medical (prescriptions, dentist etc).... 15

Pet insurance/vet bills................. 0

Buildings insurance..................... 12

Contents insurance...................... 0

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 15

Haircuts................................ 20

Entertainment........................... 30

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 1312.6[/b]

[b]

Assets[/b]

Cash.................................... 1800

House value (Gross)..................... 140000

Shares and bonds........................ 0

Car(s).................................. 6000

Other assets............................ 2500[b]

Total Assets............................ 150300[/b]

[b]

Secured & HP Debts[/b]

Description....................Debt......Monthly...APR

Mortgage...................... 99000....(350)......3.5[b]

Total secured & HP debts...... 99000.....-.........-   [/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

PayPal.........................891.69....30........0

RateSetter.....................4406.96...145.5.....15

Ratesetter 2...................7512.25...202.......15

Nationwide 2...................4657.25...107.6.....3

Nationwide.....................636.22....41.64.....3

Admiral........................6590.44...255.4.....6[b]

Total unsecured debts..........24694.81..782.14....-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 1,590

Expenses (including HP & secured debts). 1,312.6

Available for debt repayments........... 277.4

Monthly UNsecured debt repayments....... 782.14[b]

Amount short for making debt repayments. -504.74[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 150,300

Total HP & Secured debt................. -99,000

Total Unsecured debt.................... -24,694.81[b]

Net Assets.............................. 26,605.19[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

RAS

You have various child-related expenditure in your SOA but no resident children? 

Your budget is otherwise very skinny; have you allowed for the energy cost increases? 

Are you aware that you will be required to release the equity in your house in year 5? If you can't remortgage you may be required to take out an expensive secured loan. So you'll probably end up paying back all you currently owe plus the IP fees, at a much higher rate than your mortgage, possibly on par with your more expensive debts.

Of course, if you default, at least all the interest on the current debts is frozen.

If you insist on an IVA, at least go to Stepchange who have the lowest fees.

sourcrates

As a Homeowner you have less in the way of choice, than a non-homeowner.

Who was it told you about the 12-month IVA rule on the loans? as I've not heard of that before.

You can, if you wish choose multiple routes here, a combination of a DMP whilst saving up a good emergency/settlement fund, if you allow the debts to all default, then all interest and charges stop immediately.

As time goes by, your original creditors will want to offload these accounts, as they don`t like managing bad debts for very long, so they get sold on to debt purchasing companies, who buy them for less than their face value, this in turn enables them to offer you discounts for early settlement (once they have gone through there standard range of template letters with you).

So that 25k of debt, could quite easily be settled for maybe half that, if you're lucky and have a fair wind.

To my mind that would be preferable to insolvency, as the budget rules are quite strict, and any and all windfalls must be paid to your arrangement, not to mention the re-mortgage clause in year 5, and also the fact that it`s a regulated form of insolvency, wear as DMP is completely the opposite, it`s informal, and flexible, an IVA is not as flexible.

fatbelly

It looked to me to be a choice between IVA and dmp.

As you've already tried, and failed, with an IVA the logical thing is to start a dmp. You're £500 per month short of making the contractual payment.

Paying nothing for a few months while you save an emergency fund, seems the best option.

enthusiasticsaver

I would opt for a DMP and pay nothing initially until you have saved a decent emergency fund and waiting for the debts to default.  I would then lean towards paying nominal amounts towards the debt then save for early F and Fs. I had not heard about that rule about having loans for 12 months but IVAs are much less flexible than DMPs and there are fees.  I would approach stepchange to see what they suggest. 

lixhul

Hi all. It was Step change I went to and put the budget in, and IVA was the preferred option. I took the phone call, and as my debts are less than 12-months old, they would not continue this route and recommended other options like Bankruptcy or DMP.

If I start a DMP, will my debts default anyway after 6 months is it? 

To answer some questions above:

- I should add £30 for energy I have not factored in future prices which at the minute is a tad confusing
- I live alone, I am paying CSA at £210 and I have the daughter 3 times a week which costs roughly £75 a month
- I am earning £24,150 (I have asked for a rise last week) and have pension, student/PG loan, and NI and IC taken out.

So if I am to get this right:

- Pay nothing for a few months
- Start a comfortable DMP with Step Change
- Start an IVA in 7 months

OR , the above two steps and then wait for a debt manager to contact me with settlement? 

To reiterate, how long does it take loans to be defaulted, will they still default if I start a DMP? I also assume credit rating rise I am screwed for 6 years from the time the accounts default (which right now I am not concerned about, I don't want to borrow anymore money!)

Thank you for all the help.

lixhul

sourcrates said:

As a Homeowner you have less in the way of choice, than a non-homeowner.

Who was it told you about the 12-month IVA rule on the loans? as I've not heard of that before.

You can, if you wish choose multiple routes here, a combination of a DMP whilst saving up a good emergency/settlement fund, if you allow the debts to all default, then all interest and charges stop immediately.

As time goes by, your original creditors will want to offload these accounts, as they don`t like managing bad debts for very long, so they get sold on to debt purchasing companies, who buy them for less than their face value, this in turn enables them to offer you discounts for early settlement (once they have gone through there standard range of template letters with you).

So that 25k of debt, could quite easily be settled for maybe half that, if you're lucky and have a fair wind.

To my mind that would be preferable to insolvency, as the budget rules are quite strict, and any and all windfalls must be paid to your arrangement, not to mention the re-mortgage clause in year 5, and also the fact that it`s a regulated form of insolvency, wear as DMP is completely the opposite, it`s informal, and flexible, an IVA is not as flexible.

Stepchange. It was the preferred choice when I entered all the details. I took the phone call, they stopped the process when I stated how old the loans were. 

lixhul

sourcrates said:

As a Homeowner you have less in the way of choice, than a non-homeowner.

Who was it told you about the 12-month IVA rule on the loans? as I've not heard of that before.

You can, if you wish choose multiple routes here, a combination of a DMP whilst saving up a good emergency/settlement fund, if you allow the debts to all default, then all interest and charges stop immediately.

As time goes by, your original creditors will want to offload these accounts, as they don`t like managing bad debts for very long, so they get sold on to debt purchasing companies, who buy them for less than their face value, this in turn enables them to offer you discounts for early settlement (once they have gone through there standard range of template letters with you).

So that 25k of debt, could quite easily be settled for maybe half that, if you're lucky and have a fair wind.

To my mind that would be preferable to insolvency, as the budget rules are quite strict, and any and all windfalls must be paid to your arrangement, not to mention the re-mortgage clause in year 5, and also the fact that it`s a regulated form of insolvency, wear as DMP is completely the opposite, it`s informal, and flexible, an IVA is not as flexible.

Thanks for comment.

So your advice would be to wait a few months and start a DMP which is comfortable enough for me to save something up? Then at some point I'll be contacted? Does the debt still default on a DMP?

lixhul

RAS said:

You have various child-related expenditure in your SOA but no resident children? 

Your budget is otherwise very skinny; have you allowed for the energy cost increases? 

Are you aware that you will be required to release the equity in your house in year 5? If you can't remortgage you may be required to take out an expensive secured loan. So you'll probably end up paying back all you currently owe plus the IP fees, at a much higher rate than your mortgage, possibly on par with your more expensive debts.

Of course, if you default, at least all the interest on the current debts is frozen.

If you insist on an IVA, at least go to Stepchange who have the lowest fees.

Yes. We do not live together, I pay CSA £210, and she stays at mine 3 times a week. This part is non-negotiable unfortunately.

I live alone and have not that much expenditure. I should add £30 a month to energy you are correct, the rest is pretty accurate as far as could work out.

It was Stepchange I went to for the IVA which came up as the preferred option when I completed the details, however they stopped the process when I informed them that the debts are fairly new.

lixhul

enthusiasticsaver said:

I would opt for a DMP and pay nothing initially until you have saved a decent emergency fund and waiting for the debts to default.  I would then lean towards paying nominal amounts towards the debt then save for early F and Fs. I had not heard about that rule about having loans for 12 months but IVAs are much less flexible than DMPs and there are fees.  I would approach stepchange to see what they suggest. 

Hi, thank you.

So for a few months I should not pay anything? Do the debts still default when I contribute something in a DMP? 

What is an F&F sorry?

It was stepchange who I went with for the IVA and they turned it down during the phone call due to the debts being less than 12-months old. My latest debt was in May (£4000) which I spun on a Roulette wheel.

fatbelly

Defaults are applied after 3-6 payments that are below the contractual amount, or at least that is the guidance

F&F is shorthand for full & final settlement. When debt buyers buy a defaulted account they pay typically 10p in the £ for it. That gives them the opportunity to negotiate a settlement with the debtor that gives them a profit and the debtor gets the debt dealt with for less than the balance figure. A mark of 'partial settlement' is made on the credit file.