IVA or DMP

london1973

I am weighing up the options on an IVA or a DMP having discussed at length my situation with an excellent charity/debt advice agency. 

in short both seem to have pros and cons so wanted to throw it out there, i do this with some trepidation as there seem to be some very judgemental types here, amongst some really excellent advice, so i would be grateful if anyone kind enough to post might just not bother trawling through my posting history with a view to making comments that are only going to add to my stress!…

So i have a stack of credit card, loan debt and back taxes,  (caused in large part by my business (consultant in the restaurant sector) being decimated by the pandemic,  having to support 3 children’s education, required privately due to their specific needs, and an extremely testing relationship with an ex-wife) - yes i have been bankrupt, thereafter had a solid few years debt-free life,  but since then i have had no option due to the above.. (again trying to stave off the ‘YOU’VE LEARNED NOTHING’ naysayers) .  Sorry to be arsey but i just don’t want to end up in a spat here. 

It seems a DMP is a better option in terms of being more informal BUT it won’t include HMRC debt, which will need to be negotiated separately (fine btw) but once done will require sufficient headroom in my finances to pay towards a DMP, so thats the challenge there. 

The IVA will include HMRC debt (is that right?) but is worse as on record etc and harsher on credit file? Now obviously my thinking is it doesn’t really matter if the credit file is affected with an IVA as a DMP will mean loads of defaults that will look just as bad, so who cares? Is that right or is an IVA a whole different ballgame? Again, the mere mention of perhaps wanting credit one day is going to fan the flames here but the reality is i don’t want anymore crap loans, and i don’t care if i never see a credit card again, but i just might need a new car one day, or a mortgage, so its helpful to understand if one of these options is way worse than the other on that front, i suspect the answer is no. I’m leaning towards the IVA.

   It would be great to hear what people think, many many thanks, i love you all

RAS

There are a limited number of instances when an IVA is the most suitable solution.

Do you own a house? Rough salary?

What value is the HMRC debt and what value the non-HRMC debt. If the HMRC are owed more than 25% of your eligible debt, an IVA is most unlikely to be accepted, and even below that you are at the mercy of perhaps one other creditor.

fatbelly

You say you might need a mortgage some day, implying you do not own property.

As an IVA is bankruptcy for someone with an asset to protect, can you tell us what asset you are nervous about losing.

From your post it seems the choice is between bankruptcy and DMP. As a rough guide, if your surplus income is enough to repay the debt in under 5 years you should go for a DMP

If you meet the criteria for a DRO, do one of those. From your post, I can't see why an IVA would even be on your shortlist.

london1973

RAS said:

There are a limited number of instances when an IVA is the most suitable solution.

Do you own a house? Rough salary?

What value is the HMRC debt and what value the non-HRMC debt. If the HMRC are owed more than 25% of your eligible debt, an IVA is most unlikely to be accepted, and even below that you are at the mercy of perhaps one other creditor.

That’s very helpful, thanks..actually i didn’t realise creditors needed to vote on it as that wasn’t explained, in fact she made it sound like it was very straightforward and virtually a matter of me choosing which one, which doesn’t appear to be the case

HMRC debt is about 30% of the total, 20k/40k (=60K) … 

No i don’t own a house, virtually zero assets…

why is an IVA so rarely the best option, other than the above reason?

Thanks again

london1973

fatbelly said:

You say you might need a mortgage some day, implying you do not own property.

As an IVA is bankruptcy for someone with an asset to protect, can you tell us what asset you are nervous about losing.

From your post it seems the choice is between bankruptcy and DMP. As a rough guide, if your surplus income is enough to repay the debt in under 5 years you should go for a DMP

If you meet the criteria for a DRO, do one of those. From your post, I can't see why an IVA would even be on your shortlist.

Well that’s why I’m here, i don’t really understand the implications of an IVA, why so bad?

did i reference an asset i am nervous about losing? Not sure what you mean by that. A DRO wasn’t even mentioned to me by the charity i spoke to, beginning to think they weren’t so great after all! Surplus income is very hard to predict for me as I’m freelance in an unreliable sector, so very good months and very bad.

Grumpelstiltskin

IVA is insolvency a DMP isn't.

You owe too much for a DRO max. s i£30.000

RAS

Did they also explain the fees for IVAs? And how tight the allowed budgets are?

There are a lot of companies who act as lead generators in a very poorly regulated environment. It's not unheard off on MSE to find people whose total debt is barely more than the fees, being pushed into unreasonable monthly payments just to pass muster.

Given the HMRC situation, you might be best defaulting on everything else now and making a deal with the HMRC if you can/want to. The advantage is that your credit record will be clear in 6 years, which is much better than AP markers from minimal payments. The other option is BR.

Then when the HMRC is cleared, you could address the other debts, looking for full and finals at 50% or less. 

Whatever you do, put whatever you can garner from stopping debt payments for the next couple of months and sales of unwanted items into an emergency fund. Even with the HMRC on your back you need to deal with the odd small emergency.

PS if you are freelance with variable income, an IVA wouldn't really work for you, they prefer £xxx per month regularly.

london1973

RAS said:

Did they also explain the fees for IVAs? And how tight the allowed budgets are?

There are a lot of companies who act as lead generators in a very poorly regulated environment. It's not unheard off on MSE to find people whose total debt is barely more than the fees, being pushed into unreasonable monthly payments just to pass muster.

Given the HMRC situation, you might be best defaulting on everything else now and making a deal with the HMRC if you can/want to. The advantage is that your credit record will be clear in 6 years, which is much better than AP markers from minimal payments. The other option is BR.

Then when the HMRC is cleared, you could address the other debts, looking for full and finals at 50% or less. 

Whatever you do, put whatever you can garner from stopping debt payments for the next couple of months and sales of unwanted items into an emergency fund. Even with the HMRC on your back you need to deal with the odd small emergency.

PS if you are freelance with variable income, an IVA wouldn't really work for you, they prefer £xxx per month regularly.

That’s super helpful thanks

assuming i default on everything where does that end up, you say sort out HMRC and then address the other debts (which sounds sensible) but what happens to those debts in the meantime? Do i need to get a DMP in place? 

Also what is an AP marker?

thanks again

RAS

Arrangement to Pay markers stay on your credit record for 6 years after the debt is paid off, which could be a decade or more instead of 6 years.

The other debts will text , email, write and ask for payment. They can't do anything legal until the default is issued, which will be 6-18 months based on reports here. Then you pay them a pittance until the HMRC is sorted, as that is a priority debt. Legal action is possible, but infrequent. Mostly it's threats of further action, which means their computer is programmed to contact you again at intervals. 

The big issue is HMRC, and making sure if you can come to an arrangement that you save next year's payment as well.

fatbelly

As you are already looking at insolvency, have no asset to protect and 60k debt then it looks like bankruptcy would be your best route.

You would get an income payment arrangement to pay your surplus income for 36 months but unless you have £1500+ available for a DMP this is going to get things over and done, and a clean start, faster than other strategies.

london1973

fatbelly said:

As you are already looking at insolvency, have no asset to protect and 60k debt then it looks like bankruptcy would be your best route.

You would get an income payment arrangement to pay your surplus income for 36 months but unless you have £1500+ available for a DMP this is going to get things over and done, and a clean start, faster than other strategies.

Thanks, if i didn’t want to go bankrupt, for whatever reason, and there are work-related reasons that mean its not ideal, what would the suggestion be- i am realistically confident my income will increase steadily over the next few years- so its about buying time as much as possible and not being in an eternal firefight..