IVA or DMP

sourcrates

Debt management is the most flexible approach if you expect your circumstances to change in the near future.

Most people who use this method to tackle their debts, start off with low affordable payments whilst saving a fighting fund, this is then used further down the line when your situation improves, to make settlement offers and clear the debt quicker.

Insolvency does not give you that flexibility.

london1973

sourcrates said:

Debt management is the most flexible approach if you expect your circumstances to change in the near future.

Most people who use this method to tackle their debts, start off with low affordable payments whilst saving a fighting fund, this is then used further down the line when your situation improves, to make settlement offers and clear the debt quicker.

Insolvency does not give you that flexibility.

By do you mean debt management someone else (e.g one of the charities) takes charge and manages your creditors, whilst i am not trying to shirk my responsibilities i am feeling rather overwhelmed by the prospect of individually negotiating with 9 different creditors and how much time and stress this is going to take. Sounds a bit pathetic i agree but i really need to be focusing efforts on work and getting out of this hole, and not spending all day on the phone to creditors. This wasn’t really explained by the people i spoke to

(apologies for the Bold text, mistake)

tigergambit

london1973 said:

sourcrates said:

Debt management is the most flexible approach if you expect your circumstances to change in the near future.

Most people who use this method to tackle their debts, start off with low affordable payments whilst saving a fighting fund, this is then used further down the line when your situation improves, to make settlement offers and clear the debt quicker.

Insolvency does not give you that flexibility.

By do you mean debt management someone else (e.g one of the charities) takes charge and manages your creditors, whilst i am not trying to shirk my responsibilities i am feeling rather overwhelmed by the prospect of individually negotiating with 9 different creditors and how much time and stress this is going to take. Sounds a bit pathetic i agree but i really need to be focusing efforts on work and getting out of this hole, and not spending all day on the phone to creditors. This wasn’t really explained by the people i spoke to

(apologies for the Bold text, mistake)

Hi, yes, Stepchange or Payplan would manage the creditors for you and you just pay the charity a lump sum monthly. So it is less stressful. Letting them do this is quicker too as creditors already have a relationship with them. However if you do go down the DMP route and aim for defaults you can insist that creditors only deal with you by letter and as they will not all default at once deal with them one by one as the defaults come through. This is much more flexible.

Btw I have recently fallen out with Payplan big time as they were pushing hard on an unsuitable IVA, so do be careful. The charities mentioned are funded by creditors and have their own viewpoint.

sourcrates

You make it sound much more complex than it actually is, there is no negotiation as such, its pretty simple, and can take less than 15 mins per month to manage, yes just 15 mins.

First step, is non payment for a few months, get those defaults registered, and that emergency fund topped up.
Next, when your ready, work out a budget you are happy with, its then simply a case of paying what your budget says you can afford, to whoever is contacting you for payment of your various accounts, at this stage its likely to be debt collection companies, all have online accounts, and various options to pay.

If they insist on seeing a copy of your budget, send them one, otherwise there is no need to correspond with them whatsoever, no need to send any letters/emails, no negotiation, nothing could be simpler.

It`s simply a case of paying your monthly bills as you did before, except now you pay a reduced amount, according to your budget, rather than what the minimum payment should be, over a longer period of time, and with no added interest or charges to concern you.

london1973

tigergambit said:

london1973 said:

sourcrates said:

Debt management is the most flexible approach if you expect your circumstances to change in the near future.

Most people who use this method to tackle their debts, start off with low affordable payments whilst saving a fighting fund, this is then used further down the line when your situation improves, to make settlement offers and clear the debt quicker.

Insolvency does not give you that flexibility.

By do you mean debt management someone else (e.g one of the charities) takes charge and manages your creditors, whilst i am not trying to shirk my responsibilities i am feeling rather overwhelmed by the prospect of individually negotiating with 9 different creditors and how much time and stress this is going to take. Sounds a bit pathetic i agree but i really need to be focusing efforts on work and getting out of this hole, and not spending all day on the phone to creditors. This wasn’t really explained by the people i spoke to

(apologies for the Bold text, mistake)

Hi, yes, Stepchange or Payplan would manage the creditors for you and you just pay the charity a lump sum monthly. So it is less stressful. Letting them do this is quicker too as creditors already have a relationship with them. However if you do go down the DMP route and aim for defaults you can insist that creditors only deal with you by letter and as they will not all default at once deal with them one by one as the defaults come through. This is much more flexible.

Btw I have recently fallen out with Payplan big time as they were pushing hard on an unsuitable IVA, so do be careful. The charities mentioned are funded by creditors and have their own viewpoint.

yes it is payplan i am dealing with so that’s really helpful to know, the person i am dealing with there seems to be quite measured so far

to your point on the DMP route it seems you are saying this way i WOULD be dealing with creditors individually? not the charity? and if so would this mean months and months of being hounded x 9 creditors, that sounds like the stress i am trying
to avoid!

RAS

No.

With a DMP, either you pick a charity like Stepchange, or someone like Payplan, or you can go it alone. And you can change which you do at intervals.

But if you go straight to Payplan, they will start paying your creditors and you end up with Arrangement to Pay markers which wreck your credit record for a lot longer. 

What we suggest is that you just stop paying. Yes there will be texts, block, phone calls, block, emails, assign to spam. You might want to send each creditor a letter, telling them you will only deal with them by letter. But you can do one a week if need be.

What you have to do is put the money you are no longer paying into debt into a saving/emergency account. Perhaps set up a SO to transfer the amount your budget suggests when your pay arrives. 

The most important thing is to concentrate on learning to live within your budget. Stress test it over 6 months. What's missing? Where are there savings? You'd need to do that anyway on any debt plan, and in RL. Is your emergency fund getting bigger as expected?

Once a week, open any letters, read, and file. The only one you are interested in is the letter confirming the default. Doublecheck on your credit record. If the default's registered, set up a standing order to pay a proportion of what you've allocated to that creditor.

You then only need to monitor correspondence in case they send a letter before action. Nothing else matters. If anyone hasn't defaulted after say 9 months, you could contact them to request it, but you don't have to. It might allow you to move on quicker.

When you've got all the defaults, hand over to Payplan or Stepchange. Cancel the old SOs and set one up with your DMP provider.

EDIT: There is another really important reason to delay setting up the DMP. MSE is littered with panic stricken threads from folk who rushed in and then the car failed it's MOT, the cooker's bust, they've bust a tooth. You NEED at least 6 months of the money you are no longer paying your creditors in an emergency fund. Start aiming for £1k, then for a month's salary. At a minimum.

That's on top of a budgeting account into which you pay a monthly amount to cover car/bike maintenance, annual insurances, holidays, birthdays, Christmas. All the stuff that comes round every year and for which you rarely got enough money in the bank, so you put it on the cards.

fatbelly

Good advice above. Both Stepchange and Payplan will provide fee-free debt management plans, which is why we view them positively on this board. Equally both may have a go at pushing an IVA so you need to be definite about what you want and when. It's your life. 

tigergambit

london1973 said:

to your point on the DMP route it seems you are saying this way i WOULD be dealing with creditors individually? not the charity? and if so would this mean months and months of being hounded x 9 creditors, that sounds like the stress i am trying to avoid!

RAS has given a really good explanation of your best courseabove. 

I am really, really not good with stress, believe me. The thing which I have found most difficult with resolving my debts is the glacial pace at which everything happens. Follow Sourcrates advice above and ask that you only be contacted by letter. Then give yourself 30 minutes each week to check and file the letters until you get the default ones. You don't need to do anything else until that point.

Use the intervening time to build up an emergency fund and refine your budget so that it is realistic but, hopefully, gives you an opportunity to keep building that emergency fund for future use. 

I know that "ignoring" creditors feels all wrong but in reality you can say nothing to them which will help you until you get that default.

EssexHebridean

A couple of points not directly related to the detail of the DMP, but important for future money management. You need to draw up a solid household budget which is based on your worst-case month for income. Then anything above that can be used for further payments into the Emergency Fund or Fighting Fund. You must also going forward ensure that your income is only considered“yours” after your tax and NI has been taken into account. When I was self employed I always transferred my contributions into a separate savings account which would pay me a little interest as well - it all helps! 

I’d also reiterate the advice to insist on creditors only contacting you by letter - it should take a lot of the stress out of the situation. 

london1973

RAS said:

No.

With a DMP, either you pick a charity like Stepchange, or someone like Payplan, or you can go it alone. And you can change which you do at intervals.

But if you go straight to Payplan, they will start paying your creditors and you end up with Arrangement to Pay markers which wreck your credit record for a lot longer. 

What we suggest is that you just stop paying. Yes there will be texts, block, phone calls, block, emails, assign to spam. You might want to send each creditor a letter, telling them you will only deal with them by letter. But you can do one a week if need be.

What you have to do is put the money you are no longer paying into debt into a saving/emergency account. Perhaps set up a SO to transfer the amount your budget suggests when your pay arrives. 

The most important thing is to concentrate on learning to live within your budget. Stress test it over 6 months. What's missing? Where are there savings? You'd need to do that anyway on any debt plan, and in RL. Is your emergency fund getting bigger as expected?

Once a week, open any letters, read, and file. The only one you are interested in is the letter confirming the default. Doublecheck on your credit record. If the default's registered, set up a standing order to pay a proportion of what you've allocated to that creditor.

You then only need to monitor correspondence in case they send a letter before action. Nothing else matters. If anyone hasn't defaulted after say 9 months, you could contact them to request it, but you don't have to. It might allow you to move on quicker.

When you've got all the defaults, hand over to Payplan or Stepchange. Cancel the old SOs and set one up with your DMP provider.

EDIT: There is another really important reason to delay setting up the DMP. MSE is littered with panic stricken threads from folk who rushed in and then the car failed it's MOT, the cooker's bust, they've bust a tooth. You NEED at least 6 months of the money you are no longer paying your creditors in an emergency fund. Start aiming for £1k, then for a month's salary. At a minimum.

That's on top of a budgeting account into which you pay a monthly amount to cover car/bike maintenance, annual insurances, holidays, birthdays, Christmas. All the stuff that comes round every year and for which you rarely got enough money in the bank, so you put it on the cards.

Thank you RAS (and everyone!) for such helpful advice…

i do have a couple of further questions I’m afraid 😬- I’m just one of these people that gets in a panic if i am confused about something

it all makes sense strategically but …

1. Once a creditor defaults you say set up an SO and ‘pay a proportion of what you’ve allocated’…well what is that, whats it based on, if i have 9 creditors all for varying amounts is it a pro-rata amount from the total amount i can afford? Who decides? And who’s to say it will be accepted, it’s going to be pretty nominal to begin with. People are saying i am over-thinking this and it’s not complicated (which are both true i am sure!) but surely there has to be an element of individual negotiation with each creditor just to get the initial amount agreed, prior to handing it over to Payplan etc

2. This also assumes all creditors will amble towards defaulting, is that right, i mean they won’t try other options like the courts, BR etc, i do see that looks unlikely- i think what we are saying is that they will first default and THEN consider other options if you continue not to pay, hence the need to start making some sort of contribution once defaulted? 

Thanks again