dmp or iva

I am self employed and my income has been pretty steady for the past 2 years, I have £22500 debt from credit cards and a loan which so far i have been paying just the minimum on everything but it has squeezed and squeezed my income and i am getting nowhere. I have no savings as I was using them to top up my income when I had a low month but this has now gone. I will not be able to afford the next months minimum payments. I am married and have a mortgage and we have equity of around 270K.
I have spoken to iva.org and they first said a DMP would be the best option, then they changed and said an IVA.
Looking at both, I am not sure - the affordable payments of £102 for the IVA feel like they would take away the enormous stress I feel every day but I am worried they would try to make us sell the house. It is in joint names and I tried to remortgage to release some equity but the bank said no based on income. The IVA that iva.org suggested is 6 years due to this. they added a year he said because of not being able to release equity.
 I am also worried that if the IVA was sold then the new people would add more Fees.
 I have heard that if someone was willing/able to help me and offer a settlement  for the IVA of the original IVA agreed amount, then it might be accepted? is this likely? in that case it feels like the best route but I swing from that to trying a DMP and back again. Just don't know what to do.
My worries with a DMP are that they would take me to court and might try and make us sell the house as it seems like an obvious solution to them. I also feel the uncertainty for months/years would be very stressful. I have never missed a payment and it feels very alien to do so but from mid Feb i will not be able to cover all the payments. Marbles/Newday is the largest amount at £7000 and I worry that they will not accept a small payment for long as I've heard they can be difficult.
I was advised to if possible make the Newday not the largest creditor by borrowing from family if it is possible and make them less than 25% as they would not agree to an IVA if they had the controlling vote. And to take my name off the joint account as we have an overdraft. I pay no money into the joint account so this would probably be fine. I just don't want my partner's name to be linked with the debt. But if the bank took my name off and then reduced the overdraft amount, then it would be disastrous as we use all of it each month and back again. But if I can do those, would an IVA be the best solution? Apparently they think an IVA would be agreed to. 
Am really stressed and ashamed of the mess I've got myself into. Does anyone know what solution would be best out of an awful bunch?
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Comments

  • Floss
    Floss Posts: 8,101
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    edited 29 January at 3:06PM
    PLEASE do not sign up for an IVA until you fully understand the process, fees & impact.

    Taking you to court for credit card debt is very unlikely, as is forcing you to sell your home, and it might be that a DMP is your best option.

    If you read the top sticky, it will give you more information and also a link to complete an SOA so the good folk on here can help with suggestions. 

    https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps/p1
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  • RAS
    RAS Posts: 32,436
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    There are very few situation when an IVA makes sense and you owe so little, you're no where near the market they were designed for. 

    You are of course a prime target for introducers who get a nice fee for referring you to insolvency practitioner who get even bigger fees.
    The person who has not made a mistake, has made nothing
  • tp555
    tp555 Posts: 23
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    Household Information[/b]
    Number of adults in household........... 4
    Number of children in household......... 
    Number of cars owned.................... 2[b]

    Monthly Income Details[/b]
    Monthly income after tax................ 850
    Partners monthly income after tax....... 3620
    Benefits................................ 0
    Other income............................ 0[b]
    Total monthly income.................... 4470[/b][b]

    Monthly Expense Details[/b]
    Mortgage................................ 1667
    Secured/HP loan repayments.............. 0
    Rent.................................... 0
    Management charge (leasehold property).. 0
    Council tax............................. 301
    Electricity............................. 394
    Gas..................................... 0
    Oil..................................... 0
    Water rates............................. 66
    Telephone (land line)................... 0
    Mobile phone............................ 36
    TV Licence.............................. 14
    Satellite/Cable TV...................... 85
    Internet Services....................... 28
    Groceries etc. ......................... 520
    Clothing................................ 0
    Petrol/diesel........................... 250
    Road tax................................ 57
    Car Insurance........................... 62
    Car maintenance (including MOT)......... 0
    Car parking............................. 0
    Other travel............................ 0
    Childcare/nursery....................... 0
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 0
    Pet insurance/vet bills................. 27
    Buildings insurance..................... 17
    Contents insurance...................... 15
    Life assurance ......................... 57
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 0
    Haircuts................................ 0
    Entertainment........................... 0
    Holiday................................. 0
    Emergency fund.......................... 0
    partner loan............................ 250
    partner credit card Bcard............... 100
    partner credit card m & s............... 183[b]
    Total monthly expenses.................. 4129[/b]
    [b]

    Assets[/b]
    Cash.................................... 300
    House value (Gross)..................... 450000
    Shares and bonds........................ 0
    Car(s).................................. 4000
    Other assets............................ 0[b]
    Total Assets............................ 454300[/b]
    [b]

    Secured & HP Debts[/b]
    Description....................Debt......Monthly...APR
    Mortgage...................... 168000...(1667).....1.74[b]
    Total secured & HP debts...... 168000....-.........-   [/b]

    [b]Unsecured Debts[/b]
    Description....................Debt......Monthly...APR
    Newday credit card.............7632......318.......36.4
    Virgin credit card.............2591......31........4
    Sainsbury credit card..........5200......179.......29.4
    Novuna loan....................1734......135.......5
    Very account...................1894......60........44.9
    Next store account.............3561......180.......24.9[b]
    Total unsecured debts..........22612.....903.......-  [/b]

    [b]
    Monthly Budget Summary[/b]
    Total monthly income.................... 4,470
    Expenses (including HP & secured debts). 4,129
    Available for debt repayments........... 341
    Monthly UNsecured debt repayments....... 903[b]
    Amount short for making debt repayments. -562[/b]

    [b]Personal Balance Sheet Summary[/b]
    Total assets (things you own)........... 454,300
    Total HP & Secured debt................. -168,000
    Total Unsecured debt.................... -22,612[b]
    Net Assets.............................. 263,688[/b]

  • tp555
    tp555 Posts: 23
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    We don't have any money for car repairs, holidays, christmas and birthdays, or going out. Those have mostly gone on credit cards. My partner's income was used for the mortgage and I don't want his credit score affected. I was paying the loan he has as he took it out to consolidate my debt a few years ago but it didn't pay all of it. If I could lower my monthly outgoings I want to contribute towards the household bills - as it is everything I earn is going on paying the minimum payments. 
  • tp555
    tp555 Posts: 23
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    Floss said:
    PLEASE do not sign up for an IVA until you fully understand the process, fees & impact.

    Taking you to court for credit card debt is very unlikely, as is forcing you to sell your home, and it might be that a DMP is your best option.

    If you read the top sticky, it will give you more information and also a link to complete an SOA so the good folk on here can help with suggestions. 

    https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps/p1
    I've posted the SOA above, thank you
  • fatbelly
    fatbelly Posts: 20,178
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    edited 29 January at 4:31PM
    There's no advantage to an IVA on that income/expenditure. You would end up paying your surplus income over 72 months and a standard debt management plan would do the job quicker.

    Kim's first steps is useful

    https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps/p1

  • tp555
    tp555 Posts: 23
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    fatbelly said:
    There's no advantage to an IVA on that income/expenditure. You would end up paying your surplus income over 72 months and a standard debt management plan would do the job quicker.

    Kim's first steps is useful

    https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps/p1

    Thanks for answering, I don't understand how a DMP would be quicker, it sounds like the payments might be slightly more than the quote I've had to do the IVA monthly amount which would be £102 and yet would not be able to pay the £22500 off in 72 months, whereas the IVA has an end date of 72 months and £102 per month which would be manageable. Also, I was told the the IVA could be paid off with a settlement if creditor agrees part way through of 72 x £102 less monies already paid, instead of ending up paying the £22500. Is this right?
  • RAS
    RAS Posts: 32,436
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    If you do a DMP after getting defaults, rather than rushing into it, interest and fees are halted and you could well get full and finals in a few years at around 50%. So the lot paid off within 6 years and a clear credit recorded. It's very rare to get any sort of action securing consumer debt on your house, and if they did it would be a restriction, which has very little effect.

    On an IVA, you've got to release equity in year 5 or extend the IVA and could end up paying back the whole debt plus the £6-9k fees. Even more likely if your income increases any time in the next 6 years.

    With the added issue of having to declare an IVA if you are ever asked whether you've had one in the past. 

    A DMP prioritises your household expenses and allows you to pay back what you can afford. IVA budgets are a lot less friendly and it is unlikely you would be allowed no more than 20% of the household bills. I doubt if they'd allow you to contribute to the loan your spouse took out on an IVA. 

    Add to which, where is the income contribution from the other two adults?

    Your indebtedness is going to impact on your partner. For a start, you share a mortgage, and your partner took out a loan to cover previous debts. A self managed DMP would allow you to prioritise your partner's debt and make reduced payments to the other creditors.

    Time to start by getting a new basic bank account and get your name off the "joint" account, whatever you do.
    The person who has not made a mistake, has made nothing
  • sourcrates
    sourcrates Posts: 28,493
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    tp555 said:
    We don't have any money for car repairs, holidays, christmas and birthdays, or going out. Those have mostly gone on credit cards. My partner's income was used for the mortgage and I don't want his credit score affected. I was paying the loan he has as he took it out to consolidate my debt a few years ago but it didn't pay all of it. If I could lower my monthly outgoings I want to contribute towards the household bills - as it is everything I earn is going on paying the minimum payments. 
    Its a common theme, everything you have stated that you have no money for is an essential spend, yet you have prioritised credit card repayments, which by the way are non-essential, and non priority debts, over what you need to live on, something you simply should not do.

    IVA`s were introduced for homeowners, essentially, who had this asset, a house to protect, so could not go bankrupt, as assets are protected in an IVA, but you only owe 20k, if it had been a figure of say £120,000 in debt, an IVA would be ideal for you, you would repay about a 3rd of that, plus fee`s, and have about 70 odd k written off.

    But with a 20k debt, you are likely to repay it all, plus fees, as your payment will increase yearly with your income, and will still be asked to re-mortgage in year 5, or face another year of payments.
    People find the strict budgeting regime very hard to handle, looks fine on paper, but 6/7 years is a very long time, and things can change.

    You would be much better off with a flexible, debt management plan, that you can alter and change at will, with no requirement to sign over your overtime/windfalls/pay increases etc etc, most DMP`s end with settlement offers, so the time in debt is cut even further.

    They are flexible, and not regulated, it would be a much better choice for you.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing [email protected]. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • tp555
    tp555 Posts: 23
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    RAS said:
    If you do a DMP after getting defaults, rather than rushing into it, interest and fees are halted and you could well get full and finals in a few years at around 50%. So the lot paid off within 6 years and a clear credit recorded. It's very rare to get any sort of action securing consumer debt on your house, and if they did it would be a restriction, which has very little effect.

    On an IVA, you've got to release equity in year 5 or extend the IVA and could end up paying back the whole debt plus the £6-9k fees. Even more likely if your income increases any time in the next 6 years.

    With the added issue of having to declare an IVA if you are ever asked whether you've had one in the past. 

    A DMP prioritises your household expenses and allows you to pay back what you can afford. IVA budgets are a lot less friendly and it is unlikely you would be allowed no more than 20% of the household bills. I doubt if they'd allow you to contribute to the loan your spouse took out on an IVA. 

    Add to which, where is the income contribution from the other two adults?

    Your indebtedness is going to impact on your partner. For a start, you share a mortgage, and your partner took out a loan to cover previous debts. A self managed DMP would allow you to prioritise your partner's debt and make reduced payments to the other creditors.

    Time to start by getting a new basic bank account and get your name off the "joint" account, whatever you do.

    Thank you for this, yes I am getting a new basic account and getting my name off the joint one. 
    If I do nothing and let the accounts default, then once I get a letter of default, do I offer an amount that I will pay or just start paying the amount I can afford without asking once defaulted? 
    Will the interest and fees always been halted when an account defaults? 
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