dmp or iva

ayupmeduck

who are the other 2 adults in your household? Do they pay any rent to you at all. Also how is your council tax so big?

I would definitely consider a DMP over an IVA.

RAS

I'm glad you're moving away from an IVA. I was walking home when the lightbulb came on and I realised how much of a mess you could get into, and how little the advisor understood the consequences of their advice. The person you spoke to will be a call centre operative acting as a lead generator for an insolvency firm. There's no way the Insolvency Practitioner dealing with an IVA would agree to what they said.

Let's start with the fact that you are currently servicing a loan that was taken out in your partner's name. Presumably that the £250.per month at the end of the expenses list?

There is no way an IP would allow you to pay anything towards that debt, unless you've got a properly documented agreement with your partner and that might not be wise as he's not registered.

In an IVA you are not allowed to make preferential payments to one creditor. Even if the IP agreed to include it, you'd only be allowed to pay a small portion of the £102 you were quoted towards the loan in your husband's name. Which would put him in the doo-doo.

Given your income, you're barely earning more than you'd get for 20 hours at minimum wage, and not currently earning enough to contribute to NI payments that could secure you pension rights and benefits if necessary.

And you have very little to pay towards your newer debts once you pay off that loan. 

You need to get a full-time job, even at minimum wage, and start earning something to contribute to the household and towards your newer debt. If you really enjoy your SE work, you can do that as a side hustle but you need underlying employment.
 

tp555

sourcrates said:

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.

Thank you so much, I'm realising this is a much better way to go - I am worried about a couple of things - you say the IVAs were introduced for homeowners with an asset to protect - does this mean my house would be at risk if I go down the DMP route? 
And is my debt going to get a lot worse when I stop paying everything and wait for them to default - are the creditors likely to slap £s of interest and late payment charges etc so I'll owe a lot more by the time I start paying?

tp555

RAS said:

I'm glad you're moving away from an IVA. I was walking home when the lightbulb came on and I realised how much of a mess you could get into, and how little the advisor understood the consequences of their advice. The person you spoke to will be a call centre operative acting as a lead generator for an insolvency firm. There's no way the Insolvency Practitioner dealing with an IVA would agree to what they said.

Let's start with the fact that you are currently servicing a loan that was taken out in your partner's name. Presumably that the £250.per month at the end of the expenses list?

There is no way an IP would allow you to pay anything towards that debt, unless you've got a properly documented agreement with your partner and that might not be wise as he's not registered.

In an IVA you are not allowed to make preferential payments to one creditor. Even if the IP agreed to include it, you'd only be allowed to pay a small portion of the £102 you were quoted towards the loan in your husband's name. Which would put him in the doo-doo.

Given your income, you're barely earning more than you'd get for 20 hours at minimum wage, and not currently earning enough to contribute to NI payments that could secure you pension rights and benefits if necessary.

And you have very little to pay towards your newer debts once you pay off that loan. 

You need to get a full-time job, even at minimum wage, and start earning something to contribute to the household and towards your newer debt. If you really enjoy your SE work, you can do that as a side hustle but you need underlying employment.
 

Thank you so much for the advice - yes the loan is the 250 payment - I was paying it but then I had to stop as the minimum payments were taking all of my money - I was thinking with an IVA the payment would be low enough for me to pay into the bill account which is food etc so it would be 'contributing towards bills' but would ease it enough to cover the £250. 
It concerns me that the house could be at risk though with a DMP
Also re the new bank account - I have a direct debit for 9.99 for Adobe that I need for my work - is it ok to set that up in my new account or is that considered 'debt'? I pay monthly and can cancel at any time.

RAS

You really should not be making business payments from your personal account. I'd suggest that you open another basic bank account from which you pay any business costs.

RAS

tp555 said:

Thank you so much for the advice - yes the loan is the 250 payment - I was paying it but then I had to stop as the minimum payments were taking all of my money - I was thinking with an IVA the payment would be low enough for me to pay into the bill account which is food etc so it would be 'contributing towards bills' but would ease it enough to cover the £250. 
It concerns me that the house could be at risk though with a DMP
Also re the new bank account - I have a direct debit for 9.99 for Adobe that I need for my work - is it ok to set that up in my new account or is that considered 'debt'? I pay monthly and can cancel at any time.

You are engaging in a lot of magical thinking and as sourcrates pointed out earlier have got your financial priorities completely back to front.

And you've not answered a number of questions that might help people give you better advice.

In both an IVA and in a DMP, the priority is to pay your basic bills. But it's hard to assess what your contribution would be without full information about the household income.

In an IVA, what you are allowed to pay is strictly controlled by the Insolvency Practitioner. They will need details of the income of all four adults and the mortgage.

As explained you won't be allowed to pay the loan. Given the disparity in your income and your partner's, the IP would only allow you to pay a small portion of the bills and may not allow you to include the car costs. You personally won't be putting anything like holidays or presents on credit cards, because you won't be allowed. You would get a small monthly allowance towards holidays, going out and presents but there'll be limits on phone, satellite TV etc. I'm not sure how much the allowances are these days, but not generous. You're looking more at a week in caravan than flying overseas, for example.

A DMP is more flexible as there is no official guidance on the permitted allowances. Even so a charity or company managing a DMP is unlikely to agree to work with you if you are paying off the partner's loan rather than the debt for which you are contractually liable. 

At a rough guess, your contribution to household income could be £500-£600, but that leaves you very little to contribute to paying off the loan or the newer debts. 

The answer to your debts is that you have to increase your income with stable employment, even if it's minimum wage. You can't afford self employment which may well be how you got in this mess in the first place.

I'd strongly recommend that this week you get out your statements for the last 6 months and allocate every spend to one of the categories in the household budget.

And identify anything that you've bought that actually relates to your work.

_Penny_Dreadful

Is the self employed incomes worth it?  A full time minimum wage job would bring in £1,490 and will increase to £1,616 from April.  As an employee you would be auto-enrolled in the workplace pension into which your employer will have to contribute.

tp555

ayupmeduck said:

who are the other 2 adults in your household? Do they pay any rent to you at all. Also how is your council tax so big?

I would definitely consider a DMP over an IVA.

They are my children who are living here after uni and are both working hard to develop careers online which are just starting to earn money. No, not at the moment, The council tax is just what it is for our house - it's 4 bedrooms.

tp555

RAS said:

You really should not be making business payments from your personal account. I'd suggest that you open another basic bank account from which you pay any business costs.

Thank you yes I'll do that

tp555

RAS said:

tp555 said:

Thank you so much for the advice - yes the loan is the 250 payment - I was paying it but then I had to stop as the minimum payments were taking all of my money - I was thinking with an IVA the payment would be low enough for me to pay into the bill account which is food etc so it would be 'contributing towards bills' but would ease it enough to cover the £250. 
It concerns me that the house could be at risk though with a DMP
Also re the new bank account - I have a direct debit for 9.99 for Adobe that I need for my work - is it ok to set that up in my new account or is that considered 'debt'? I pay monthly and can cancel at any time.

You are engaging in a lot of magical thinking and as sourcrates pointed out earlier have got your financial priorities completely back to front.

And you've not answered a number of questions that might help people give you better advice.

In both an IVA and in a DMP, the priority is to pay your basic bills. But it's hard to assess what your contribution would be without full information about the household income.

In an IVA, what you are allowed to pay is strictly controlled by the Insolvency Practitioner. They will need details of the income of all four adults and the mortgage.

As explained you won't be allowed to pay the loan. Given the disparity in your income and your partner's, the IP would only allow you to pay a small portion of the bills and may not allow you to include the car costs. You personally won't be putting anything like holidays or presents on credit cards, because you won't be allowed. You would get a small monthly allowance towards holidays, going out and presents but there'll be limits on phone, satellite TV etc. I'm not sure how much the allowances are these days, but not generous. You're looking more at a week in caravan than flying overseas, for example.

A DMP is more flexible as there is no official guidance on the permitted allowances. Even so a charity or company managing a DMP is unlikely to agree to work with you if you are paying off the partner's loan rather than the debt for which you are contractually liable. 

At a rough guess, your contribution to household income could be £500-£600, but that leaves you very little to contribute to paying off the loan or the newer debts. 

The answer to your debts is that you have to increase your income with stable employment, even if it's minimum wage. You can't afford self employment which may well be how you got in this mess in the first place.

I'd strongly recommend that this week you get out your statements for the last 6 months and allocate every spend to one of the categories in the household budget.

And identify anything that you've bought that actually relates to your work.

Yes I understand, I am actively trying to increase my income and applying for jobs, re the loan, I meant if I was contributin regularly to the household budget then the loan payment for my partner would be easier. I will do the thing you suggest with the statements for 6 months. 
One thing, when I go down the DMP route and get the defaults, I understand it's better to show them the SOA and explain how much I can afford to pay, do I do the SOA for just my finances, with a contribution to the household bills, or do i use the figures as above, with everything going in to the household?