Debt advice IVA or DMP

Timone79

Hi newbie here just looking for some debt advice. 

I have a considerable amount of debt 48K across 8 lenders all unsecured credit cards, store cards and loans. 

I have had to give up my job to become a full time carer for my son who has a disability so my income will be heavily reduced. My son gets high rate care DLA so I will be applying for universal credit and carers allowance once I have worked my notice. 

I own a house with a mortgage with my share of equity being £38500. The mortgage is jointly owned with my partner and we live here with our 2 children. 

I have spoken to payplan and stepchange and both have recommended an IVA. After completing a budget I will have around £230 per month spare to put towards my debts. 

My concern with the IVA is how strict it is, the additional fees and the worry about what will happen if my income reduces during this time. My son’s DLA reward is due to be reviewed next Oct so if his needs change potentially my income could go down and I worry then I wouldn’t be able to complete the IVA. 

But a DMP would take about 17 years which is an awfully long time. Obviously circumstances could change during this time and hopefully it would be paid quicker than this. 

My main priority is keeping our home so I wouldn’t want to do anything either that would put that at risk. 

Any advice or experience on IVA or DMP or my situation would be greatly welcomed. Thank you. 

sourcrates

You are in the minority of people for whom an IVA might be appropriate, the only reason I don`t recommend it outright is because of your income being mainly benefits based, they can be stopped/paused/re-evaluated etc, with little or no warning, and that is not ideal when you are an insolvent.

Failure to maintain payments in an IVA, especially when you own an asset, could, potentially put your home at risk, the IP could, petition for your bankruptcy if for any reason the IVA failed, now this is not a common occurrence, but something you should be aware of.

The DMP route, although on paper may seem to take longer, but its a much safer choice, surprisingly, its informal, and if you do it yourself, very much under your control.

There are also mays and means of reducing the time frame by as much as half or more, in your case with no proper income, by way of a first volley, I would write and tell all my creditors what you have told us above, and ask them to take a commercial decision and write off the debts.

See what fruit that bears, the remainder you could pay token payments too, wait until the debts are sold, and after a while the settlement offers will come, if you save up a good settlement fund from what you have coming in, you could potentially settle for much less than is owed.

There are ways and means of doing things, that debt charities won`t always tell you.

Brie

Does your partner know the extent of the problem?  I think that's possibly a more difficult step to take compared to admitting the situation to yourself.  It's just that it's very likely you will be getting letters that your partner may see and it's better to be honest about what's happening so there's no nasty surprises later on.  Many partners are also very supportive which is always helpful too.  

Well done for starting the journey - it may take a while but with a bit of determination you'll get there.

Timone79

Thank you sourcrates, that is really useful information. Those were exactly my concerns about entering into an IVA as my income and also future income is so uncertain right now and I wouldn’t want to enter into an IVA for it to fail as that will make me even worse off than I am now. 

I didn’t think of asking for a commercial decision to write off the debts. It is worth a shot and if not it looks like DMP may be the way forward for now. Payplan were saying they wouldn’t recommend DMP due to how long it would take and that my home would potentially still be at risk however from what I’ve read it is unlikely for home to be at risk if you are making payments. The debts are all unsecured.

Thank you Brie, my partner is fully aware of the situation and he has been really supportive. 

fatbelly

I agree with the comments so far.

What stood out for me is having £230 spare from UC/CA. This sounds unlikely.

Were Payplan/sc suggesting that you use your son's DLA?

Timone79

Hi, no the DLA has been set aside as that is for my son’s needs so it has not been included in the budget as income. 

I have used the calculator on entitled to website to estimate benefit income for now. I will be able to apply at the end of the month once I finish work. The calculator shows I would receive approximately £1445 per month consisting of universal credit, carers allowance and child benefit. My partner works and he pays in £1150 per month into our joint account. I would also be paying in £650 and this covers all our household bills, mortgage and food shop. The remainder from the £1445 would cover gifts, clothes, my phone bill, hobbies, school dinners and uniform, health etc and I’ve worked out approx £230 left over from that. Of course I can’t be 100% sure until I start receiving it but I wouldn’t agree to any payment plan before then. 

My concern with the IVA was that when my sons DLA is reviewed in October 2024 if his award changes for example if he went from receiving high rate care that he gets now to mid rate care then my universal credit income would reduce making it tricky if I was committed to an IVA. My income could potentially increase too if I can find another job to fit around my son’s care needs. It’s all just so uncertain as I don’t know if he will need the same or less care as he gets older. He is 4 years old currently so anything could happen.