IVA or DMP

tmanz

Hi everyone,

I have approached the above concerning just over £10,000 worth of debt varied from credit card, loans, overdraft, purchase credit.

The following options were offered to me to help me hopefully clear up the outstanding debt, would be keen to hear your thoughts on this:

• IVA - £100 per month for 5 years

• DMP - £860 per month for 1 year

Both of these advisors have been extremely helpful and have provided me with plenty of information, I have not felt pressured to take on either of these options. I can see the pros and cons with either of them.

To clarify, I do not have any assets or savings. My monthly income is £1,800. It would be good to begin saving again for the future. I am now living with family and my partner, and we are in the midst of acquiring council housing, so it will have to be added into outgoing expenses at some point. My girlfriend has a low income and receives universal credit, thus I do not want her to aid me in this situation.

DMP assisted me in determining that my monthly spending would be approximately £700 - £800. My current outgoing debt payments are roughly £450 per month (including car finance - I'm happy with this arrangement and will be separated from the above debt options).

My biggest pet peeve right now, and has been for a while, is this overdraft that I can't seem to get out of (£2,500); it seems like every time I get paid, I'm still in overdraft, and by the end of the month, I'm as close to the maximum overdraft as possible.

As I previously stated, it would be good to begin saving and planning for the future, especially because I intend to start a family. I understand with either of them that it will take a hit on my credit but I'm happy to wait in the long runs, build myself up again. I'm not in a hurry to buy a house or even rent because I don't have the money, but in the long-long run, I might be in a better position to do so.

Thoughts?

Thanks

fatbelly

My initial thought is that you must be getting advice from a shark.

Whether dmp or IVA, you are supposed to pay your surplus income into it. There shouldn't be a £760 per month difference.

With no assets to protect, you are looking at a dmp. The most flexible way is to do it yourself with advice from the debt-free wannabe board

Brie

fatbelly said:

My initial thought is that you must be getting advice from a shark.

Whether dmp or IVA, you are supposed to pay your surplus income into it. There shouldn't be a £760 per month difference.

With no assets to protect, you are looking at a dmp. The most flexible way is to do it yourself with advice from the debt-free wannabe board

Or DRO but the car might put the kabosh on that one.  

I'll get this moved to the debt free - once there look at putting together the statement of accounts and posting it back and see what the lovely people can suggest.  Certainly it will be more sensible than half your income on an IVA.

RAS

With your level of debt and uncertainty about your living costs over the next year, you should not being doing an IVA.  If one is accepted, you can only reduce the monthly payment by 15% without your creditors' approval, which is unlikely. And inflation will leave the pips squeaking in a few years anyway.

I'm hoping you haven't contacted one of those companies in the media advertising that you can use a simple Government approved scheme to reduce your debt by 79/81/89/93%, depending which day of the week it is?

You may find yourself paying additional housing costs, so failing the IVA anyway. 

And as fatbelly says, if your excess income is £100, then it's £100 regardless of whether you do an IVA or a DMP. 

An SOA would be good. Although right now your priority is to get a new basic bank account with one to whom you owe nothing, or perhaps use Monzo or Starling. Do check the banking groups before you apply. Stick a fiver there in readiness for sorting out your situation.

 

sourcrates

I`m moving this to the DFW board for you.

It appears you may have been talking to fee charging debt management companies, the absolute worst places to take advice from.

sammyjammy

I don't understand, if your current debt payments are £400ish and the DMP proposes you pay £800ish thats just over paying not a DMP and wouldn't trash your credit record.  Maybe I have misunderstand but get the SOA done and people can see whats what.

tmanz

Thanks for the opinions. This is all new to me and somewhat daunting so don't know where to start. 

If I'm being honest the idea of doing an IVA at £100 per months for 60 months = £6000, whilst the rest of the debt is written off seems appealing. It will allow me some breathing space for a number of years, build up my current account, save on the side, allow me leftover income to focus on council rent/housing costs.

The option of DMP route would hit me pretty hard in the short run, having to shift £1,026 per month (£860 +car finance). Even if we cut our spending by £600 per month for instance, their is not much room to breathe and in no way we'd be able to afford council housing on my income.

IVA route - £100 per month + £166 (car finance) = £266 per month, allowing me to have £1500 leftover to split across spending. 

DMP - £860 + £166 = £1,026 per month, allowing me to have £774 leftover to split across spending. Wont be able to afford council housing along with other spending on this amount. 

I've been told by payplan and the IVA that both of these plans will take a hit on my credit score, I'm aware of this.

I am hoping to acquire council housing in the next few months, due to our personal situation. With that potential big expense taken into consideration, I'd be leaning towards IVA.

From what I've read on these forums, I'm aware that IVA is frowned upon by a lot of people (sorry). Hopefully you understand my situation, I'm just sick and tired of seeing my monthly pay slip go towards nothing really, nothing for the future and reading some figures on the amount of debt some people are on, £10k might not seem like a big deal, but for me it feels like £100k! 

I have already arrange a new clean bank account, so im ready for whatever action to take place next. 

ManyWays

tmanz said:

I am hoping to acquire council housing in the next few months, due to our personal situation. With that potential big expense taken into consideration, I'd be leaning towards IVA.

I have already arrange a new clean bank account, so im ready for whatever action to take place next. 

The numbers you have been quoted dont make sense on a long term basis because the monthly payments in a DMP and in an IVA should be quite similar. 

It may be that the IVA firm is hoping to tempt you in with a low payment that will then rocket up when you are committed to a 5 year IVA contract. Dont think the IVA looks like a bargain as the payments wont stay the same.

And the DMP payments would drop if they are unaffordable. 

So dont do anything until you get your housing sorted out. The numbers you are being told now are irrelevant to what they will be when you are not living at home. 

fatbelly

I think that's good advice.

Do not commit to a long term strategy until your housing is settled.

I would trust Payplan to advise properly in most instances. They a well known provider of dmps and IVAs.

I cannot believe they would give you those two options. If they had calculated that you had £800 surplus then clearly a dmp is what they would advise.


It sounds like the IVA Sharks are proposing to lie about your situation to try to sell a £100 per month IVA. This is unlikely to end well in a formal insolvency solution.