Should I rethink my plan?

ashamedjelly

Hi all. 

I am in roughly £106k of unsecured debt, but lucky enough to have a high paying job, so…big hole but big shovel. In total there are 8 creditors who I owe to. 

After months of reading this forum, I thought that a self managed DMP would be the way forward. I’ve stopped payments for two months and am waiting for defaults. Once defaults are lodged I can afford to pay around £1,250 per month to service my debts (so just over 7 years to clear them completely). 

I jointly own a house with my husband. Our current fixed mortgage deal with NatWest ends in September 2025. 

Maybe I am overthinking, over researching etc. but I am starting to second guess my DMP decision. Should I do an IVA instead? It seems like both have the same impact on credit files, but I might be better off doing an IVA with a reduced monthly payment and clearing what I can in 6 years? Would I still be able to remortgage to another fixed rate with NatWest in an IVA? 

Pros and Cons of DMP vs IVA would be very helpful if anyone has any similar experience. Would like to avoid having to remortgage to take money out of the house if possible - I know sometimes
its requested in an IVA. 

Thank you. 

enthusiasticsaver

An IVA is a formal debt solution whereas a DMP is informal so liable to  be more flexible.  You also cannot self manage an IVA and it will be registered on the insolvency register. I definitely would not remortgage. I think there are also fees involved in an IVA although I do not have personal experience of one so someone more informed will hopefully confirm. 

fatbelly

The fees for an IVA are high, and built-in. They are taken at the start of the plan.  So if the IVA completes, all well & good. If it doesn't, the debts come back with little paid off. And a lot of IVAs fail because circumstances change over 5 years.

The equity clause is standard for year 5 so you won't avoid that. As lenders are reluctant to lend, that is where the sixth year comes in.

In your case the decision is between 6 years in an IVA and maybe 8 in a dmp, remembering that many IVAs drag on beyond this and many dmps can be finished sooner with settlement deals.

There doesn't seem to be much advantage in an IVA on that score.

You may find an IP who will tell you that they can fudge the figures so that rather than pay £1250 you pay say £500. This may be attractive. However IVAs have yearly reviews and if the truth comes out you will be asked to pay more.

The protection from court action is overstated. If you are paying what you can in an dmp, the creditor isn't going to get more by court action and the debt isn't going statute barred so it's protection against something that is unlikely to happen

IVAs have their place but your case isn't clearly pointing at one

GrumpyDil

As regards the remortgage my understanding is that you can do most existing lender remortgages without any additional assessment of your finances. Unless there are specific reasons why a remortgage would not be a good idea with a XMP I would definately look at the options for a remortgage with your existing lender. 

RogerPensionGuy

If I remember correctly in the old days, set up an IVA and it was typically 5 years/60 months of payments. 

A bad example was if a person pays say 59 monthly payments and they just cannot pay the 60th for whatever reason, the debts can bubble up painfully and missing just one payment was very painful, espically if it was near the end of paying off the IVA, need to really check current IVA rules. 

Reference all the above and the possibility of remortgaging issues, tread carefully as credit history can really hurt on-going deals.

If your mortgage is pretty big, then do maximum research on all this stuff as getting walloped on big mortgage costs may change considerations. 

One quick thought, how about asking for a mortgage holiday break after checking all the rules and how you get penilised in the future, this may allow you to to fast pay off debts. 

Maybe a re~mortgage now for home improvements(nudge nudge) get the cash and pay off all the debts. 

Looks like plenty of choices available, but just look at all the goods & bads now and in the future and make a well informed decision. 

Remember these debt payoff or recovery schemes are very geared for them organisation to gets its share being very important for them and the person using their facilities maybe lower down the list of overall real needs. 

Grumpelstiltskin

OK  at the moment do not touch an IVA with a barge pole.

 How did you manage to get into so much debt? You need to know this so it doesn't happen again.

Is your husband fully on board with the situation?

Start with a self managed DMP, you can then always change your mind if things change in the future. With an IVA you are stuck with it.

ashamedjelly

Thanks everyone for your advice. 

@Grumpelstiltskin - I have previously posted a SOA and back story about how I accumulated debt. Years of trying to have children after cancer when I was younger meant we spent thousands on IVF treatment. All credit cards are now cut up and I have got an emergency fund building so I don’t have to rely on credit ever again. My husband is fully on board and thinks we should stick to the DMP.

Grumpelstiltskin

OK Definitely work on a self managed DMP, like I say with that you can change tack at anytime if things get better / worse, you never know what the future holds and you will not be bound by an IVA.

RAS

Any chance you can get these threads merged so people aren't asking the same old questions?

Really don't recommend an IVA, the budgets are very tight and inflexible. And don't re-mortgage to pay the debt.

Just transfer to the best offer made by your current provider when the time comes. You could check now whether they allow you to fix in the last 3 or 6 months of the current deal?

ManyWays

Would I still be able to remortgage to another fixed rate with NatWest in an IVA? 
Yes, you would be able to get a new fix regardless of the IVA or DMP, but not a remortgage where you borrow more.

You said before that your husband was unaware of your total debts. Either a DMP or an IVA will harm his credit rating, but an IVA more so, also in an IVA he would usually be asked to sign a restriction on your house, so the IVA firm is notified if it is sold. It will be hard keeping a self-managed DMP a secret, an IVA is likely to be impossible.

In an IVA you may have to get a secured loan at a high rate to release equity in the last year.