Ready to tackle my debt

Fts74

Hi all,
Spent the last few days reading and absorbing as much information as I can.Im currently around £25k in debt, loan credit cards.
I initially felt guilty thinking about basically defaulting my debts,I've never missed a payment,things changed when I was made redundant last July and I've managed to keep paying.New job but I'm on reduced wages now so it's becoming unsustainable. 
I went on Stepchange, filled in all the details and they recommended an IVA but I don't own my own home have no real assets so I think because after my outgoings it leaves around £130 a month they deem this too long for a DMP.
I have another bank account unlinked to any of my debts so I can transfer DDs for rent etc,I'm just a little too late to stop paying the DD this month for my loan before I can transfer salary to my other account.
I intend to follow the advice of stop paying and wait for Defaults and take it from there whilst building up some funds.
Thanks for all the amazing info on here.

Fts74

One question I do have, when the time comes to offering payments to creditors, am I right in thinking I'm not obliged to do an I/E with them if they ask?

sourcrates

Debt management is becoming ever more streamlined these days, it used to be you`d send offers of payment and wait for acceptance etc etc, but nowadays its much simpler, once your debts default, to just set up payments on line with each individual lender, most will be debt collectors anyway, who all have reasonable websites capable of taking payments.

No, you don`t have to conform to any requests from lenders, but keep in mind, the only reason they ask for this is to make certain what you are paying is affordable, FCA requires them to ask this, so keep that in mind.

Fts74

Thanks for your help. 

fatbelly

It sounds like there is something wrong with stepchange's algorithm

For a non-homeowner facing a 200- month dmp, the alternative is not a 60-month IVA.

It is bankruptcy with a 36- month IPA

RAS

Agree with fatbelly, although given how many people miss expenditure off their SOA like presents, holiday, medical and dental, insurance, it might be wise to stress test the SOA first. 

If in real life the excess is below £75, a DRO might be appropriate, depending on assets?

Fts74

That's interesting, I've been as honest as possible with the SOA,but it's not something I'm used to doing.
My instinct was no not an IVA, but as you say, a potential 200 month DMP doesn't sound great regardless of whether I'm prepared to play the long game as my circumstances could change and I could pay more or less for that matter.

fatbelly

RAS said:

Agree with fatbelly, although given how many people miss expenditure off their SOA like presents, holiday, medical and dental, insurance, it might be wise to stress test the SOA first. 

If in real life the excess is below £75, a DRO might be appropriate, depending on assets?

Yes, the difference between £130 per month and £75 per month is only about £13 per week, the amount that could easily be lost in food&housekeeping, particularly with the SFS figures (already generous) being raised on 7 April

RAS

@Fts74 I'm not suggesting any lack of honesty.

It's just based on years of responding to people who have lowish value (compared with debt) DMPs and are stressed out by real life events, whether that's a family emergency, or something failing and needing replacement, and commenting on SOAs.

People are often so relieved to find a solution and so grateful that they push themselves to try and live a fairly bare existence which can't be sustained longer term. 

DROs aren't for everyone either. They are acts of insolvency, they require a stable income stream and expenditure for the 12 months. There are savings and asset limits. They can fail if you get a promotion at work, move in with a partner to reduce costs etc.

So I'd suggest starting with the intention of doing the DMP, saving what you can and reassessing in 6 and 12 months. To some extent the savings you achieve will tell the story. Divide those by the months needed to achieve them and if you managed to save less than £75 per month take advice on the DRO, if you want.

ManyWays

I think starting with a DMP and seeing how realistic the budget is is a good approach. DMPs can go on for ever, but their big plus is that they are flexible and a good move in an uncertain situation.
With no assets bankruptcy is better than an IVA, and if your realistic spare income is under 75 a month a DRO is better than both. 

Fts74

Thanks for taking the time to reply. I think I'll go the DMP route and evaluate after 12 months.Hopefully I can save some money in the meantime.