What’s the best debt solution?

Spanglebell

Hello,

I’ve tried to do an SOA and confused myself thoroughly so I thought I’d just begin. 

Up until very recently I was poised to go into an IVA. 

My financial circumstances have changed drastically and I now have more income than I thought. 

My partner’s finances are separate to mine, and have to stay that way because of his job. 

He has his own debts paid for from his own income and they are all up to date. He pays all the bills, I pay most of our day to day living expenses. 

His job is volatile, so save £300 per month, and we need to keep that. He’s on this third job of 2025 so it’s really vital to not incurring more debt that we have a buffer. 

We have a secure home, owned by family but not by us. We do maintain it, hence the savings also important here - we don’t have oodles, there’s £2.5k for job loss and that’s it. 

I was ready to go into the IVA as my spare income after all our expenses were accounted for was £95.

Now that has shifted to a minimum of £292 and as the year progresses that will increase to £361. In effect I will be able to pay off £4,148 per year. 

I have £21,000 of debt.
All of it in default. 

1 (£600) has gone to a CCJ.
16 different lenders. Ranging in size from £9k to £150.

The oldest default is from 2021, the newest this year.

What is the best way to approach it? 

I have looked at debt management plans and an IVA…I’m not quite convinced either are right. 

My gut instinct is to save the money and make settlement offers, but I’d really like advice and one that isn’t working on commission. 

MEM62

Spanglebell said:

I have looked at debt management plans and an IVA…I’m not quite convinced either are right. 

Why not?  

Spanglebell said:

My gut instinct is to save the money and make settlement offers, but I’d really like advice and one that isn’t working on commission. 

This could be incorporated into your debt management plan. 

You do not have to pay for advice.  Plenty of guidance is available both on these forums and from one of the debt-free charities.  

Spanglebell

I’m wary of the IVA because of fees, and therefore whether I’m being given the best advice or being sold to the highest bidder, because I’d have to severely reduce my pension contributions and my partner has no pension to speak of whereas my employer contributes double what I contribute. I’ve also read historic posts on this forum saying they’re more suitable for homeowners, which I’m not, but I don’t know how accurate that is. 

I wasn’t aware that you could negotiate settlement offers in a DMP so thank you that is useful to know. 

Grumpelstiltskin

Do not touch an IVA with a barge poll. Your debt is not large enough to think about one.

A DMP is an informal solution, nothing is recorded anywhere but you do realize if you have any joint accounts his credit record could be affected.

If you are happy with a DMP ( and why would you not be?) then either use a charity like Stepchange or run it yourself.

fatbelly

With the level of surplus income that you will have, there is no advantage in a IVA. I don't think you need bankruptcy either

Follow the guidance here. An soa would be useful

https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps-to-take -are-here-please-read-then-ask-questions

Grumpelstiltskin

Read through this thread and complete the SOA fatbelly mentioned.

In Debt and Wannabe Debt Free? first Steps to take are here, please read, then ask questions. — MoneySavingExpert Forum

sourcrates

There are three (3) statutory debt solutions in the UK, Bankruptcy/IVA/DRO, and one informal arrangement, which is debt management.

I would forget the statutory options, as non would be appropriate for you.

As well as the informal debt management option, there are variations on this theme, you touched on one earlier, saving up a good settlement fund, and settling each account as and when suitable offers are made/accepted going forward.

This is a useful strategy, and can work well for you, over time that 21k can comfortably be settled for around half that figure given a dose of luck and a fair wind, so I would go with your gut instinct here.

tigergambit

Avoid an IVA, just not suitable at all.

Use your SOA showing £95 surplus and set up agrees with your creditors. Save the extra £200 into an emergency/settlement find with a view to making F&F offers in a few years.*

* If you've not been paying towards any of these debts do not start now unless they send you notice of court action. You may be on the way to expiration. 

A few more details will help people give you better advice.

Brie

sourcrates said:

There are three (3) statutory debt solutions in the UK, Bankruptcy/IVA/DRO, and one informal arrangement, which is debt management.

I would forget the statutory options, as non would be appropriate for you.

As well as the informal debt management option, there are variations on this theme, you touched on one earlier, saving up a good settlement fund, and settling each account as and when suitable offers are made/accepted going forward.

This is a useful strategy, and can work well for you, over time that 21k can comfortably be settled for around half that figure given a dose of luck and a fair wind, so I would go with your gut instinct here.

wouldn't a DRO be a possibility as the OP says they don't own the home they live in?  If there's rent being paid in some form then it may be a good option.  And it could just be the OP that applies rather than both of them.  It might be something that can't be decided until there's a SOA available.

sourcrates

Brie said:

wouldn't a DRO be a possibility as the OP says they don't own the home they live in?  If there's rent being paid in some form then it may be a good option.  And it could just be the OP that applies rather than both of them.  It might be something that can't be decided until there's a SOA available.

A DRO requires 12 months of absolute financial stability, and you must also meet the £75 minimum disposable income allowance.

OP states that:

"I was ready to go into the IVA as my spare income after all our expenses were accounted for was £95.

Now that has shifted to a minimum of £292 and as the year progresses that will increase to £361. In effect I will be able to pay off £4,148 per year". 

So they would not qualify due to disposable income, unless the budget can be tweaked, but we`d need to see an SOA to determine that.

Brie

@sourcrates
well spotted!