IVA or DMP ???

jamesm5094

Hello, 

I am really struggling with debt, so cut long story short I have spoken to a debt helpline and they have offered me an IVA or a DMP. 

I did a budget with them and they have worked out i have £217 available to pay towards my unsecured debts each month. My unsecured debts add up to £1,300 per month! Total unsecured debts is £57,000. I have several littles ones which add up to £15,000 then the rest is two bigger ones, one for £17,000 and another for £25,000

I am trying to find out best advice on what to do! I have read different things online and IVA sounds scary like bankruptcy and a DMP sounds also scary as it says creditors can still come for you and send debt collectors. I like idea of the DMP to help but its the thought that the creditors can still pass onto debt collectors. 

Im settled in my long term home and on a tracker mortgage so not worried about being able to get a new mortgage. 

How much does a DMP & IVA really affect remotgaging if i had to? And how long does it affect for after having a DMP or IVA? 

Any help with what to do is much appreciated. 

Thank you 

fatbelly

Both strategies will affect your ability to borrow - the IVA directly as it is, like you say, bankruptcy for someone with an asset to protect.  The dmp affects it indirectly because each creditor issues a default that stays on your record for 6 years.

With only £217 available to 52k of debt, a dmp is going to take a long time whereas an IVA is over in 6 years.

Who is the debt helpline that is advising you?

ManyWays

Like @fatbelly, its important to know who you were talking to. As some firms who should be avoided use names similar to National Debtline. Who did they suggest you talk to for a DMP or IVA? 

they have worked out i have £217 available to pay towards my unsecured debts each month. My unsecured debts add up to £1,300 per month!
That is a measure of how impossible your current situation is. You have to do something.

Who are your large debts with, as those creditors would be able toveto an IVA.

Have you looked at what mortgage fixes you can get? This could be less than a tracker mortgage at the moment. And if you are going into a debt option, it may be good to get that fixed. 

I like idea of the DMP to help but its the thought that the creditors can still pass onto debt collectors.
In a DMP it's very good news when a debt is sold to a debt collector as they are usually much more prepared to accept a partial settlement offer than the original lender is. Debt collector visits are rare if you are in a formal DMP, and a debt collecor anyway has no rights at all to enter your house.

jamesm5094

Thanks for reply, so helpline was Money wellness but I am also going to speak with step change about what they advise. 

so basically current situation:

Secured:

Main mortgage owe £365,000 £1783 per month tracker rate

second charge mortgage £190,000 £1290 per month fix for 5 years

unsecured

Tesco £25,000.      £374 per month      

MBNA £17,000     £259 per month

Drafty £2,900     £231 per month

Paypal Credit £5,100  £295 per month

Partner Paypal credit £1,100 £45 per month

HSBC Credit card £3000  £95 per month

Creation £852    £80 per month

I have tried looking at if I can borrow more on main mortgage to clear the unsecured but they won't lend anymore currently. I know a DMP would take years and years but wouldn't it be possible to just use a DMP for say 3-6 years so that I keep paying down my main mortgage and then when possible remortgage the extra to clear all the unsecured. It's just that would I get a remortgage to borrow the extra to clear unsecured if I have a DMP even though that would then technically end?

Just not sure with what is best route to go down, I have possibly asked about doing a third charge to clear all unsecured debt and just have the one but problem is that is still going to be costly, okay not as much as them unsecured add up to each month but I still think it will be too much. and I'm not 100% I would get accepted for it. Equity wise I am okay on my property as it is worth about £800,000 but it's just affordability I fail on. 

Or would it be better to try and clear somehow the smaller unsecured debts and then do a DMP for the bigger loans?

any help with what route to go down is much appreciated as I'm stuck.

obviously I want to try and avoid affecting credit score and getting defaults etc as much as possible. currently I am all up to date with payments but that's only as I did have some spare money to cover the unsecured debts each month but that has pretty much run out.

RhiBi

I’m no expert (I start a lot of my posts saying that!). But if you don’t make minimum payments then your credit score will be affected.  My understanding is that any sort of DMP, whether formal such as an IVA or informal will have an effect.

The strong advice on here is to never turn unsecured debt into secured.  Also, it would be helpful to look at how you got into debt, I’ve consolidated credit card debt in the past, taken out a loan to pay the cards off.  The problem was I didn’t change my spending habits so now have loans and credit cards that have become unmanageable.

Grumpelstiltskin

OK Money Wellness are not a debt helpline, they just push IVAs as they get a cut.

So speak to Stepchange but don't agree to a DMP until you are 200% sure it is the right thing and the right time

jamesm5094

Thank you Rhibi, so to be honest main reason I got into debt was because of home improvements. Long story short I purchased a property with only my main mortgage and I then got the secured loan to do debt consolidation as well as a lot of it towards home improvements. (ive basically built a small property attached onto my house). I then got into the other unsecured debt mainly Tesco/MBNA/Drafty to finish my home improvement work. The other unsecured debts was just purchases I made on them.

So yes I probably shouldn't have done it but now the home improvements are done my property is now valued about approx £950,000 so I have plenty of equity. day to day living wise yes its not luxury lifestyle but if I didn't have the unsecured debt then I would be ok just. well I wouldn't be in the negative each month. the money wellness offered me the IVA and also the DMP at £217 and if I could get payments down to that through a dmp then this would be affordable for me. Then like I say about hopefully only have it for few years and clear it through remortgaging if it would be possible. 

or unless anyone can help with a better solution or advice please? my main concern is getting the unsecured debt cleared, the main mortgage and the secured loan I can deal with and have enough each month to cover them.

thank you 

sammyjammy

Is selling up and clearing all the debt an option?  As has already been stated changing unsecured debt to secured is a really bad idea, particularly for someone thats already consolidated before..  With only £217 to go towards these debts a DMP is going to be hard work.   

What are you doing with the small property you've built?  Can you rent it out?

A statement of affairs would be useful.

jamesm5094

Selling up is not an option as we moved long distance to get this property and do not want to sell it, i say small house size as an example but its like a big extension so is part of the property so cannot be rented out unfortunately. also if i tried to sell the house currently the improvement works are not currently finished so i would not get full value for it. The work is 80% completed.

RAS

You may not be able to sell, but could you take a lodger, not necessarily all week every week? Tax free income.

Alternatively, are there any large events that attract a lot of visitors? That'd need declaring.

ManyWays

wouldn't it be possible to just use a DMP for say 3-6 years so that I keep paying down my main mortgage and then when possible remortgage the extra to clear all the unsecured. 
No. Main stream mortgage lenders like you to have had any problem debts well in the past. The only sort of mortgage lender that would consider this is a very bad credit one which you should avoid.
What is wrong with seing the DMP as the way to clear the unsecured debt? While the mortgage and second charge just steadily get paid down

I have possibly asked about doing a third charge to clear all unsecured debt and just have the one but problem is that is still going to be costly, okay not as much as them unsecured add up to each month but I still think it will be too much. and I'm not 100% I would get accepted for it. Equity wise I am okay on my property as it is worth about £800,000 but it's just affordability I fail on. 
This would be extremely risky and expensive. Why would you do this rather than have a DMP for the unsecured debt?

Or would it be better to try and clear somehow the smaller unsecured debts and then do a DMP for the bigger loans?
No this is just a silly idea. (I guess I would make an exception for one where the balance is tiny, less than 100, but none of the debts you have listed are really small.) It will make no difference to getting credit in future if you have five or seven defaults in a DMP.

In summary: stop trying to make things complicated.  Securing these unsecured debts is a very bad idea, now or in a few years time. Just dump all the debts into a DMP.

Or into an IVA. If you want us to talk about DMP v IVA, please post a Statement of Affairs, see https://www.stoozing.com/soa.php.