DMP or IVA?

Tomh1

Hello all - as with many I have amassed a lot of unsecured debt through bad life choices and necessities (Court cases following divorce). I'm not here to moan about it and wallow in self pitty but to tackle the issue head on. SOA is below. I have swayed between DMP and IVA. In all honesty I have no idea which is best and StepChange have reccomended both.

I am 32, I have 4 children and one on the way. I private rent, I have a HP vehicle which I need to keep. I would like to get back on the property ladder by the time I am 40 so the kids have some security should the worst happen. I do not expect my employment to change, however redundancies are always a risk. What is my best course of action?

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 4
Number of cars owned.................... 1[b]

Monthly Income Details[/b]
Monthly income after tax................ 3144
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0[b]
Total monthly income.................... 3144[/b][b]

Monthly Expense Details[/b]
Mortgage................................ 0
Secured/HP loan repayments.............. 211
Rent.................................... 450
Management charge (leasehold property).. 0
Council tax............................. 0
Electricity............................. 0
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 50
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 66
Groceries etc. ......................... 350
Clothing................................ 80
Petrol/diesel........................... 150
Road tax................................ 23
Car Insurance........................... 79
Car maintenance (including MOT)......... 0
Car parking............................. 32
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 406
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 50
Haircuts................................ 40
Entertainment........................... 150
Holiday................................. 0
Emergency fund.......................... 0[b]
Total monthly expenses.................. 2137[/b]
[b]

Assets[/b]
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 3000
Other assets............................ 0[b]
Total Assets............................ 3000[/b]
[b]

Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 0........(0)........0
Hire Purchase (HP) debt ...... 0........(211)......0[b]
Total secured & HP debts...... 0.........-.........- [/b]

[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
Virgin Money...................5200......200.......0
Halifax........................8000......330.......0
HSBC...........................5424......113.......0
Plata Loan.....................32434.....661.9.....0
BarclayCard....................250.......8.........0
MBNA...........................500.......25........0
Halifax........................3293......98........0[b]
Total unsecured debts..........55101.....1435.9....- [/b]

[b]
Monthly Budget Summary[/b]
Total monthly income.................... 3,144
Expenses (including HP & secured debts). 2,137
Available for debt repayments........... 1,007
Monthly UNsecured debt repayments....... 1,435.9[b]
Amount short for making debt repayments. -428.9[/b]

[b]Personal Balance Sheet Summary[/b]
Total assets (things you own)........... 3,000
Total HP & Secured debt................. -0
Total Unsecured debt.................... -55,101[b]
Net Assets.............................. -52,101[/b]

[i]Created using the SOA calculator at www.stoozing.com.
Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

ManyWays

Let's talk about the details of your SoA before talking about an IVA or a DMP.

Are these the numbers you gave to Stepchange?

Does your partner work? Do they also have debts? Are they paying for some / half / all of some of the expenses listed here?

Are the children with you full time? If not, can you explain the split. And their ages.

Do either of you earn over 60k a year? If not, you should get child benefit

The very large Plata loan, how much did you borrow and what is the interest rate? Was this for consolidation?

Tomh1

Does your partner work? No Do they also have debts? No Are they paying for some / half / all of some of the expenses listed here? Any expense with a zero is being covered and not by me.

Are the children with you full time? 3 children are hers, full time. My little one is with me 50 percent of the time If not, can you explain the split. And their ages.

Do either of you earn over 60k a year? If not, you should get child benefit. No, already being paid.

The very large Plata loan, how much did you borrow and what is the interest rate? Was this for consolidation? Yes the plata loan was to consolidate during the divorce, the borrow was 25k the interest is 21.9%

sourcrates

IVA`s are best suited to homeowners, they are a regulated insolvency solution, any asset, such as a house, will be protected under that arrangement, however you rent, so will have no need of that protection.

IVA`s can be quite restrictive also, in terms of any extra money you might receive, either from work, or via any windfall, that must be paid to the arrangement for the benefit of your creditors, you also need your income to be stable for the full term of the arrangement, up to 60 months.

If any monthly payments are missed for any reason, they get added on to the end of the IVA, likewise any arrangement where you make a reduced payment, all arrears will be added to the end of the IVA, again extending it further.

There may be a standard re-mortgage clause that kicks in, during year 5, if you can`t re-mortgage, then another year of payments may be the result.

The only benefit to an IVA is it should clear your 55k of debt within 6 years, if you can abide by its rules.

Debt management on the other hand is an informal agreement, that you can pretty much run yourself, with no restrictions or rules to follow, you would likely be looking at a similar timescale in terms of re-paying the debt, but with no restrictions on how you manage it.

ManyWays

Can you include the income from Child Benefit and any other benefits in your SoA please.

Groceries etc. ......................... 350
That is a lot too little for 2 adults, 3 children full time and one half time. You will be doing well to manage on 700

Clothing................................ 80
also looks low. Suggest 120

The Plata loan, have you looked at an affordability complaint?

Your car is on finance? when does this end? Is this PCP or HP?

Tomh1

Thank you for the replies, upon reflection I have decided to go down the DMP route.
I will ask Stepchange to manage this for me.

From this month I will stop paying all debts other than the HP vehicle.

Should I write to lenders or just wait until the defaults and then begin StepChange DMP?

Grumpelstiltskin

Do not start your DMP until you have a decent emergency fund, if you start too soon and something goes wrong/ breaks down and you have no access to credit and no emergency fund you are in trouble.

Also do not contact your creditors, all they are interested in is getting you to pay them.

Tomh1

Thanks Grumpel, I will cease all payments immediately and build the emergency fund. I will also not contact any of my creditors

RAS

The more contact you have with creditors at this stage the longer they take to issue defaults. It's likely to be 6-12 months and you want them ASAP.

Once those are in place they'll write telling you if they've sold or assigned the debt. A few keep them in house. Then you can start paying something small and let them know you will be going with Stepchange in a few months.

Tomh1

Thanks RAS. I have cancelled all direct debits today and cancelled the payment authority from my bank for the loan payment.

I will remain silent with creditors and not answer any type of communications.

I have completed the budget with stepchange so I have an idea of what my payment will be however over the next few months will be lumping as much as possible into an emergency fund.

Grumpelstiltskin

Great now just don't panic if anything you hadn't thought about happens. We are always here to answer any queries.