Help to Decide

Chunkydog1305

Hi all

Really need some advice. Due to a significant change in financial circumstances for my husband we have found ourselves in a position of needing to seek help for debt.
As with anyone going through this it has been really stressful but we have spoken with stepchange and given the option of a shared Debt Management Plan or separate IVAs. The debt is split fairly evenly but my wage is significantly higher.
Our total unsecured debt is very high at £100,000

Stepchange seem to be preferring us to take the DMP route over the separate IVAs. The DMP will take us 28 years to repay at just over £280 a month. It leaves us with a manageable amount to live on and support our children. We may find ourselves in a situation in the future where we are able to overpay slightly more on the DMP. However the most we will ever bring it down to is around 16 years if this is the case.

Is anyone able to advise if the separate IVAs would be a better option?
We have a shared ownership property so only around £10,000 equity with 22 years left on our property to pay. We also have a secured loan on the property which obviously we have to pay as a priority.

I am so confused with what to do for the best as stepchange seem so reluctant for us to do the IVA so if anyone can advise I would be really grateful

fatbelly

It's unusual for Stepchange to be negative about IVAs. Did they explain why? On the face of it a solution that sees you debt free in 5 or 6 years is a better option.

The IVAs would be 'interlocking'. Maybe run it past Payplan

https://www.payplan.com/debt-solutions/iva/

Chunkydog1305

No the person I spoke with just kept saying the IVA would have bigger consequences and look worse on our credit file. He was saying creditors would appreciate us paying them back in full. Thank you for the advice and link

RAS

Sure the creditors would appreciate you paying them back in full. But the reality is that if you do a DMP as we suggest your credit record is repaired after 6-7 years and no one can see whether you've paid off in full, partially or still owe.

We advise delaying the DMP until debts are defaulted to ensure that happens. Stepchange like to start immediately so you can get AP markers which do stay on your credit record until 6 years after the debt is paid off.

Most creditors sell defaulted debt on at a big discount and the collection companies will offer settlement for a discounted rate. They'd rather have 20-30% in their accounts than wait for it in dribs and drabs.

I'm not sure how IVAs work with shared ownership, and you might need to look at your specific documentation.

Short-term, debt collection of consumer debt moves slowly, so you have time to research and make your decisions. Do not be panicked into choosing quickly.

There are however a couple of things that you do need to do to keep your money safe.

If any of your income goes into an account that belongs to a banking group to whom you owe unsecured debt, you need new bank accounts and to transfer manually essential DDs and SOs. Do not use the switching mechanism. Some on-line suppliers and basic bank accounts do not do credit checks, so use them.

Once your income is safe, make sure secured debt, rent and CT are paid out of the new accounts, and cancel all the consumer credit debt payments. If you owe a lot of money to a single provider, they may decide to go for CCJs. But 90% of cases aren't pursued.

That may affect your eventual decision on IVA versus DMP.

And please, please do not respond to any TV or media ads offering IVAs. They are just lead generators trying to find mugs to pay fees, for services you can get a lot cheaper. If you decide to do IVAs use Payplan or Stepchange whose fees are much lower.

Come back to ask when you have more information or questions.

fatbelly

Wow. What creditors want has nothing to do with finding the best debt solution, and any solution messes up credit history for 6 years.

Whether you persevere with them, trying to find a sensible adviser, or switch to someone else, is up to you.

ManyWays

IVAs are possible with shared ownership. That does not mean they are the best option for you, but it is one worth considering.

Due to a significant change in financial circumstances for my husband

Can you say what this was? IVAs need really stable finances going forward to be a good idea

How large is the secured loan? They are unusual in a shared ownership property. How long a term is it?

I assume the property is jointly owned?
Is it suitable for you or may you need to move in the next few years?

Do either of you own a car or have one on fincne, HP or PCP?

How much do you own now? Could we see a list of your debts: lender, rough balance?
Same questions for your husband.

Chunkydog1305

Thanks all for your advice this is such an upsetting and embarrassing situation to be in so I honestly really appreciate it. We have both just opened revolut accounts. We can afford this months payments but come next month we have now used all our savings.

The reason for our situation is an accumulation of my husband’s business having to close, we panicked and took a secured loan out to pay people we owed money to. My husband then had a well paid job so we were just floating with out debts making the minimum repayments but unfortunately 18 months ago he lost his job and has had to take a much lower wage (£20,000) less but the job is stable. 

Due to ill health it’s unlikely he will ever go back to earning a higher figure salary again. I have a stable job and income. 

My Debts

• Halifax (Credit Card) – Me – £5,000.00
• MBNA (Credit Card) – Me – £7,948.00
• Barclaycard (Credit Card) – Me – £8,508.00
• Barclaycard (Credit Card) – Me – £7,036.00
• Admiral (Personal Loan) – Me – £21,255.00 3 yrs left to pay off 
• Barclays (Overdraft) – Me – £1,000.00

My Partner’s Debts

• Admiral (Personal Loan) – My Partner – £10,006.00 3 years left to pay off 
• Close Brothers (Hire Purchase Debt) – My Partner – £13,754.00 3 years left to pay off
• Novuna (Personal Loan) – My Partner – £28,247.00 4 years left to pay off 
• Barclaycard (Credit Card) – My Partner – £8,500.00
• MBNA (Credit Card) – My Partner – £10,102.00

Joint Debts

• Barclays (Overdraft) – Me & My Partner – £2,000.00
• Nationwide Building Society Mortgages (Mortgage) – Me & My Partner – £46,000.00 over 22 years 
• Tandem Bank (Other Secured Debt) – Me & My Partner – £54,992.00 over 22 years but fixed at 17.8%!!!!! 

We would love to move as I have to children who have to share a room, not the end of the world I know but mum guilt steps in. Moving would also allow us to pay off the secured loan but no one will lend to us with our unsecured debt. I also do not think we should have had the secured loan attached to the property with our shared equity but the lender said it was fine……again panic and misunderstanding of a situation on our part so I’m not sure if we would get into trouble with the company we have shared equity with if they find out, the idea always was we would take out a further loan down the line to pay off the secured loan. It’s such a mess but thank you once again for any advice 

Grumpelstiltskin

If you can't afford to pay your unsecured debts then don't pay them, cancel the payments now.

The worse thing you can do is panic, I think you know that now. nothing terrible will happen if you don't pay the unsecured debts, nothing moves quickly in debt collection and you will have time to start building an emergency fund, something that is vital to have when you will have no access to credit.

sourcrates

I think on seeing those figures, individual IVA`s may be the way forward, the joint overdraft will be included in both arrangements, as you both retain liability for the full amount.

Budget wisely, in fact overbudget to some extent, as your payments will increase as the IVA progresses, as you need stability for the full 5 years this will take, I think in your case it would be better than a 20 odd year DMP, your home would be legally protected from any further action by your creditors, and with over 100k owed between you, I would imagine a charging order would be a possibility from at least one of your creditors, an IVA will prevent that from happening.

Look at IP`s recommended by stepchange, not some fly by night IP that advertises on social media.

Oh, and stop paying the unsecured stuff now, its silly throwing money at debts that will end up in an insolvency, a complete change of approach is needed in how you handle things going forward, others with more recent knowledge of current IVA`s will be able to elaborate further on this.

An IVA is specifically designed for your kind of situation, I don`t normally recommend them, as they are not suitable for the vast majority of debtors, but in your case its probably a good choice.

fatbelly

Defo wave goodbye to Barclays. You are going into some form of debt solution so the overdrafts will go in and you need somewhere for income and essential expenditure that is unconnected to existing debts.

Your situation is straightforward and looks suited to an IVA to me. Partner- what is the HP? A vehicle that he needs?

RAS

OK, stop paying consumer debt now. Get another (extra) bank account or ISA with a different provider and put any money you don't need for living expenses this month onward into that to build an emergency fund. You need some advice on how much you can have without affecting IVAs. Whether you can both have savings or the limit is joint?

You need to move that HP (Close) account out of the consumer debt, as it is secured. On what? A car? You'll need separate advice on that and the first thing to do it to find the contract as that may dictate your options.

The other wee nightmare is your secured loan. With your combined mortgage and that loan you appear to be in substantial negative equity. How much is your property share worth?

You may need additional advice on that situation. As before, you've got a few months to make decisions. But you need to get out the loan documentation and work out whether you might even be able to overpay that once the IVA finishes? You need to fully understand the rules now rather than getting nastier surprises later.

You also both need to understand that any increase in income has to be reported to the IP and they will take most of it. And any windfall like inheritance will also be used to pay off the creditors and IP fees. You could end up repaying more than the current debt if you get a large windfall.