About to start DMP - advice please

t829usx · 13 December 2018 at 2:09PM

Hi all,
So after months of burying my head in the sand, I have now 100% realised I need to get myself onto a DMP and tackle my unsecured debts of around 33k.
I have a 1 year old mortgage as 95% LTV (24 years left to run!) and a full-time job earning around 28k - so in my eyes an IVA probably isn't a great option, although I should really get further advice on that...

At the moment I have not missed any payments on anything (Loans + credit cards + overdraft), - I have just set up a 'clean' bank account, just a Natwest Select account without overdraft, hopefully that will be ok moving forward. I will cancel non-priority direct debits over the next week or two, and let my employer know of my new bank details for my salary to be paid into.

I have yet to speak to Stepchange, which I intend to do to help setting up a DMP - but my main question is do I contact Stepchange NOW, or do I say nothing to anyone, and wait two or three months after non-payment of debts, until the default and threatening letters start, in the meantime I could potentially save an emergency fund? Does that sound sensible, or am I missing some vital details?!

Thanks

OCTOBER · 13 December 2018 at 2:42PM

Hello, welcome - this is a great place to start!
just a quick note from me as I am a newbie myself, and just starting my DMP journey -but soon great advice will come along to you here, from all these knowledgeable folks .
Have you tried SC online debt remedy yet - that was my first step, I also rang them soon after and you won't be rushed into anything,
good luck on your journey

Craig1981 · 14 December 2018 at 6:34AM

based on level of debt and length of mortgage, an IVA may be a better option for you - up to 6 years and you should be done. this again, depends on your SOA and what money you have available to pay to it.

a DMP at 33k may take the majority of a decade to complete. either way, DMP or IVA, both will impact your credit history.

tealady · 14 December 2018 at 7:58AM

If you fill in your statement of affairs and post here, then we can have a look and (hopefully) suggest where you can cut back.
HTH

Suseka97 · 14 December 2018 at 8:17AM

If you give SC a call they will be able to advise whether an IVA or DMP is best in your situation. Or use their online debt remedy tool to get an idea of how long, based on your circumstances, a DMP would last.

If you choose the DMP route then saving an emergency fund is definitely a good idea, and you don't need to rush in to start. Once your new bank account is up and running and your salary has been transferred across, then you should write to all your creditors to explain you are experiencing financial difficulties, that you are in discussion with SC and that they'll be in touch in due course to agree a payment plan. You can provide the SC reference and will find most, if not all, will put your account on hold for an initial 30 days - you can easily stretch that out when needed.

Depending on which route you choose to take - do head over to the DMP mutual support thread and/or the Bankruptcy/IVA ones and have a read. You'll find lots of folks in a similar situation and useful info to get you up and running either way.

fatbelly · 14 December 2018 at 11:22AM

t829usx wrote: »

Hi all,
So after months of burying my head in the sand, I have now 100% realised I need to get myself onto a DMP and tackle my unsecured debts of around 33k.
I have a 1 year old mortgage as 95% LTV (24 years left to run!) and a full-time job earning around 28k - so in my eyes an IVA probably isn't a great option, although I should really get further advice on that...

At the moment I have not missed any payments on anything (Loans + credit cards + overdraft), - I have just set up a 'clean' bank account, just a Natwest Select account without overdraft, hopefully that will be ok moving forward. I will cancel non-priority direct debits over the next week or two, and let my employer know of my new bank details for my salary to be paid into.

I have yet to speak to Stepchange, which I intend to do to help setting up a DMP - but my main question is do I contact Stepchange NOW, or do I say nothing to anyone, and wait two or three months after non-payment of debts, until the default and threatening letters start, in the meantime I could potentially save an emergency fund? Does that sound sensible, or am I missing some vital details?!

Thanks

Your plan sounds sensible, and realistic. I don't see any harm in starting the ball rolling now. Maybe also chat to Payplan.

Don't let anyone (sc, payplan included) push you towards an IVA without very good reason. Particularly anyone who doesn't even know how much surplus income you have available. Unfortunately fees sometimes distort advice. National Debtline are pretty much impartial, as would be a good CAB debt specialist.

t829usx · 19 December 2018 at 2:13PM

Thanks for the replies, I will get a statement of affairs filled out and posted.

The one thing that is swaying me away from an IVA, and correct me if I am wrong here, but say I spend 5 years (60 months) on an IVA whilst paying £500 per month mortgage - that is £30,000 towards my mortgage (£90k mortgage), yes a chunk of that will be interest, but I understand I would need to remortgage after 5 years and then any equity would go to my creditors as part of an IVA - hence I would almost be back to square one without any house equity (although I would be debt free). Can you understand my point of view in that respect? With a DMP my debts will slowly come down, but my mortgage remains unaffected?

fatbelly · 19 December 2018 at 8:00PM

t829usx wrote: »

Thanks for the replies, I will get a statement of affairs filled out and posted.

The one thing that is swaying me away from an IVA, and correct me if I am wrong here, but say I spend 5 years (60 months) on an IVA whilst paying £500 per month mortgage - that is £30,000 towards my mortgage (£90k mortgage), yes a chunk of that will be interest, but I understand I would need to remortgage after 5 years and then any equity would go to my creditors as part of an IVA - hence I would almost be back to square one without any house equity (although I would be debt free). Can you understand my point of view in that respect? With a DMP my debts will slowly come down, but my mortgage remains unaffected?

Most people cannot remortgage at that point and so do a 6th year.

https://debtcamel.co.uk/iva-equity-release/

But the uncertainty around this does need to be factored into your decision if you do have equity.

t829usx · 20 December 2018 at 2:36PM

Ok so here is my attempt at an SOA as it stands - scary when it is in black and white in front of me:

This is my first attempt so I'm sure it will need tweaking, so any advice would be appreciated.

First thing to flag up would be spend on fuel (diesel) - my commute to work is 30 miles each way five days a week, so I fill up around £60-70 each week and is pretty much unavoidable - this in turn pushes my car maintenance costs up, due to extra money for tyres/servicing etc, hope that makes sense.

Presents, Entertainment, Holiday and Emergency Fund are all guesses but they amount to £200 at present - to be fair I don't think I will be going on any holidays for the short term at least, so these could possibly be tweaked too?

Mobile phone I already know could be cheaper, but I have one year remaining from a two year contract.

I know this varies for each individual, but in my head I think I should be aiming for between £200-300 per month for a DMP - possibly £300 and even then it will potentially take a decade to pay off assuming freezing of interest etc.

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 1855
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1855

Monthly Expense Details
Mortgage................................ 505
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 125
Electricity............................. 40
Gas..................................... 70
Oil..................................... 0
Water rates............................. 45
Telephone (land line)................... 20
Mobile phone............................ 38
TV Licence.............................. 13
Satellite/Cable TV...................... 25
Internet Services....................... 0
Groceries etc. ......................... 200
Clothing................................ 20
Petrol/diesel........................... 280
Road tax................................ 15
Car Insurance........................... 50
Car maintenance (including MOT)......... 50
Car parking............................. 10
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 10
Pet insurance/vet bills................. 0
Buildings insurance..................... 12
Contents insurance...................... 12
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 50
Haircuts................................ 10
Entertainment........................... 50
Holiday................................. 50
Emergency fund.......................... 50
Total monthly expenses.................. 1750

Assets
Cash.................................... 0
House value (Gross)..................... 98000
Shares and bonds........................ 0
Car(s).................................. 5000
Other assets............................ 0
Total Assets............................ 103000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 90000....(505)......4
Total secured & HP debts...... 90000.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Shawbrook loan.................13000.....300.......0
Nationwide loan................4700......123.......0
Barclaycard....................10500.....200.......0
Nationwide Overdraft...........1000......15........0
Nationwide credit car..........2000......50........0
MBNA Credit card...............3400......35........0
Total unsecured debts..........34600.....723.......-

Monthly Budget Summary
Total monthly income.................... 1,855
Expenses (including HP & secured debts). 1,750
Available for debt repayments........... 105
Monthly UNsecured debt repayments....... 723
Amount short for making debt repayments. -618

Personal Balance Sheet Summary
Total assets (things you own)........... 103,000
Total HP & Secured debt................. -90,000
Total Unsecured debt.................... -34,600
Net Assets.............................. -21,600

t829usx · 20 December 2018 at 3:52PM

And further to earlier comments about the IVA route - I have done some online digging for my situation.
At my current mortgage rate of 4.33% - (£92,500 mortgage started in September 2017) in around 5 years time the outstanding balance would be approx £77,000 (using this sites calculator). If I assume my house value doesn't really rise in that time, it should be worth approx £100,000. This would mean 77% LTV. If i understand correctly, the remortgage clause after 5 years is a maximum of 85% LTV, so worst case I would have to try and remortgage for the difference of 8% which would be approx £8000 (if successful).
Does that sound about right to you guys too? If that is the case, I need to seriously consider this IVA route as an option as opposed to DMP.
Sorry for all the questions and if's/buts - I'm just trying to get my head around this the best that I can.

Thanks

fatbelly · 20 December 2018 at 7:28PM

t829usx wrote: »

At the moment I have not missed any payments on anything (Loans + credit cards + overdraft), - I have just set up a 'clean' bank account, just a Natwest Select account without overdraft, hopefully that will be ok moving forward. I will cancel non-priority direct debits over the next week or two, and let my employer know of my new bank details for my salary to be paid into.

That is definitely a sensible first move. Having seen your soa I am surprised by my own conclusion that an iva is probably a better way forward than a dmp.

In round figures you have £100 available and need £700 to continue with your contractual payments, which does not look possible.

To clear a dmp in 6 years needs £500, and that looks difficult. However, you may get an IVA sorted for £200 and that is do-able.

Your figures for Presents / Entertainment / Holiday / Emergency could all be halved and you could live fairly comfortably and still deal with your debts.

I do think there's some room for further economies here from a mse point of view - if you are a single person, £200 per month for groceries is highish. As you pointed out, your phone contract could be better.

Tools on mse may help you to reduce your spend on all insurances plus utilities (you can pick up £100 for a transfer to Bulb if you act in the next few days).

Your car is costing you over £400 per month. 300 miles per week and £60 of fuel works out to under 30 miles per gallon, which is regarded as a gas-guzzler in today's world. What have you got?

About to start DMP - advice please

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free