Advice on DMP

Norfolk_Jim · 17 October 2019 at 6:00AM

Hi, I have reached a point where I think despite all my best efforts my debt has come to the point where I will never be able to repay it. I can kick the can down the road till I die with minimum payments and Stepchange tell me I will take 22 years to repay these debts (im 55) but these new rules on persistent debt will I think force my hand in the next couple of years. I have 6 creditors - one is a CC from my bank and mortgage provider - at £3300 its the smallest debt.
In the New Year I have about that much coming to me from a policy I hold.
Sorry about the long intro but my question is this. Would I be doing something wrong if I paid off that card before going on a DMP probably sometime next year? Will the other creditors see that and would it cause problems with setting up a DMP afterwards?
I was hoping I could maintain my good standing with my bank that way as I would then only have a current account and mortgage with them.
I suppose the alternative is to move all my current account DDs and SOs to another bank. Am I being silly to want to try and avoid that?

fatbelly · 17 October 2019 at 6:46AM

It's about using your resources most effectively.

There's another fairly active thread where the 'least worst' option is a long dmp. But you can always try to bring a dmp to an early end with full & final settlement offers. So your £3300, if you keep your powder dry, may eventually be able to clear 10k. Whereas now it only clears £3300

£3300 is a sensible amount to have in an emergency fund/fighting fund

Loyalty to your bank (or as you put it, good standing) isn't worth it. In a dmp (or any other strategy really) your credit file is trashed. In your own best interest, as I'm sure stepchange have advised, you should start a new bank account unconnected to your debts and move all savings/income/dds to that account.

Have you posted a statement of affairs? I'm not a big fan of IVAs but have you looked into one?

NeverendingDMP · 17 October 2019 at 1:28PM

Just thought id say hello. My dmp with stepchange was also many years. I self manage now and its still will be quite a few years probably.
Id never heard of full and finals when i started but they are an interesting thing to read about. Just to give you an example i recently settled a debt of aprox 11500 with a payment of 3330. Your money due is a similar amouny. It may serve you better in the long run if you keep it safe for a while to use at a later date. Also depending on how long your mortgage is etc you may like to keep it as an emergency fund for when the boiler washer etc breaks. I hope they dont x

Norfolk_Jim · 18 October 2019 at 6:57AM

Hi, no I have not looked at an IVA and Im not really sure what one is and what it involves. Thank you for your good advice, you make a lot of sense.
Im not bothered about trashing my credit file. I might want a CC one day for the S75 cover it can provide but I dont anticipate ever wanting credit again. I have about £26000 left on my mortgage.

Ive not put up a SOA yet - I think from having looked at all those other threads over quite a few years now that I have a good idea what the suggestions will be. In many cases my budget falls down because there is no provision for things like car repairs or house maintainance. I've given up most things I enjoy and just work all the time. When Im not at work I'm trying to sell everything that isnt bolted down. My wife is a horder with OCD so there is a lot of crap to sell - it just isnt worth very much and takes a lot of time to list and post and administer. Im getting very tired of it all. Ive had depression for many years but have been much better this year and my meds have been decreased but recent pressures are driving me back to the doctors. I just hate the way my meds make me feel so flat

fatbelly · 18 October 2019 at 8:00AM

Norfolk_Jim wrote: »

Hi, no I have not looked at an IVA and Im not really sure what one is and what it involves. Thank you for your good advice, you make a lot of sense.
Im not bothered about trashing my credit file. I might want a CC one day for the S75 cover it can provide but I dont anticipate ever wanting credit again. I have about £26000 left on my mortgage.

Ive not put up a SOA yet - I think from having looked at all those other threads over quite a few years now that I have a good idea what the suggestions will be. In many cases my budget falls down because there is no provision for things like car repairs or house maintainance. I've given up most things I enjoy and just work all the time. When Im not at work I'm trying to sell everything that isnt bolted down. My wife is a horder with OCD so there is a lot of crap to sell - it just isnt worth very much and takes a lot of time to list and post and administer. Im getting very tired of it all. Ive had depression for many years but have been much better this year and my meds have been decreased but recent pressures are driving me back to the doctors. I just hate the way my meds make me feel so flat

Hi Norfolk Jim

The thing about a soa is that it gives a complete picture. Without that there's just a drip-feed of information as you answer individual questions and we have to act like Sherlock Holmes.

For instance... your debt is greater than 6 x 3300 = 20k and it will take 22 years to clear on the dmp. Monthly payments therefore are greater than £75.

You have a large amount of equity in a property you own (X - 22k); therefore you are disqualified from a DRO and not advised to go bankrupt.

Of the insolvency options that might be an alternative to a 22 year dmp, only an IVA is left.

The thread I referred to earlier is about someone in a position like you but who can't do an IVA because he is in a job where he tells us that insolvency is a sackable offence (not entirely convinced but never mind). For most jobs, that is not the case.

An IVA is insolvency for someone who is trying to protect something, like a house or business. You make payments for 5 years at an affordable rate. If you can remortgage in year 5 to release equity, you do that. Most can't, and so do another year of payments. The remaining debt is then written off.

In your situation and at your age you should look into it (soon) as on the figures above you would be offering (through your insolvency practitioner) something like 20p in the £, which is typical for an IVA.

Debt Camel is very good on these

https://debtcamel.co.uk/debt-options/guide-to-ivas/
https://debtcamel.co.uk/choose-iva-firm/

sourcrates · 18 October 2019 at 12:32PM

I have to agree with fatbelly on this one, IVA`s were designed with people like you in mind, homeowners who have a lot of debt, and also a property to protect, so cant go bankrupt, and an alternative solution, such as a DMP which will take far too long.

These arrangements do get a bad press, as they are sold to some people for whom they are unsuitable, however, you appear to be the ideal candidate for one, i`ve had one myself, now for me, it was the wrong choice, i should have gone bankrupt, as at the time i had no assets to protect, but thats in the past, and it did clear my debt, your case is different, and i would recomend looking into one.

All IP`s charge fee`s, the company/companies recomended by stepchange charge the least.

fatbelly · 18 October 2019 at 1:28PM

sourcrates wrote: »

All IP`s charge fee`s, the company/companies recomended by stepchange charge the least.

Is that true? In any case it may not be the best criterion to use.

If there's one with high fees and one with low fees but each have the same proposed monthly payment and can get it approved by creditors then what's the difference to Jim?

However, if Jim has a pension pot that he can access at 55 (but sensibly does not want to do so while he is working) then an IP that has a clear no-touch policy on pensions might be the one to go for.

I'm not an expert in IVAs - don't see enough of them but my starting point would be to look at the Debt Camel recommendations - at least they are open with their failure rates.

sourcrates · 18 October 2019 at 2:52PM

fatbelly wrote: »

Is that true? In any case it may not be the best criterion to use.

If there's one with high fees and one with low fees but each have the same proposed monthly payment and can get it approved by creditors then what's the difference to Jim?

However, if Jim has a pension pot that he can access at 55 (but sensibly does not want to do so while he is working) then an IP that has a clear no-touch policy on pensions might be the one to go for.

I'm not an expert in IVAs - don't see enough of them but my starting point would be to look at the Debt Camel recommendations - at least they are open with their failure rates.

As you say, the fee`s come from the debtors payments, so they really hardly matter in that respect, stepchange set up a sister company in 2007 (StepChange Voluntary Arrangements) to administer them on their behalf, according to their website, over 95% of applications get approval from creditors, and i agree, the debt camel article is quite unbiased, and is as good a place to start as any.

The point about fee`s was that companies that charge higher fee`s may not have as good an approval rate as those that charge less, you really need to do your homework when concidering an IVA.

Norfolk_Jim · 19 October 2019 at 5:42AM

I understand. Actually the debt is a tad over £40000 not including mortgage. I will see about doing a SOA in the next few days. I have little time to do it this week (I work on a farm and am doing long, long hours for the next few days but then I have a break) but I will when I get the chance.
I have never missed a payment in my life. Would that make obtaining an IVA more difficult? Wont creditors feel Ive paid previously so I should still be able to?

Norfolk_Jim · 19 October 2019 at 6:41AM

I was going to ask if it would be a good idea to begin with a DMP and take time to investigateIVA's but then I saw this in the debt camel link you gave
"Another approach would be to opt for a Debt Management Plan for a year or two now instead of an IVA. After that you may then be able to offer individual creditors full and final settlement offers using money from your pension."
Do you agree with that? I have an Equitable life pension that could yield 15-20,000 but my main pension is my teachers pension, that one I would not want to touch in any event but Id be willing to sacrifice my EL pension pot if it cleared my debts

fatbelly · 19 October 2019 at 7:53AM

It sounds like you are using debt to finance debt. So the sooner you stop doing that, and get something organised (in this case a 22-year dmp) the better. And then explore options

A free Pensionwise appointment wouldn't be a bad idea.

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