Advice please

[shrek]

I recently joined the forum, having decided to face the fact that I need to get my debts sorted out. I have spoken to the national debt helpline and they advised on a debt management plan rather than an IVA. Can anyone advise on the good and bad points, and is there a time period for a debt management plan ?

[MelanieGiles]

Hi shrek and welcome to the forum

A DMP will continue for as long as it takes to clear the debts in full, during which time the creditors may continue to charge you interest and they may take legal action against you.

An IVA will last for five years, but your creditors are unlikely to get paid in full.

To be able to give definitive advice, I and the other experts would need further details of your circumstances such as the amount you actually owe, the amount you are able to offer to creditors and what assets you have.

Why do you think that the national debt helpline advised you that a DMP was a better option?

[shrek]

Apparently, as there is some equity in my home, although not enough to cover the debts, an IVA wouldn't be a viable option, although I don't know if this is the case.

[Adam Davies]

Hi Shrek
Can you post as many details as possible ?
House value,outstanding mortgage,total unsecured debt and your disposible income[amount left over after paying mortgage and living costs but not unsecured debt payments]
Thanks

[shrek]

House value about £240,000. Mortgage outstanding about £200,000. Total debt is £49,200. Disposable income after paying all bills is about £150 a month (This was worked out with the help of the debt line).

[debbiw]

Hi Shrek, A Full & Final offer with the equity in your home maybe a better option for you x

[shrek]

How does that work ?

[ianmillington]

I think you are already mortgaged to the hilt and so I can't see a F&F working myself. From what you say I don't think you can fund the remortgage.

I would have real doubts about the viability of an IVA too, given the size of your mortgage and the relatively small contribution you would be able to make. I have similar doubts about a DMP working too for the same reason, plus the added risk of the debts continuing to increase.

You need an IP to go through the figures with you. However, assuming your figures stack up the only real solution that will work for you is an IVA that is likely to involve, I fear, a sale of the house. Alternatively bankruptcy.

Ian

[shrek]

That is the thing I am fearing the most, losing my home. I know it is of my own doing, but I really want that as a last option....

[shrek]

I take it bankrupcy would mean the sale of my home anyway....

[ianmillington]

Yes it would go in Bankruptcy I believe. There is too much equity for the trustee to ignore. A sad but necessary part of my job is telling people what they need to know. From what you have said it looks like it will be difficult to keep the house under any scenario. Some creditors tend not to vote in favour of IVA proposals that provide for more than 40% of gross income to be paid out on the mortgage and secured loans. Apart from the obvious ("home being the castle")is there a compelling reason for keeping the house being the overriding factor?

Before you do anything hasty, however, you need to get a full appraisal of your financial situation. For example we don't know the make-up of your income and expenditure or your creditors. we don't know what savings can be made. Only by speaking to an expert will you get to the bottom of things.

By the way, I'm sorry but I don't think the advice that the debtline have given you can possibly be right, as I can only see a DMP without something else making things worse for you.

Ian

[MelanieGiles]

Are you paying your current mortgage on a repayment or interest only basis? If you are paying on a repayment basis, you could switch to interest only to free up more money to offer on an ongoing basis via an IVA.

Do you live on your own or with a partner? And if the latter - are they named on the property and the mortgage?

[shrek]

My mortgage is on a repayment basis. I live with my wife, and she is named on both the mortgage and property.

[MelanieGiles]

It might we worthwhile therefore getting a quote for an interest only mortgage to see if that frees up sufficient additional money to offer to creditors via an IVA. You would also need to accept that creditors will also expect you to raise some equity during the final year as well - based upon your share of the equity released by taking out a new mortgage of 85% of the property's value at that time.

Interest only mortgages are dangerous, in that they do not allow any of the capital to be repaid - but if retaining your property is important to you then this may be the lesser of three or four evils. No harm in asking your mortgage company for a quote.

[ianmillington]

Yes, of course you should investigate changing the mortgage to an interest free one. Sorry I didn't point that out earlier.

Ian