Recently started DMP that would take 23 years...

[Murray_Mint]

First post, so "Hi" and "Help!"

My husband and I are late 20's with a young daughter, who will be starting school next September. We both work full time and before tax earn around £45,500, but out of that we pay £500 per month in childcare.

We have a huge amount of debt, for various reasons, but this has been accumulated over the last 10 years - basically our financial attitude was learnt in the boom years and now the **** has hit the fan [:(]

We are desperate not to loose our house, but just couldn't carry on even meeting our minimum payments - it's only when the credit ran out that we realised we used credit to pay the credit payments! So stupid i know [:(]

Our (awful) vital stats are...
£40k unsecured debt - DMP monthly payment £144 (started 01-09-08)
£38k secured debt - monthly payment £321
£178k mortgage - interest only! - monthly payment £881 (fixed rate of 6ish% finishes 2009

What would you wise people recommend? I am a member of another forum, which is very pro-DMP and fairly anti-IVA.

I REALLY don't want to go BR. But I'm afraid of an IVA, if one of us lost our job or something, do we loose the house straight away? There is no equity in the house right now, but do we have to borrow money against the house in the last year of an IVA to pay to the creditors? What if there is no equity? What if there is - where would we borrow money from?

The DMP is not a permanent solution in it's current format, but obviously we will have more income free come next September.

Please do give me some advise, any food for thought would be appreciated!

Thanks [:)]

[MelanieGiles]

My main concern in reviewing your case is that you have an interest only mortgage which is due to expire in 2009. You ought to find out what the current standard variable rate of this lender is, to see if your payments are likely to increase once the fixed rate ends. You could find that this absorbs all of your disposable income, leaving you with nothing to offer to creditors on an ongoing basis.

If you have no equity in the property which would be lost under bankruptcy proceedings, I would suggest that you give serious consideration to this option. If there is equity, it would seem sensible to continue with the DMP payments until your child starts school - at which time you ought to know what your new mortgage payments are. At this time, your disposable income could be reassessed to see if an IVA now seems affordable.

[Viki.W]

Hey Murray Mint, just wanted to welcome you to the forum. You're not stupid so please don't think like that. We've all been there. You'll get lots of good advice and support on the forum so please stick around and ask as many questions as you like. X

[Murray_Mint]

Hi, thanks for your comments. I've just checked and my mortgage is with Abbey, and at their current SVR of 7.09% my monthly I/O payments would increase to £1,050!! So you're absolutely right, my DMP payment is swallowed up.

I think I'll need to try to up my earnings, reduce our outgoings and keep talking to the creditors until next September.

Oh, and hope beyond hope that the financial markets stabilise and the SVR's reduce a bit by next year

Feeling quite panicky now... If we went bankrupt I'm sure they would take our house, I just can't envisage taking that risk

[MelanieGiles]

Your house will only be affected if you have any equity. Do you, based on today's valuation?

[Murray_Mint]

Hi Melanie,

Thank you for your guidance, you must answer 1,000's of posts!!

I would estimate a value of £250k today. There is a similar house in the same road which has been on the market a long time at £275k, but just no interest.

The mortgage debt is £178k and secured loan debt is £38k. So potentially there is up to £34k value that the creditors could go for.

I think they would. It would be really hard, as my parents loaned us £30k towards the deposit on the house, so we would be homeless but still owe them that much money.

[Murray_Mint]

Sorry, me again. If we made it through to next September, when our available income increased due to DH starting school, then we would look into going for an IVA. When proposing an IVA, can the creditors object to the level of mortgage i.e. if you lived somewhere cheaper you could afford to pay us more? Also, how does the equity release work in the final year of an IVA?

Thanks again!

[Murray_Mint]

Sorry, me again. If we made it through to next September, when our available income increased due to DH starting school, then we would look into going for an IVA. When proposing an IVA, can the creditors object to the level of mortgage i.e. if you lived somewhere cheaper you could afford to pay us more? Also, how does the equity release work in the final year of an IVA?

Thanks again!

[plasticdaft]

Sorry, me again. If we made it through to next September, when our available income increased due to DH starting school, then we would look into going for an IVA. When proposing an IVA, can the creditors object to the level of mortgage i.e. if you lived somewhere cheaper you could afford to pay us more? Also, how does the equity release work in the final year of an IVA?

Thanks again!

Welcome to the forum.

Cant imagine creditors objecting to where you live and forcing you to move to somewhere else.(I have a 4 person tent for sale,and the rental for the small plot in my back garden is a reasonable £100 a week!!!)

The equity release is does by remortgaging,an expert will help you better than I can.

Keep the questions coming,its how we all learn things.

[MelanieGiles]

Have you thought about selling the property and moving into cheaper rented accomodation? Never a great idea to jump off the housing ladder, but I think your only alternative is to soldier on until Sept 09 and then offer an IVA when your circumstances will have hopefully improved.