robbing Peter to pay Paul

[stam]

Hi,
new to this so please bare with me. Is there a rule of thumb as to whether DMP or IVA is the more appropriate? I have approx 120k debt, 10 creditors. I have about £500 that I could realistically afford to pay each month. I have a property and am paying interest only, about 15k equity no other assets other than business van over 1K in value, (no van no income though).
I'm robbing Peter to pay Paul at the minute but don't think I can do this for much longer - nobody unpaid yet but that is only weeks/days away.
Thanks

[Oliver]

A debt management plan is never going to be a great solution for you because even if you can get your creditors to agree to freezing interest rates and charges (which is not legally binding on them) it will still take you c20 years to pay your debts off. This leads me to deduce that either bankruptcy or an IVA is the way forward for you as this will ensure that debts are cleared after a finite amount of time. I am not sure how you have calculated the £500 payment that you can afford, you will need to do a detailed income and expenditure report to find out your exact disposable income (total income less reasonable living costs). It is likely that you will need at least c£600 per month (could increase depending on your creditors) to propose a succesful 5 year IVA. However, you may be able to propose a 6 year IVA on your £500 disposable income. Bankruptcy will also need to be considered as this may be your best option. I suggest that you discuss the finer details with 2-3 companies (the ones on this site are a good starting place) so that you can receive some expert advice on your personal circumstances.

Best Regards
Oliver

Thomas Charles and Co Ltd.
Experts in personal debt solutions.
Read customer feedback at: www.thomascharles.com/about_us.asp

[Sadsack]

Hi Stam and welcome

I don't believe there is a "rule of thumb" regarding this. As I am not an IP, my comments here only reflect my opinion and should in no way be taken as "so"!!!!!!

With the amount of debt that you have, entering into a DMP will take you years and years to pay and there is no guarantee that your creditors will stop bugging you etc.

In an IVA, all interest charges stop, your creditors won't contact you ie phone calls, letters etc and you will be debt free in 5/6 years depending on what your creditors want.

There are numerous Companies on this site and on the internet whom you could approach and put your case to. If you were to post a bit more information regarding who your creditors were, how much you owe them etc, a qualified professional will be along to give you the best advice. If I could throw my penny in - shop around at least 2 or 3 companies before making your decision. Ask as many questions as you can, even if you feel they are trivial. The more you ask, the better understanding you have about the whole process.

Good luck and let us know how you get on.

Sue

Ho Hum! Think I'll bang my drum!

Read My Blog
http://sadsack.blogs.iva.co.uk/

[Sadsack]

Apologies Oliver - guess we both answered at the same time!!!

Sue

Ho Hum! Think I'll bang my drum!

Read My Blog
http://sadsack.blogs.iva.co.uk/

[MelanieGiles]

Hi stam and welcome to the forum

As one of the forum experts, my advice is to consider all options available, and perhaps seek opinions from several experts before deciding the right way forward for you personally.

From the facts you have presented, an IVA would run for a five-year period, but a DMP would take over 20 years to repay - and of course there is no guarantee that your creditors will agree to cease charging interest under DMP proceedings.

Are you self-employed?

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[Oliver]

No problems Sue, glad we offered the same advice, great minds and all that!

The only thing that I would suggest is that a good rule of thumb would be to divide your debt by 60 months (5 years), if the figure remaining is less than your available disposable income then an Informal Debt Management Plan should be strongly considered depending on number of creditors and likelihood of interest being frozen etc......

In your case Stam I would suggest that a DMP is not an appropriate way to deal with your debt problem.


Best Regards
Oliver

Thomas Charles and Co Ltd.
Experts in personal debt solutions.
Read customer feedback at: www.thomascharles.com/about_us.asp

[tracy.h]

Hi Stam
You also need to post who your creditors are as Nortern rock and hsbc are two of the creditors that will not except less than 40p in the £,and on debts of £120,000 depending on disposable income one of the technical experts will be able to advise if an iva is viable,
You also should make sure that when doing income and expenditure you make sure that you put down realistic amounts such as opticion,dentist pet insurance and any other everyday living expensis,that you would incur,as 5 years in an iva is tough and if you do not add everything that you spend it would be unrealistic
There is a form on Melanies website that you can fill in that will give you a realistic amount of disposable income to give you a correct idea of what you would be able to offer if you were to consider proposing an iva,other than that you can post details on this site.

Tracy

[stam]

Firstly many thanks to all of you for your replies.
I have had initial conversations with a couple of advisors who fed back verbally their view of my disposable income, I gave the lower figure in my first posting.
One of these was Payplan who don't seem to feature much on this forum so any views would be appreciated, (I understand that professionalism may prohibit some of you from commenting). I am talking to some more of you next week so I'm sure will get a better understanding.
I have just printed off Melanies web pages, (hope that's OK), so that I can work on an accurate picture of my income / expenditure over the weekend that I can post up - (and have in front of me when I'm discussing).
I have been self employed for just over 12 months and have based my monthly income on an average of the year, (a little finger in the air but best I can do I think).

Regards

STAM

[stam]

Sorry - forgot to state that one of my loans is with Northern Rock and has approx £33k remaining[:(]

Regards

[MelanieGiles]

Hi Stam - It's good to see that you are shopping around for advice - this will give you a very broad view of the marketplace and enable you to choose the most appropriate advisor for your case.

Do keep posting on the forum and let us have regular progress reports on your IVA journey.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[Adam Davies]

Hi
As Northern rock hold more than 25 percent of your debt its very important that you use an IP that has a good relationship with N/R,so do plenty of homework and I would suggest having a good look at the posts on this forum concerning N/R
Good Luck

Andy Davie
IVA.co.uk Spokesperson and site manager
(aka Neverending)

Please check out my blog: http://andydavie.blogs.iva.co.uk

View my profile here:
http://www.iva.co.uk/andy_davie_profile.asp

[Sensible77]

Hi, Stam. I approached Payplan about my debt problem, see http://www.iva.co.uk/forum/topic.asp?TOPIC_ID=2425.

They do not charge any upfront fees or charge if the IVA is unsuccessful. The whole process has taken only 2 months and my creditor’s meeting is this Wednesday 30 May at 1pm. After initial doubts, I have found them to be very good, but of course I won’t really know till Wednesday. Whenever I have contacted them, which is usually by e-mail as it is difficult to talk at work and I like to have a record of my queries, they have responded very quickly and provided satisfactory answers. However, I’m sure many other organisations are just as good. In fact if I was aware of Melanie Giles before I started with PayPlan, I probably would have used her company. I didn’t find this website until afterwards but I have found it to be an excellent source of information and help.

[stam]

Thanks again for your comments:

I have a more complete picture now and believe my total debt to be £118858 presently with 10 creditors. Of these Northern Rock is the largest with approx £33k then Barclays at approx. £24k. I've used Melanies website to calculate expenditure, (other than card and loan repayments) and believe this to be approx £1,594 per month, loans and card repayments total approx. £1810 per month.
I have a tax payment for 05/06, (recently notified underpayment) of £963.
I operate as a sole trader and believe my income to be £2077 per month, (average for the year Apr06 to Apr07) which was my first year trading.
Equity in my house would appear to be approx £15-20K, and i'm presently paying interest only at just over £800 p/m.

Using the above I'm estimating £483 per month could be considered as disposable income (IVA payment) but I am concerned this does not seem enough.... Could the equity in my home be used bridge the gap and if so what's the process?

I also owe my parents £15k which I have not included in the above, I'm not sure how to treat this within the IVA process.

Thanks
Stam
ps apologies Sensible77, I tried to post thanks for your link to Payplan info but lost it somehow - it was a useful read!

[MelanieGiles]

Hi Stam

This would create a return to creditors of approximately 30p in the £, which may not be acceptable to Northern Rock. It is difficult to understand this creditor's acceptance criteria at the moment to be able to advise you further. How old is the Northern Rock debt, and is it part of a "together" mortgage?

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[stam]

Thanks Melanie,

The Northern Rock loan was taken out on 1/2/06 for £25k and is not linked, mortgage is with IF. (I've tried to calculate the outstanding balance so may not be spot on).

regards

Stam