Personally speaking I would get her to speak to some other companies - anyone that promises that they can do a full and final after a while needs taking with a pinch of salt.
Speak to someone else tomorrow - your friend can find someone better out there.
It is hard to tell without knowing the full facts Paula - and at the end of the day it has to be her decision. Also no way of knowing whether interest and charges would be frozen in a DMP. She could try that route and revert to an IVA if creditors did not leave her alone, if she thinks this is best.
It is difficult to say if an IVA is the right solution for your friend without knowing the facts but your friend can seek advice from a few companies before deciding how to proceed.
I have worked for a debt management company and know that Payday loans do take much longer than "main stream" lenders to accept a DMP during which time they continue to add late payment fees, interest and collection fees - when they do accept the DMP, the debt is sometimes double what it was originally
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Your friend should certainly get another opinion as there are other options. For example,if she switched her entire mortgage to repayment she could offer the endowment policies as a full and final settlement. She could then use her surplus for replacement life cover and the increased mortgage payments.
However, this may not be the correct advice depending on medical history, age etc but is only an example of what can be done other than a very long DMP with no legal protection. There is always the possibility that creditors could secure their debt leaving your friend with little or no equity going forward.
Thanks all. The Payday Loan thing is as I expected. I guessed that by the sheer nature of their business that they would not be very forthcoming. I am genuinely concerned that she could end up with much more than she started with there.
Michael - you are making some suggestions I don't think would have ever occurred to me and certainly not Julie. With regard to age and health, she is nearly 47, is a nurse working for the NHS and is in good health. I guessed that her endowments maturing might be able to be used in some way.
She is coming around tonight so I will encourage her to explore options. She has already moved bank accounts on the advice of DFH but I guess this would be a move required regardless of the route and company she goes with.
Certainly the endowments could be used but she would need to look at all options. They would be lost in bankruptcy and many IPs would want them surrendered before she could enter an IVA so she should do the best for herself.
If she does go down this route she should not surrender anything until creditors have agreed the proposal as she does not want to be left with cash and no surplus income. The money would just ebb away.
Michael, does this mean that if you were proposing a DMP for Julie that you would not expect her to surrender the endowments and you would expect an agreement to be reached based purely on the disposal income (which has currently been calculated at £500 per month). When the endowments mature, I am guessing that it is at this point that the DMP company are suggesting that she could get a reduced F&F offer on the DMP. Does this sound right to you.
When you say 'surrender' do you mean that she could be asked to cash them in a the value they are worth now as opposed to waiting for them to mature anyway?
In a DMP there is no obligation to surrender the endowments and they can be used for reducing the mortgage or whatever the client wishes to do. It is not a legally binding agreement so it is possible that creditors may settle later from the proceeds of their maturity but only if they do not know this. Once the endowments mature the disposable income will actually increase so I doubt if creditors would accept a full and final with the full facts known.
Surrender does mean cashing them in now although she could sell them on the open market and get a higher value than the basic surrender amount.
Hi All, Just a quick update. I met with Julie last night and we made a call to Payplan to explore the options they suggested. As Payplan don't charge fees, there was a significant saving to be had from the DFH example who charge 2 x monthly payments + £70 set-up fees, and then 17.25% of each monthly payment. Payplan worked out the joint disposable income between Julie and Darren of £880 per month, so providing they get the necessary agreements in place from their creditors, they could be debt free within 66 months (the joint debt is £58000). Payplan were also confident that they could propose an early settlement at such point that Julie and Darren have the funds available to make one.
Whilst the monthly repayment is more than Julie originally anticipated (I don't think the reality of having to live on the bare minimum has quite sunk in yet), she is relieved that there seems to be an option for her and that the larger payment just gets the balance down quicker. She left my home last night saying that she felt better than she had for weeks and so I was happy with that result. The rest is for her to carry on with but my help is there if she needs it any further.
Payplan did say that she had too much disposable income for an IVA and could potentially end up paying more back than she owed taking into account the potential enquiry in the property too - I didn't particularly
understand this but, given that Julie was petrified at the thought of an IVA anyway, I did not push this any further. As Melanie has suggested, if the DMP does not work out, she can always look at IVA options down the line.
Thanks for all your advice everyone, I am sure we can never be 100% certain that we are making the best decision and only time will tell.
I am back to stressing over my own F&F offer now - 31st August cannot come quick enough.
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There is no such thing as too much disposable income for an IVA! That is a decision for creditors and the debtor to make when considering their options, and not the debt advisor!
Glad that she has made a decision with your support. You are what is commonly referred to as a great mate!
I did think that was odd Melanie. I appreciate that 60 months at £880 would be nearly £53k which is only £5k less than her actual debt but the FA also said that the creditors would want the £11k equity in her home too which would mean she was paying £4k over her debt. I just didn't understand this as I assumed that even if there was equity to make up the full amount, the creditors would not expect additional monies to those owed.
I did say to Julie (before the conversation with Payplan) that I would prefer an IVA if I was in her shoes because you have a shorter term and a legally binding agreement to support you. After that conversation I just assumed that there was lots I didn't know about them outside of my own circumstances. I still feel that DMPs feel too loose on the agreement front and could potentially run on much longer.
Your thoughts are quite correct Paula - creditors would not demand that your friend introduced all of her equity in her property into the IVA, however if she can really pay all of her debts off in a non-fee paying DMP within 66 months then if I were her I would certainly give it a go - but advise her to keep her eye on ongoing interest and charges and also onging legal action from creditors, which could result in creditors seeking to protect their position by taking a charging order over her property. This would not really be a problem if she was intending to repay her creditors in full.
