Is a DMP the same as an IVA?
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Considering a debt solution, but don’t know how it will affect your family? Make sure you read our blog about how debt solutions can help if you have children.
Here at Debt Advisory Centre we understand the strain being in problem debt can place you under. And this can be made even worse if you’re not just worrying about your financial future, but your children’s as well.
Our research into Women and Debt revealed that whether or not a woman has children can seriously impact how worried she is about her finances. In fact, a quarter of women who are married with children find money to be the most worrying aspect of their lives, and this jumps to 40% when we asked single women with children.
In light of this research, we’ve put together a post for parents who might be considering a debt solution and are wondering how it might affect their children.
What is a debt solution?
In case you’re not familiar with the debt solutions, here’s a brief run-down of how they work. In short, they are plans that allow people to deal with unsecured debts that they’re having problems paying back.
Some solutions allow you to continue paying everything you owe back, but at a lower more affordable rate, like Debt Management Plans (DMP), or Debt Arrangement Scheme (DAS) if you live in Scotland. There some solutions which allow you to pay a lower, affordable rate towards your debts, but take into account the fact that you can never pay the whole amount that you owe in a reasonable amount of time, like Individual Voluntary Arrangements (IVAs) or Trust Deeds, if you’re in Scotland. Or, there are some solutions that can suspend your payments towards your debts altogether if you meet the specific criteria, like Debt Relief Orders (DROs) or Minimal Asset Process (MAP) for residents of Scotland.
Your circumstances will dictate which debt solution is right for you, if any, and they all come with their own set of pros and cons. For example, any debt solution will have a negative impact on your credit rating, as they all involve you stopping the contractual payments that you agreed to when you first took the credit out. This will stay on your credit file for six years from the date that you stop making the contractual payments and may mean that you find it harder or more expensive to borrow anything in the future.
You may find that there has already been damage done to your credit score and that, overall, starting a debt solution would be the best thing for you. It’s really important that you consult a trained debt advisor first and foremost – they will be able to recommend the very best solution for your needs. Just use the options to the left to speak someone about this now.
Will starting a debt solution affect my children?
If a professional debt advisor has recommended the solution because it’s the best thing for your circumstances, you’re likely to find that the impact on your family will be positive – especially over the long term. Let’s look at an example.
If a DMP was the right solution for you, and your creditors agreed with the lower payments, you should see an improvement in your ability to manage your household finances. This is because the amount you pay towards your debts is calculated once all your essential costs have been taken into account. Now buying food and clothing for you and your children, and the money you spend on petrol to get them to school for example, would certainly count as essential spending.
Some parents with problem debt have found themselves in the difficult position of having to choose between buying food and paying an overdue bill. A DMP aims to relieve people of that pressure and to ensures that you’re able to afford the essentials for you and your children.
Will my family have to make sacrifices?
When you’re looking into debt solutions, your budget plays a very important part in deciding which one is best for you. There are also some cases where you need to make sure that you are putting everything you can realistically afford towards your debts. With an IVA for example, you normally pay into the plan for five or six years, after which time, as long as you have kept to the conditions, the rest of your unsecured debt would be written off. One of the conditions would be to stick to a budget, which demonstrates your commitment to paying off as much of the debt as you can while the IVA is ongoing.
If your family is involved with lots of costly hobbies and activities, it’s true there’s a chance that your creditors will ask you to cut down on these costs, but only if they see them as being excessive. The creditors actually have a list of guidelines when it comes to household costs, which tells them the amount that they would expect people to be paying towards something. For instance, if you’re a couple without children, they might expect you to be spending a certain amount of money socialising each month. But if you’re a family of four, the guidelines would be different and would take into account the extra people in the household who are financially dependent on you.
It all comes down to what is reasonable in the end. Your creditors may ask you to cut down on some non-essential expenses, but they don’t expect you to stop every hobby that your child is involved with, and there will be allowances made for hobbies and socialising in your budget. Remember that if you call us, we would go through your budget very carefully with you and check what you were paying towards each category. If you described anything that raised a red flag in terms of the creditors’ guidelines, we would warn you about it and work with you to make sure the proposal we put forward is as strong as possible and one the creditors could realistically accept.
Improving relationships at home
As we said at the start, being in problem debt can have a serious impact on your ability to enjoy life. This goes for everyone, of course, whether you have children or not, but if you do have children, we’re sure you’d rather spend time treasuring watching them grow up, rather than worrying about debt.
If the worry and anxiety you’re feeling about your debts is starting to affect your relationships at home with children or a partner, then it’s definitely time to seek help. When people reach out to us for help and find that there’s a way to solve their money problems, they very often feel as though a huge weight has been lifted off their shoulders. When you know there’s a plan in place you can breathe a little easier and focus on the really important things in life, like spending time with your family.
In the right circumstances, a debt solution can provide the freedom from money worries you’ve been looking for and even go some way in improving your relationships at home. Make sure you get in touch with us for a chat if you’d like to look into your options today.
by Christine WalshBack to blog home