Sometimes it’s not clear which is the right way out of debt for you and your family. Obviously you want the most comfortable journey if two routes will get to the same place at the same time!
But you need to make choices now, without being sure what is going to happen over the next few years or how your creditors will react.
Look at some of the possible trade-offs:
- if the easy way will take 8 years and the hard way will take 3, you might prefer to grit your teeth and get it over with;
- the easy way may not work, but the hard way is more certain;
- the hard way will give you a better credit record than the easy way;
The big choices
There is no “one size fits all” solution to debts.
If you are young and single, you will have different priorities and timescales from someone with a young family or approaching retirement. So your preferred solution might not be the choice that someone else would make.
Sometimes a direct comparison of two options can help:
Some points to think about:
- How far should you cut back? If you have already made cut backs and you can still hardly manage the minimum payments, or your debts are increasing, look at a DMP.
- If you may be able to get an affordability refund, a DMP may be your best option. Winning any affordability complaints will really speed it up.
- Don’t let worries about your credit score stop you from taking the right decision to tackle your debts. But if you can’t clear your debts, you can never save a deposit, so don’t let daydreams about a mortgage stop you from sorting your debts out.
- If you have a mortgage and you are worried about what will happen when your fix ends, read Getting a new mortgage fix with poor credit. For most people, you can stay with your current lender without having any affordability/credit checks. So this is not a reason to postpone deciding what to do about your debts.
A Breathing Space may sound like a lovely idea, but it doesn’t actually solve your debt problems. If you stop paying the debts during a breathing space, your credit record is still harmed. For many people there is no need for a Breathing Space as it’s clear which is your best option, so you can get going on that without a delay!
An uncertain future
In 2023, the last few years have upended so many people’s lives in ways they never expected, with Covid and the cost of living crisis.
This isn’t a reason not to make a decision now. But it does mean that it may be better to go for options that are fast, like bankruptcy or a DRO, or which are fully flexible like a DMP.
So think ahead to what could happen in the next few years: higher mortgage payments? more children/children leaving home? is your job insecure or might you get promoted? are you likely to retire or inherit money? meet a new partner?
This may feel a lot like guesswork, but it’s better than just assuming things will remain the same!
Still unsure?
Take your time and don’t be pressured into a wrong decision by worries about defaults, threatening letters (they may be bluffing), or getting a CCJ (contact National Debtline about how to respond).
Talk to other people – see Good places to get help and advice.
If the call is finely balanced and you keep changing your mind, in the end you have to make a decision. There is no point in delaying for months or years if nothing is changing or your situation is getting worse.
If in doubt, go for a DMP and then review your decision in 6 months time.
nigel says
Here is my dilema. I am soon to be 68 and have about £37000 of debt, most are credit cards and some catalogues. One card issuer gave me 5 very close together several years ago. One of the three catalogue companies had me on a £4500 limit as did a spin off sister company of thiers. After missing payments on one they reduced the limit to 800 but the other kept it at 4500 even though I had been late on 2 payments but caught up. Any ways, Stepchange have shown the 2 options are DMP or BR. I also am tired of working and have just finished 18 months of treatment for blood cancer, although it still remains, i also have not long had a triple bypass, diagnosed with a dystonia as well. My job would not be any issues with a BR but my concern is the restriction order length, I agree I should pay in whilst working but after I leave work we will just have our state pensions and a small military pension. We have helped our son out who lifes abroad and will never see that money in our life times returned. Paying for a further 2 years after being discharged would be impossible. Is it set in stone on how the BR must be run or is it down to the OR? I hope this makes sense. of course another option is i die at work with all the stress of this and the job and they get wiped out and my wife gets my company life insurance. i know, weird thoughts eh.
Sara (Debt Camel) says
Let’s forget those weird thoughts…
Is the only reason you are still working the debts?
Are you renting or buying? If renting, private or social housing?
What is your wife’s financial situation – does she too have debts?
Sara (Debt Camel) says
Also why are you concerned about a restriction order?
Nigel says
Sorry, I am all confused. I meant an IPA. If this is set in action then I am still in a situation where I am paying out and have nothing free to be saved.
There is an option I guess of going into a DMP….and still not being able.
I have read that an IPA could be given as late as the latter part of the first 12 months into a BR, once again never knowing what will happen for sure is still a balance on the edge of the knife. I would have thought the moment one is declared BR all that can be taken to pay creditors would start strait away.
I just don’t see any of these options work well for my situation. Everyday I am working and constantly think about these options and still can’t find a solution my head that might be the better option. I could pay into a DMP for several months then stop it and try and safe before stopping work after trying to find a place to live, then declare BR. Surely with just our state pensions, military pension we would not have enough for an IPA to be set in place.
Wife has no debts, only works 16 hours week…her health is not going to be to good due to type 1 and past medical procedures.
I just do not know.
Sara (Debt Camel) says
So you didn’t say, but I am going to assume you are renting. Your situation is VERY different if you own a property.
“Surely with just our state pensions, military pension we would not have enough for an IPA to be set in place.”
I can’t really say anything here. Some military pensions can be large. Also it will depend on what your rent and bills are for where you live.
If you have a small IPA for 3 years (and I am not saying you would) then you have to balance that against the uncertainty of a DMP and making low payments to that.
Two other options –
1) you may also be able to win some affordability complaints but with such a lot of debt owing, they would be unlikely to clear it all and so you would still need a debt solution as well. If that is bankruptcy then there is little point in delaying this for 6-12 months while affordbility complaints go through only to have to go bankrupt in the end.
2) with your health problems, you could consider making token payments for a year and then asking for write offs as your health has not improved and at your age you will not be able to work again.
I think you you need someone to help talk your through the options now and support you with putting a plan into action – the RBL is excellent and I suggest you talk to them: https://www.britishlegion.org.uk/get-support/financial-and-employment-support