DMP or approach creditors? Opinions very gratefully received

jessibell

I'm in a pickle after living on credit for years and then seperating from my husband late last year. I have just run out of available funds and a bonus for 1.5k I was relying on to get me through the year has been canned and redundancies made at work(which I avoided).

Although I have managed to keep up payments and haven't missed any yet, either this month or next month I will have to ring creditors and tell them I am unable to pay. I've registered with CCCS and from information I've entered they have decided I have £323 available to pay my creditors which is good because it's about £250 less than I pay in total at present.

I'm constantly shaving stuff off my budget and lowering payments. I'm going to reduce my mobile this month, and I'm going to make my mortgage interest only for a year aswell. I'm a really annoyed at myself cause if I'd been this good before I'd be rich!

So I'm after advice. The way I see it is I can ask my creditors for a lttle breathing space... but then I'll still be accumulating interest and not paying off anything. (I tried for 0% cards and was declined). Or I can do DMP and knacker an unblemished record, but actually stand a chance.

It's such a scarey step to take and I would love to hear what some of you guys think. I've ben reading these boards for months and the help has been priceless. Thank you all in advance.... a very worried lil bunny x x

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 1
Number of children in household......... 1 (edited as i put 2...I'm sure I'd remember another one!)
Number of cars owned.................... 1
Monthly Income Details
Monthly income after tax................ 1723
Partners monthly income after tax....... 0
Benefits................................ 132
Other income............................ 0
Total monthly income.................... 1855
Monthly Expense Details
Mortgage................................ 514
Secured/HP loan repayments.............. 145
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 73
Electricity............................. 35
Gas..................................... 50
Oil..................................... 0
Water rates............................. 18
Telephone (land line)................... 15
Mobile phone............................ 55
TV Licence.............................. 12
Satellite/Cable TV...................... 17
Internet Services....................... 10
Groceries etc. ......................... 240
Clothing................................ 0
Petrol/diesel........................... 160
Road tax................................ 12.08
Car Insurance........................... 35
Car maintenance (including MOT)......... 15
Car parking............................. 0
Other travel............................ 40
Childcare/nursery....................... 0
Other child related expenses............ 20
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 20
Buildings insurance..................... 12.5
Contents insurance...................... 18
Life assurance ......................... 20
Other insurance......................... 0
Presents (birthday, christmas etc)...... 5
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 10
Total monthly expenses.................. 1551.58

Assets
Cash.................................... 0
House value (Gross)..................... 95000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 95000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 84000....(514)......0
Hire Purchase (HP) debt ...... 3000.....(145)......0
Total secured & HP debts...... 87000.....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
barclaycard....................700.......21........0
egg............................3000......90........0
halifax........................6000......180.......0
natwest O/D....................700.......35........0
natwest CC.....................7000......210.......0
natwest loan...................12000.....252.......9
Total unsecured debts..........29400.....788.......-

Monthly Budget Summary
Total monthly income.................... 1,855
Expenses (including HP & secured debts). 1,551.58
Available for debt repayments........... 303.42
Monthly UNsecured debt repayments....... 788
Amount short for making debt repayments. -484.58

Personal Balance Sheet Summary
Total assets (things you own)........... 95,000
Total HP & Secured debt................. -87,000
Total Unsecured debt.................... -29,400
Net Assets.............................. -18,400

sunshine38_2

Hi Sweetie

Well done on posting and welcome to the MSE family

One point that occurs to me on looking through your SOA is that there is no mention of tax credits and you have 2 kiddies. Are you not entitled to claim this. I'm not sure how old your children are but it's just a thought.

There will be far more experienced people along who will be able to take a good look at your SOA and maybe after receiving their advice first you should then look at a DMP. I tried that route first but ultimately it was a DMP that we had to go on.

Such a shame about your bonus - I'd be gutted losing out on that too. Good news that you are okay after the redundancies ... everything is a little uncertain at the moment, isnt it.

Will the change to your mortgage payments make much of a difference?

I'll pop off for now and try and think of some more ideas. A lot of people ask whether you have things you could maybe ebay/sell on amazon (things like that) to raise some cash towards clearing some of your smaller balances or throwing at the higher interest balances.

Good luck!

Sunshine x

jessibell

Hi Sunshine

Thanks for the reply I have the tax credit and child benefit on there lumped as one amount. I didn't claim it until I read these boards!! Wish I'd done it ages ago. I was thinking about ebay and wondering if it was best to do it quickly and maybe pay off one thing before gong on DMP or to wait and squirrel it for the inevitable exploding boiler type scenario.

The mortgage going to interest only will be £150 less. I was wondering whether to do this before DMP or after so I have some more to squirrel away. I reckon if I have a decent pot I could always stop the DMP in 12 months or so when they all start charging full interest again and maybe ask for a full and final off a couple.

Ooooooh man i'm so confused!

sunshine38_2

Hiya

The trouble is, that going on a DMP will not instantly mean all interest and/or charges will be stopped. There are no guarantees I'm afraid of all the creditors agreeing to do that. Yes you could do it for 12 months, just to give yourself some breathing space maybe but that will certainly affect your credit file. In my case, out of £1700 worth of payments being made, only £900 has come off the overall total (sigh!) due to interest/charges/admin fees etc being added to different accounts. That is just with my creditors though, not all creditors will continue to add these - some of them are actually quite reasonable and agree to stop to give you a chance of repaying. I will try and reclaim additional charges etc - just as soon as I can find the energy to do it! You never know, might get some back which will come off the overall total.

I would sort your mortgage out before going onto any DMP plan, if you can. To go on a DMP you are agreeing not to enter into any further credit agreements/loans etc. If you are using the CCCS site to gauge what repayments could be made to creditors, make sure that you enter a realistic amount for your outgoings for the house/clothes/school subs/food etc. The idea is that you learn to live within that budget (so make it whatever is best for you and your family!) and not to "live" on your credit cards etc. There is a DMP mutual support thread and there are various experiences that you can read about on there.

There will be others who will come along and try to help you based on your current figures. It is always recommended that you pop over to the old style moneysaving thread where you can find ways of stretching your food/household budget - it's well worth a look.

There will be a way that suits you, it's just a question of finding it! Take some time to read through the DMP thread/let others come along to help you with your current figures and then weigh up your options.

Hope I haven't made you more confused :rotfl:

Sunshine

GeorgeUK

Another thing about the DMP or even not meeting the minimum payments at all even if you make agreements to pay a reduced amount, is that your credit rating will be shot.

How long until you need to remortgage?
Is your credit rating okay just now?

Council tax............................. 73
If paying over 10 months, can you ask to pay it over 12?

Electricity............................. 35
Gas..................................... 50
Check the comparison sites to see if you are getting the best deal (uswitch, moneysupermarket)

Mobile phone............................ 55
PAYG?

Telephone (land line)................... 15
Satellite/Cable TV...................... 17
Internet Services....................... 10
Is this combined in a package?

Groceries etc. ......................... 240
This is quite alot for just 2. Have a look at the old style board for meal plan ideas and possibly buy and cook in bulk, freezing some meals.

Car Insurance........................... 35
Pet insurance/vet bills................. 20
Buildings insurance..................... 12.5
Contents insurance...................... 18
Life assurance ......................... 20
Again, have a look at the comparison sites to make sure you are getting the best deal.

Have you tried getting any 0% or life of balance credit cards to transfer some of the higher APR debts to?
Virgin are currently offering 0% for 16 months and from the 2nd month onwards, the minimum payment is £25.
Halifax have a good LOB card with a minimum payment of 1% which may allow you to meet the payments although you may need to do some number crunching. It might be an idea to try getting the virgin card and hopefully transferring the halifax card you have across to it, then trying to get that CC as a LOB card.

That might get you close to breaking even if you can cut back the groceries, get the mortgage to interest only and hopefully save a few hundred using the lower monthly minimums. It may depend on the limit that Virgin allow. You can have about 3 credit checks in a 6 month period before your credit score is affected so don't apply to too many places. I only mention these transfers as the Virgin card could save you over £100 each month in payments.

sunshine38_2

Morning Jess :hello:

Just thought I'd pop by and see how you are getting on.

I notice that you've got some good advice from GeorgeUK (thanks George!) so that will give you some more ideas to think about. I'm pretty sure there will be others along with more ideas/tips for you so you're going to have a great weekend deciding on which path to take

Hope you have a good weekend

Sunshine

jessibell

Hi George,

Thanks for taking the time to reply, its really good to get someone else's perspective on it. Believe it or not at the moment I'm on the tesco website working out the price of meat compared to my local butcher, and seeing how much I can save by chosing own brands etc.

The mobile I am trying to sort as I'm in a contract for another 8 months so is kind of in hand.

My mortgage is a really bad situation as I'm just out of term. This is ok for now, but as I'm with A&L and as the dreaded house price index is used, my house is undervalue and I can't remortgage with them. I'm scared to try and go to another lender incase they value the house similarly.

I was refused a Virgin credit card 12 months ago. I think it's obvious to new lenders that I'm stretched and high balances on my cards.

I think that the only thing I need credit in the future for is to remortgage. If I stayed with A&L and the house prices go back up again I was just going to remortgage with them, say in 12 months or two years. JUst hoping that the interest rates don't rocket.

The life insurance is also employment insurance so thats why it's a little high. I was going to can it but it offers redundancy cover which may well be needed in future.

The phone, tv broadband is a sky package. I'm tempted to ditch the telly, but Living TV is my only vice as I don't drink or smoke! Their phone deal works becuase I have friends and family abroad so need the package to keep in touch.

At this point is it better to tread water to keep afloat not really paying anything off, but keeping my credit record clear, if not bad because of being overstretched?

Thanks again
xxx

jessibell

Sunshine you're a star and I really appreciate it... I'm thinking I may have been too hasty looking at DMP yet. Or maybe not. Aaargh! hehe. I think I'll bite the bullet and ring around today and see what temporary measures creditors are willing to offer. Hey If I can stop a 3-6 months of payments then my overdraft will be clear so that's one less to deal with. Now I've got my co-op account set up the worst Natwest can do is screw me over one month if they play silly !!!!!!s.

mm2000

Hi I noticed you have an OD, CC and loan with Natwest. I assume you bank with Natwest and your wages are paid into that bank. Before you contact them, find another bank and open an account with them, get your wages paid into the new account as soon as possible. Make sure the new bank has no ties with any of the debts you have. I didn't do this, they froze my account and I lost a weeks wages before I realised what was happening and before I could open an account with another bank.
All banks etc. are bound by the Bankers Code of Practice and must act sympathetically to your hardship. If you have trouble with any remind them of this.
I went down my own DMP route 8 yrs ago. I had to do it all myself as CCCS had advised I take the bankruptcy route, but I didn't want to do this. There have been hiccups along the way including 2 CCJ's both in the first year, but I've reduced the debt by more than half in that time and had interest frozen on all the accounts too.
Best of luck to you.

GeorgeUK

There may be a few reasons why you were not given credit before, but right now i don't think there's any harm in trying as you are not looking for credit anywhere else and it's only the 1 place you will be applying to. Even if you get it, it doesn't mean you need to sign the agreement if it's not going to do you any good.

Are you on the electoral roll? If not then you need to get on it asap as this makes a huge difference to your credit score.

Have you checked your credit file? You can do so free at experian (if you cancel within 30 days). This will allow you to see what is on your file and if there is anything that may be lowering your score. Don't pay to see your credit score as compnies all have a different way of working this out, but check that everything is in order with regards any old accounts and the address etc are correct.

I think right now you need to keep as many options open as possible. If you can get a Virgin card and tranasfer the Halifax balance across, will transferring one of the other high APR cards to a LOB deal at 1% (and the saving from minimum on Virgin being £25) be enough with any other expenditure savings you make be enough?

I think holding off and getting your budget in order so you know exactly what savings you can make and trying for a Virgin card would be the best route to try. If you can't get the card, you've lost nothing but if you can then you may not need to default on your accounts which could make all the difference in the longrun.

Just my opinion though - either way it'll be a long tough slog and a tricky balancing act. I'm on that wire right now. Don't know what i would have done if i hadn't got the Virgin card. 2nd job probably.

jessibell

George you're a treasure! You're right I've nothing to lose in trying.

I smashed my ipohne by accident yesterday. Very gutted, but if the insurance pay out £400 to replace it, I'll be paying off one of my cards nearly. If I can get most of my creditors to give me a 3 months break I'll definately be out of the overdraft again. All the little things will add up I'm sure.

THe good thing is that i'm committed one hundred percent to sorting this mess out!