Struggling with debt? Ask a debt advisor a question

angelin

I'm also worried that I will have debt collectors knocking at the door. I have got an account that I never use. It's scary though my work are so useless I can just imagine them putting my wages into the old bank account! I have a credit card that I'm keeping just on top off, would I have to go into an agreement with that as well?

StepChange_James

stupid-fool wrote: »

After years of just about keeping our heads above water, my wife and I finally have to admit that we've got in beyond our depth and need to fix the problem.

We started 2 years ago by negotiating with our bank (LloydsTSB) to get our mortgage switched to interest only which meant we could *just* hold our own each month, but any unexpected expenses (eg car repairs) end up on credit cards as we have no spare cash each month. At the same time our bank (probably wrongly) gave us an additional personal loan to consolidate some debts and also issued my wife with another credit card with a high limit.

Our mortgage interest free has now ended and C&G won't extend this facility although their collections dept just agreed to allow a lower payment for 6 months but this will put us in arrears for the first time. There is no way we can manage this month with a full mortgage payment so we are on the slippery slope.

We have always managed to make every monthly payment to date and are not yet in arrears with any creditor. In November I expect to pay the agreed reduced mortgage amount but make all other payments as required.

I contacted CCCS and went through their on-line assessment which suggested a DMP. We owe around £70k unsecured, have no secured debts except our mortgage, and with a good family income around £85k gross CCCS calculated that we can manage to repay £928 per months to be debt free in around 6 years.

Most of our debt is with LLoydsTSB (overdraft, loans and CCs) with around £3k with Tesco loans, £5 Sygma CC and £5k Santander CC.

I understand that entering a DMP will mean we go into arrears, but I really don't know what to expect, or how the creditors will react. I currently have this rosy expectation that they will all agree to the CCCS proposal and accept reduced payments whilst suspending interest payments.

Can anyone give me an idea of what to expect:
1. Will I be bombarded with debt collection attempts and threats?
2. Is it really likely that interest charges will be suspended or will be end up with huge additional charges?
3. How do our specific creditors tend to behave in a DMP situation?
4. I know this will hit our credit scores for some years to come, but how bad will this get. Will I be able to get mobile phone contracts, gas and electricity accounts etc or will it get bad enough to be facing pre-payment meters and absolutely no credit options. I think this would totally destroy us.

I still haven't plucked up the courage to drop the DMP forms back in the post although I have just opened a new bank account and started to transfer the direct debits as I need to avoid LloydsTSB getting a whiff of the situation and snatching our working cash overdraft for the month leaving all bills unpaid.

I need to understand if DMP is really the right way to go.

Thanks for reading

Hi,

Thanks for posting, I’ll replying using the same numbers as your questions.

1.It is down to your creditors how they respond but most of the time creditors are willing to accept lower payments provided your income and expenditure budget shows you genuinely can’t afford the full amounts.

2.Again it is down to your creditors but we find that they usually do freeze interest and charges. Any creditors that don’t cooperate initially will usually try to get extra money from you for a few months but after a while they will either settle down and accept the payments or pass the debt to a collection agency. We find that collection agencies are usually more willing to co-operate with reduced payments and to consider stopping interest (though obviously this is up to them).

3.It is hard to generalise but there is no reason I can think your creditors would be particularly against a DMP.

4.You credit report will show that you are not making full payments to your debts, so this will make getting credit harder. Obviously on a DMP you won’t be wanting anymore debt anyway but like you mention, there are other things this affects. You current gas and electric suppliers would have no reason to put you on prepayment meters provided you keep your bill up to date. Switching suppliers may be a little bit trickier if you credit rating isn’t great and certain mobile contracts might be harder to get but our clients do manage to get by alright.

I would suggest reading the DMP& Mutual Support Thread as a good place to look next. It will give you a first-hand insight into what being on a DMP is like, from people currently on them.

Hope this helps.

James

StepChange_James

angelin wrote: »

I'm also worried that I will have debt collectors knocking at the door. I have got an account that I never use. It's scary though my work are so useless I can just imagine them putting my wages into the old bank account! I have a credit card that I'm keeping just on top off, would I have to go into an agreement with that as well?

Hello,

If any debt collectors knock on your door you can tell them to go away and tell them you are getting debt advice and will contact them once you have worked out a strategy to deal with your debts.

In reality it is quite rare for people to get visits from debt collectors as it's more efficient for debt collectors to use the phone to try and get payments. It is also important to know that debt collectors are not bailiffs, here is a blogpost we've written about this: http://moneyaware.co.uk/2012/06/debt-collectors-are-not-bailiffs/.

We recommend getting debt advice that covers all of your debts, including ones that might feel manageable. That way everyone gets fair treatment.

All the best.

James

stupid-fool

CCCS_James wrote: »

1.It is down to your creditors how they respond but most of the time creditors are willing to accept lower payments provided your income and expenditure budget shows you genuinely can’t afford the full amounts.

2.Again it is down to your creditors but we find that they usually do freeze interest and charges. Any creditors that don’t cooperate initially will usually try to get extra money from you for a few months but after a while they will either settle down and accept the payments or pass the debt to a collection agency. We find that collection agencies are usually more willing to co-operate with reduced payments and to consider stopping interest (though obviously this is up to them).

3.It is hard to generalise but there is no reason I can think your creditors would be particularly against a DMP.

4.You credit report will show that you are not making full payments to your debts, so this will make getting credit harder. Obviously on a DMP you won’t be wanting anymore debt anyway but like you mention, there are other things this affects. You current gas and electric suppliers would have no reason to put you on prepayment meters provided you keep your bill up to date. Switching suppliers may be a little bit trickier if you credit rating isn’t great and certain mobile contracts might be harder to get but our clients do manage to get by alright.

I would suggest reading the DMP& Mutual Support Thread as a good place to look next. It will give you a first-hand insight into what being on a DMP is like, from people currently on them.

Hope this helps.

James

Thank you so much for replying. I've been in the mutual support thread and read a lot this weekend, but there is so much information to work through that it's quite daunting.

I have a couple more questions if you can possibly help - we are currently up to date with all of our non-secured debts having been on an agreed interest only arrangement for our mortgage which has now expired and will not be renewed. We managed to buy some breathing space with an agreed reduced mortgage payment for 6 months that will put us in arrears, but means that we can choose to pay the non-secured whilst slipping behind on our mortgage for another 6 months if necessary.

Am I better negotiating the DMP before slipping into non-agreed arrears for the other debts, or trying not to slip into agreed arrears with my mortgage?

If we go ahead with the DMP will I end up with higher interest charges as we fall into arrears as one of my debts has only 1 year to run if I continued the regular payments - would it be possible to keep this outside of the DMP?

Thanks again

StepChange_James

stupid-fool wrote: »

Thank you so much for replying. I've been in the mutual support thread and read a lot this weekend, but there is so much information to work through that it's quite daunting.

I have a couple more questions if you can possibly help - we are currently up to date with all of our non-secured debts having been on an agreed interest only arrangement for our mortgage which has now expired and will not be renewed. We managed to buy some breathing space with an agreed reduced mortgage payment for 6 months that will put us in arrears, but means that we can choose to pay the non-secured whilst slipping behind on our mortgage for another 6 months if necessary.

Am I better negotiating the DMP before slipping into non-agreed arrears for the other debts, or trying not to slip into agreed arrears with my mortgage?

If we go ahead with the DMP will I end up with higher interest charges as we fall into arrears as one of my debts has only 1 year to run if I continued the regular payments - would it be possible to keep this outside of the DMP?

Thanks again

Hello,

Negotiating lower payments on a mortgage can be useful if you have a short term issue with your finances and will be able to catch up with the arrears once the arrangement ends. From what you have said it sounds like there is more of a long term issue and it may be better to deal with your unsecured debts now without getting behind on your mortgage (though I wouldn’t say that for certain without knowing your full situation).

As for whether to start a DMP now or wait until you’ve fallen behind, we recommend getting advice as soon as possible and most creditors will also say you should seek advice as soon as you think you might be struggling. In practice, however, some creditors will only consider lower payments once payments have fallen behind (until then they consider you up to date and therefore not in need of any help) but it is still better to have things set up sooner rather than later.

It is hard to say what will happen with the interest on your debts on a DMP. Ideally it will all be stopped straight away, and we do have people who have had this happen, but equally your creditors could add interest on if they don’t accept the payment offers.

With our DMPs we ask that all debts be included, even ones without much time left to run. We do this so we know all debts are getting fair treatment, as creditors are less likely to co-operate with lower payments if the think some debts are getting preferential treatment.

All the best.

James

Heffi1

For those wondering, I have managed to change my gas and electric supplier three times now while on my DMP and have had no problems at all. These bills are included in my budget so I have not fallen behind with them and I think this has probably helped, I recently changed last month to take advantage of the offers before the price hikes.

If this is a worry for you then hopefully this might help eliminate the worry of it all.

Former_StepChange_Rachel

Heffi1 wrote: »

For those wondering, I have managed to change my gas and electric supplier three times now while on my DMP and have had no problems at all. These bills are included in my budget so I have not fallen behind with them and I think this has probably helped, I recently changed last month to take advantage of the offers before the price hikes.

If this is a worry for you then hopefully this might help eliminate the worry of it all.

Hi Heffy1

Thank you for posting about this. Hopefully it will encourage other DMP clients to look into cheaper utility bills.

Best,

Rachel

debtdawg

CCCS, I was wondering if you can advise?

We've always treated debt payments as a priority and have never been late, missed a payment etc, but at the cost of never having much to fall back on in case of an emergency (like DH losing his job this month and then becoming the full-time carer for the children whilst I study) and it meant we often accrued more debt. I filled out a form on the CCCS website and it suggested a DMP would be suitable (in fact our repayments would be cut in half at least!) but I am worried about taking the massive step of suddenly being decent paying customers to not paying what they're expecting and want. I suffer from depression and anxiety and the thought of having people on the phone or at the door is really scary, especially with the kids around. I feel like a failure.

My question is - before I filled out the form regarding a DMP I literally just moved some credit cards around to try and take advantage of the low interest rates (i.e. I moved two onto our existing Barclaycard as we have a huge credit limit on there and it meant getting rid of two credit cards) before realising it was futile and we just can't manage our money situation. Will this go against us with setting up the DMP?

stalkie

CCCS_Rachel wrote: »

Hi Heffy1

Thank you for posting about this. Hopefully it will encourage other DMP clients to look into cheaper utility bills.

Best,

Rachel

Yes cheaper utility bills definately a good way to save money!

StepChange_James

debtdawg wrote: »

CCCS, I was wondering if you can advise?

We've always treated debt payments as a priority and have never been late, missed a payment etc, but at the cost of never having much to fall back on in case of an emergency (like DH losing his job this month and then becoming the full-time carer for the children whilst I study) and it meant we often accrued more debt. I filled out a form on the CCCS website and it suggested a DMP would be suitable (in fact our repayments would be cut in half at least!) but I am worried about taking the massive step of suddenly being decent paying customers to not paying what they're expecting and want. I suffer from depression and anxiety and the thought of having people on the phone or at the door is really scary, especially with the kids around. I feel like a failure.

My question is - before I filled out the form regarding a DMP I literally just moved some credit cards around to try and take advantage of the low interest rates (i.e. I moved two onto our existing Barclaycard as we have a huge credit limit on there and it meant getting rid of two credit cards) before realising it was futile and we just can't manage our money situation. Will this go against us with setting up the DMP?

Hello,

Thanks for posting. I don’t see going onto a DMP as a sign of failure, my thoughts are that it’s a sign that you are taking positive action to get your finances on track and you should feel proud that you are doing something about your debts.

It's hard to say whether a creditors will or won’t accept a payment offered on a DMP but I can’t see why there would be any extra issue with the card you recently took out. You transferred the balance with the best of intentions but like you said, it wasn’t quite enough to resolve the issue.

There is a chance that creditors may call you up to ask for extra payments (though this doesn’t always happen). If you're on a DMP then you can just tell any creditors to speak to us and put the phone down. Door step visits are much less likely, mainly because door step debt collectors are not bailiffs and are not a particularly cost effective way of collecting debts. We've an interesting blogpost about this: http://moneyaware.co.uk/2012/06/debt-collectors-are-not-bailiffs/.

Going from paying your debts in full every month to a DMP can feel like a scary thing, but if your budget shows you can only afford half the amount your creditors want then it suggests a DMP could be a way to stabalise your finances and help you cover the most important bills.

Hope this helps and all the best with your DMP.

James