Debt Management Plan - HELP

savingsp

I went to see the Citizens advice with regards my debt and now struggling to understand what they ment.

He told me to cancel all my direct debits. Forget paying my credit cards for now and concentrate on the priority debts. Surely though i will be incurring costs by not pating my credit cards as i have recieved a letter today fron one of my credit cards saying i have incurred a late charge. I m sruggling to understand the way this works if anyone can explain it to me i would be grateful.

Thanks

skylight

Priority debts are those that enable you to live. Rent, utility, food etc. (CSA and court fines come under this header). If you cannot meet your expenses then it's logical that you ensure that the priority ones are paid for first. A credit card is not going to help with the rent!!

Yes, you will incur charges for the credit card if its not paid; that's what you agreed to when you signed up. Paying that instead of the rent will see you evicted and a charge is far better.

The idea is that you start to repay your debts once you are back on your feet again. If this means you have to pay extra including charges, then so be it; its what happens. Are you looking at a debt management plan or perhaps go bankrupt instead?? What else was advised to you?

savingsp

He said to cancel all direct debits and set them up as standing orders. Pay prioity debts and wait until he sends out my SOA so that we can see how much is left over each month and then they will contact creditors with regards a payment. He suggest a DMP at the moment, if there is nothing left i may have to look at an IVA. He didnt explain what a DMP is though, he seemed rushed and not bothered

dancingfairy

What should happen is that you pay your priority debts first - heating , lighting., keeping a roof over your head, yourselves clothed and fed etc. These are the most important things.
Your adviser should then work out what you have left after these important bills are paid to offer to your creditors. Yes they may squawk and squeak and jump up and down but frankly they are not as important as keeping a roof over your head.
What's left is divided up and sent to the creditors to show you are trying to get back on your feet and that you are trying and in return you ask them to freeze charges and interest as a matter of goodwill. The amount is split between your creditors so the ones you owe most to get the biggest share, the one you owe next most to gets the next biggest share etc. This is called a debt management plan and is an informal agreement between you and your creditors - it's informal though so just like you are not legally bound by it nor are your creditors so they MAY take court action although if they do then a judge will look at your circumstances and make you pay what you can afford (not what the companies want you to pay). This is generally a plan to help you get back on your feet and prioritise things and hopefully things will improve longer term - ie better job etc - if things get worse you pay less and if things get better you pay more until your debts are paid off.
I hope this explains a dmp (debt maanagement plan) to you and I will try and explain other options in the next post.
df

dancingfairy

An IVA is a more formal arrangement and you and the creditors are bound by it. You put together a proposal to last a certain number of years (I think it's 5) and set out how much you will pay over the term. It's not very flexible and although you can change it slightly if things go wrong unfortunately at the end of the day if it fails then bankruptcy is the next step. Also I believe it is most suitable for people who have a house to protect although during the term of the plan you are expected to try and remortgage to give your creditors more (I think this after year 3? but not 100% sure).
Bankruptcy is also a formal agreement and basically your debts are wiped -it's not as scary as it sounds but it will prohibit you from certain jobs - such as in accoutancy or law and various other things and does make getting credit hard in the future (although not impossible). You draw up your budget and present it to the offical receiver (OR) who deals with your bankruptcy and as long as your spending is reasonable then there should be no problems - anything spare is divided up - you get to keep some and some goes to pay into your bankruptcy- I'm not sure how long this lasts - a few years I believe and then that's it. If you have nothing spare during the first few years you pay nothing further towards your debts than the up-front court fees.
I hope this gives you a brief overview of the main options but ask lots of questions to make sure you understand the best thing for you.
df

dancingfairy

oops- forgot to say the reason you are setting up standing orders at the moment is so that you are in charge of who gets paid, how much and when, and means the companies can't just take the full direct debit amounts leaving you short for food or rent etc.
df

savingsp

Thanks for clearing that up...

I just dont feel strong enough to deal with it on my own. I try and talk to my OH but he blames me, says i only work part time and its not fair all the pressure is on him. Ive suffered with depression at the beginning of the year and had to have 3 months off work, for which i recieved a verbal warning about my attendance. I am worried with everything that is happening my depression will come back.

savingsp

It's been nearly two weeks now and i havent heard anything back from Citizens Advice. I know i am one of many but should i be getting worried???