How does a dmp work?

RhiBi

Please don't shoot me down for this question, I'm not sure if we even need a dmp, as we are paying all our bills, and have money for food and the children's hobbies, I'm just wondering really.

Do they take every penny into account? By that I mean, do we give every spare penny to paying off debts? Would the children's hobbies need to stop! We have 4 children, and like all children want a 'treat' now and again. Would we be able to take them to the cinema once every couple of months for example. I am happy to live frugally, but with children, there are times, when they deserve a little treat.

I don't need replies of maybe treats is what gave us debts, but anyone who is a parent (especially to older kids!) I'm sure can understand what I'm trying to say even if I'm not putting it across very well.

Basically I suppose, I'm asking, do they take every penny after essential living expenses have been accounted for?

Mort

If you have not done so already have a look at one of the posts where someone has posted their SOA. This will give you a flavour of how a DMP budget is worked out.
I was with Payplan and they work out a budget based upon a whole series of allowances. It is enough to live on and pay off creditors at the same time. It is possible to have treats but they need to be occasional ones. Cinema and theatre trips are possible but regular things like dancing lessons would be a struggle.

eyeopener2

Cinema fine, swimming fine, horse riding lessons maybe taking it a bit far. (sorry all horse people)

A DMP bases things on moderation, your not expected to live like hermits or monks and your children to go without. You will be expected to live within your means and budget sensibly. If that includes occasional days out or treats then you budget that in.

Where your children are concerned you may find you will do a lot more free things, I can certainly vouch for that, and they are just as happy as when you spend money on them.

Good luck.

E2

RhiBi

Thanks, I am going to gather all my paperwork, and hopefully post an SOA in the next few days. DH does have a well paid job, every month £1600 is transferred into another account which then pays all the bills. This leaves approximately £1000 for food, hobbies, and general living expenses. The problem is we have a £1000 overdraft, so are never making headway on the overdraft, plus we never plan for things such as birthdays etc. if we didn't have credit cards, we'd have a comfortable lifestyle, the cc bills are paid out of the £1600.

Three of my children (we have 4 daughters) go to piano lessons, and they're doing extremely well, 2 of them are doing Grade 5 soon, and one of them is only 11. I would be loathe to stop those, I'd rather give up other things. Maybe that is where my thinking is wrong, but I'm sure any of you who are parents and have a child who is achieving something would feel a sense of determination to keep it going.

antonic

As a single guy I have been on a DMP with the excellent Payplan for the last 76 months (only 8 to go !) and in that time I havent exactly been living in poverty nor have I been living the highlife.

I have some money each month for socialising and enjoying myself , one of the things I have given up is my Liverpool FC Season Ticked (£750.00 this year , about 3 months DMP payments) my dad took it over ,BUT I have much preferred the DMP route than any of the other options.

I have been "lucky" that all my defaults will drop off my file BEFORE I finish my DMP (as defaults last 6 years my DMP will be 7 years) and my creditors defaulted me as soon as I started my DMP.

I am afraid that you will have to make hard choices like I have, BUT it can be done !

katsu

If you have £1600 of bills and spend £1k on other stuff, which doesn;t include things like birthdays etc, then it sounds like a really good time to start making an SOA (statement of affairs).

You can see the template in the sticky thread on the forum.

Start getting some idea where the money goes and then we can give you some alternative ideas on how you can make it go further and start clearing the debt.

Mrs_Arcanum

The pack from National Debtline is very helpful as it shows how much you are allowed for food etc and what you reasonably need to live on and have some life. If you post a SOE you will have many people telling you where to cut down to pay the debt off faster but this may not leave you anything spare for treats at all. So you end up with a trade off between length of time to pay it off and what you are prepared to sacrifice. If you are not prepared to be highly disciplined then a longer term pay back may suit you more.

RhiBi

I am going to sort out all my bills, and post an SOA in the next day or so.

When I see that some of you who have joined challenges have paid off large amounts in relatively short periods of time, I wonder how you do it.

Lewby

Hi Rhi. I haven't posted on here for quite a while but have faithfully returned as things have taken a significant turn for us as my OH has lost his job. We have halved our income overnight but could just and I mean' just' manage to pay our minimum balances. I weighed everything up and decided to do a self-administered DMP as I don't know when he might get another job and can't see us making any headway at all just paying the minimums on our cards, seeing the interest swallow up almost all the payments we make and scraping by.

I worked out that the financial pressure of trying to live on just £400 per month for food, petrol etc etc would be really difficult and to be honest looking at the interest payments every month on the credit card bills and knowing we were not making any dent in the debt was just too much to cope with. We have serviced all our £50k debt for over 5 years without missing a payment but like you, never seemed to make any inroads into it.

I have phoned all our creditors and they have been brilliant. Most of them have accepted a token payment for a month while we do our budget statement and have frozen the interest and charges. We did a budget plan using My Money Steps suggested by Barclaycard and I was amazed at how much they expect you to add in. I hadn't thought of haircuts, prescriptions, weekly newspapers for job hunting, christmas and birthday present budgeting, etc and I was surprised at the staff we spoke to who said that the credit cards don't expect you to cut everything out as they want the repayment plan to be manageable in the long term. Most of them have said they won't phone us as long as we keep in touch and maintain our agreed payments. I will do another reply on the DMP support thread and will list the credit card companies and what their responses have been as it may be helpful to others. I think you have to take into account that we hadn't missed any payments and I was going to them to tell them it was going to happen next month so hadn't defaulted at that point.

We have cut our debt committments by two thirds per month and almost all of our payment per month will be going off the debt. We will be in default which will affect our credit rating for 6 years but I truly don't care as we have lived with the debt for so long I don't ever want anything we can't pay for up front again. It's just such a relief to know that we are payng it off and I can see an end to it. I have cut up the cards

We are able to budget now and actually live within our means as well as servicing our debt. If we can't afford it we won't be having it but being able to look at the bank account in credit and know it's all accounted for feels so nice. I have set up two other bank accounts, one for putting the budgets for christmas and birthdays into and another for saving for car tax, insurance, mot etc. Those pots will build up and we'll be able to pay for the bills outright! That will be a first!

I think the decision about going down this route depends on the amount you owe and whether it feels worth the 6 year bad credit rating you will have. I know that if we'd carried on as we were, just paying min payments, it would realistically be about 10 years before we'd be debt free. I am hoping that with the reduced payments and no interest being added we will be able to put a little by each month by living frugally and be able to pay some of the debts of in full as we go. Our budget is set up to be frugal and we intend to pay off all our debt.

Good luck with your journey. This forum is an absolute godsend and I was massively helped to make the decision to go down the DMP route by reading the experiences of others. Debt is like a virus that affects every aspect of your life but it feels so much better to be in control of it.

Best wishes,

Lewby