To DMP or not??

helpwithdebt

Hi,
myself & my partner have got ourselves into quite a pickle.
We have managed to rack up debt across 3 catalogues, 3 credit cards & a small overdraft. We also have some buy now pay later items on 2 of the catalogues which are due to be paid at the end of June, we wont have the money to cover this. So next month our payments will more than likely double.
I have been managing to make all payments (paying minimum) but once all the bills & food shopping is done we are broke & once interest is added the debts hardly even go down.
I filled in the SOA & according to that we have £150 left over a month (but we dont) I didn't add an amount for entertainment & also left out my partners smoking (10 a day), so thats where the extra £150 goes.

I filled in the snowball calculator next & according to that if we stick the £150 onto our debts we will be debt free in 18 months.
Myself & my partner have discussed whether we could cut back & struggle for 18 months until we are debt free.
My biggest worry is that if we do go down this route, with no spare money I can see us having to order school clothes, etc on the catalogue or credit card because we wont have the money to buy them outright, which will just start the debt cycle again.

I also filled in our info on CCCS & they said we can apply for a DMP. I have received the pack through today & it is saying we would only have to pay £94 per month, at the moment we are paying £370 so it sounds like a huge difference & will make life alot more easier.
What are the downside to DMP?? we are most worried about being able to get a mortgage in the future, but this probably wouldn't be an option for us any time soon anyway (probably 8 years minimum).
Also on the DMP pack on the agreement it says 'my creditors may continue their collection activity, charge interest or other fees, or take legal action against me. CCCS cannot prevent this' so if our payments drop by £200 how will the debt ever be paid if interest is still being added??

Sorry for the long post.

mildredalien

The downside to a DMP is that you will have to stop making minimum payments to your creditors which will place you in default. It is not guaranteed that your creditors will freeze interests, but many will do. For those that won't, you can always try a full and final settlement later down the line to try which often means paying less overall than your total debt is worth. In any case, you can only pay what you can afford - I doubt your debts would be paid off much quicker if you just stayed as you are!

Defaults do come off your record completely after 6 years so it shouldn't affect you to much if you aren't planning on looking for a mortgage for 8 years anyway.

The biggest advantage of a DMP is that it allows you to get to a sustainable lifestyle where you aren't just going round and round building up more and more debt. I'd suggest posting your SOA on the forum to get some advice about cutbacks etc. so you can pay your debts off as quickly as possible - it may be that you can have more than £150 spare and would be able to make extra payments into your DMP to pay it off quicker. Remember when you fill it in to include everything - cigarettes, children's clothes, entertainment - everything that you think you will still need to spend money on. It might be that if you trim down a bit you can maintain minimum payments and throw every spare penny towards the debts to get it done yourself.

helpwithdebt

So if I go down the DMP route where do I start, CCCS haven't really given me any information.
My bills are due out in the next 7-10 days, do I just stop paying them??
They have advised me to open a new bank account as I have an overdraft on my account (only £150), do I have to change banks?? I would rather not.

I was thinking that once the DMP is in place can I pay an extra amount to my bank so that the overdraft is cleared within 2 months.
Then do the same for 2 of the credit cards, again only £150 owed on each.

Then we only have the 3 catalogues & 1 credit card debts to deal with, this is were the big money is owed.

Also CCCS have asked me to send them photocopies of statements for my debts, can I just send them my account reference numbers or even email them copies of statements?? The credit cards are all on paperless statements.

helpwithdebt

Any help would be greatly appreciated.
Thankyou

Mort

Read this which explains why you may need to change banks. For CCCS to advise you to do so I am guessing you have debts with the same bank where you have your current account.

When on a managed DMP your creditors are paid pro rata, your payments are divided up depending upon the amount you owe, extra payments should be doled out the same way. Going with CCCS is a good move as they will not charge you.
If you sign on with CCCS they will tell you when to make your last payments. Generally speaking it is best to pay minimum amounts and keep the rest back to act as a cushion for emergencies.

Your credit rating will be wrecked but in the short term you really don't want to be borrowing more. If a default is issued it will last for 6 years, you may get defaults issued towards the end of your DMP as well as the beginning.

A DMP taught me how to budget again without credit cards, hopefully you will learn as well.

Post your SOA so board members can look over it, expect to be picked up on things such a mobile and energy costs, or horse riding lessons for little Jimmy!

helpwithdebt

Thanks for your help, I only have a £150 overdraft with my bank.
I have sold some items on ebay over the past 2 weeks & now have enough to pay off the overdraft in full.
If I pay this off & close the overdraft facility does my bank still have to be changed??

Mort

helpwithdebt wrote: »

If I pay this off & close the overdraft facility does my bank still have to be changed??

This really depends upon who has your other debts. If they with the same institution that has your current account you really should. There could be the possibility of the bank taking all your money on pay day to pay off or reduce a credit card.

freshstart11

I have to agree with others we can not give an answer to help you without seeing the SOA to see your exact situation, we may be able to help you more if we have the details?