Is DMP a big mistake?

Irisheyes_2

I'm just about all ready to go with a DMP, but I'm wondering if I'm making a big mistake?

In total I owe 41K on credit cards. Stupidly sucked in by an apparently never ending stream of 0% offers. Since the offers dried up, I've got through my savings just keeping up with the minimum payments ... as soon as the card companies saw I was making minimum payments they vastly increased the "standard" interest rate on my card.

No one but myself to blame however.

I'm married; but my husband doesn't know. It would be the end of our marriage if he found out.

I'm a self-employed freelance and have recently been diagnosed with a medical condition, making it harder to get contracts. I'm in my 50s.

About a month ago I decided I was in trouble enough to ask for a breathing space on my card repayments. I spoke with StepChange, but I was reluctant to enter into something so seemingly permanent - especially in terms of damage to my credit rating. I have never missed a payment, or (until I followed advice from StepChange) had I made a reduced payment. I still hope things will pick up.

I decided to approach the card companies myself. However, the very first one - LTSB - refused to do anything about the interest rate and charges unless I went through StepChange.

So I've now completed the StepChange paperwork and signed an authorisation contract. I've also spoken to all my other card providers, with varied results.

LTSB have been the worst ... by a long, long way. In January, I paid off my monthly minimum payment to them early. I paid online via my bank and, once I had seen the money had left my account, I cancelled my direct debit the next day. What I didn't spot until the very day the direct debit was due was that my early payment had been bounced back to my bank account a couple of days after it left it.

I immediately phoned LTSB and explained what had happened and that I was concerned because my direct debit was cancelled and was due that day. LTSB reassured me that the direct debit had been paid. There was no question of my being charge late fees. I took the full name of the person who had reassured me. He was based in Belfast. It was a snowy day and the Customer Support Unit was closed. This gentleman was in a general customer services department.

Next thing, I get a phone call from Collections Department complaining I've not made my minimum payment. They have no record of any such conversation with the named person in Belfast. He apparently just recorded I had phoned about my direct debit. I have been charged £12 and am now in errears with LTSB.

So that's the state of play with LTSB. I'm now officially in default with them. With all my other cards, I made reduced payments on my last bills - following the advice of StepChange. The accounts are now all on hold, while they wait to hear from StepChange.

All except HSBC. I "only" owe £900 on that card, so I have been able to make the whole minimum payment and am not in errears. But any day now they will hear from StepChange and today I was told that as soon as a card company enters an agreement with StepChange the cardholder automatically enters "default" mode and that this stays on record for a minimum of six years.

I have applied to take my occupational pension early. I think it will start paying in April. I will receive a lump sum of approx 5K.

I would like to keep up my minimum payments with HSBC and, as soon as I receive my pension lump sum, pay off the entire amount owing to them and close the account. StepChange have said I cannot do this, as they will share it pro rata with all the card companies.

That's going to make my credit rating even worse. I know it will be bad anyway - and this is not a good end to my life. But at least I could have had one card recorded as "settled", with a good record.

I'm really now thinking I've done the wrong thing.

My apologies for the length of this post.:o:eek

kaya

I have many friends who work in finance, they would all tell you that debt management programmes are financed by credit companies Not to help those in need but in are fact there to ensure they always get there money back one way or another

Tixy

Its not a decision to enter in to lightly - but people who do enter in to them often don't have lots of other options. If you didn't go for a DMP what would be your other options? if you cannot meet your repayments then might a creditor take you to court for example? might you be looking at an IVA or bankruptcy (which husband would be much more likely to find out about).

If you are going into a DMP then stepchange are definitely a good place to use.

The reason they are have to treat all creditors equally is because that is the best chance of getting all creditors to agree to accept your reduced repayments. If lloyds or whoever see that you are keeping up your repayments to HSBC then they are far less likely to be happy that you are giving them preference over your Lloyds debt.

And just having one settled account on file and several others with defaults is not going to make your file look better than having them all defaulted.

You say your husband is not aware of the situation - do you have any joint finances with your husband? a joint mortgage or anything? if so then his ability to get credit will likely be affected by you entering a DMP and having defaults put on your credit file. Is he likely to apply for credit and if declined could this cause him to start asking you questions?
People on a DMP do usually find it much easier if their partner is aware of the situation and why their spending habits have needed to change - or for them to be able to shoulder a greater amount of joint expenditure. Obviously its your choice and you know him best, but I would think about discussing it with him - especially once you can say that you have a plan in place and are tackling the debt.

Good luck.

Irisheyes_2

Thanks for your answers, Kaya and Tixy. My husband is very anti credit. He has a credit card, purely for the Section 75 protection using it gives on big purchases. The house - and the mortgage - are both in my husband's name only. My biggest fear is him finding out about my foolish debt. It makes me sick just thinking about it.

patator

It sounds like you're very, very anxious about all of this. Firstly, try not to worry too much, there's always a way to get out of a pickle (even if it will take a while). StepChange are a very good option if this is a route you're considering. They're very helpful, you're kept informed throughout and they make things as straightforward as they can.

With talking to your husband, do you think it's possible you could get everything together, get a solution outlined and then maybe bring it up? Debt is something experienced by a LOT of people, it's much more common than a lot of people maybe realise (especially when you're in the middle of it and feel like you must be one of the few who've gotten into a mess with credit), but there is always a way to deal with it. You never know, he might be more understanding than you'd expected? This concern about your husband must be making everything feel so much more pressing; if you're able to tell him, you'd likely feel better for having it all out in the open. Of course, nobody can know your situation fully, so only you can decide how you think that conversation would go. Hoping you're okay, though.

As it stands, do you think you'd be able to keep up the minimum payments, or are you likely to begin finding yourself in arrears/will your debt snowball? If this is the case, yes a DMP would mean you'd have defaults for 6 years but they would drop off AND you'd be in a much better financial situation by the time they do. If DMP isn't for you, might it be worth posting your SOA (hopefully somebody else can link to it!) so that some of the clever people on here could maybe suggest places where you could make some savings? There's a thread on this board for people either in or considering a DMP, with lots of people with much more experience - it might be worth checking this out as the people there are well placed to answer questions!

Take care of yourself, asking for help is a great first step, hopefully some of the other friendly bods on here will be able to offer some practical advice!

Tixy

Irisheyes - what has the debt been run up on? has it been general overspending on the whole family? or on specific items just for yourself?

Do you have anything you could sell to pay a chunk off the debts - which would then make them more manageable to work on clearing them?

Do you and husband ever discuss finances? does he know that your business has been struggling - has he never asked any questions about how you are managing financially or how you are affording to buy certain things?

Michelin

Tixy wrote: »

Irisheyes - what has the debt been run up on? has it been general overspending on the whole family? or on specific items just for yourself?

Do you have anything you could sell to pay a chunk off the debts - which would then make them more manageable to work on clearing them?

Do you and husband ever discuss finances? does he know that your business has been struggling - has he never asked any questions about how you are managing financially or how you are affording to buy certain things?

I can't answer the question as to whether the DMP is the right way here (unless to say what are the options) but others with more experience will be able to.

I have to agree with Tixy though. Are you sure that he doesn't know about the debts? What has the money been spent on and how does he think you are paying for things? It really would be better if you could get up the courage to tell him but maybe once you have decided on the solution and how you are going with it.

Newchapter

Irisheyes wrote: »

Thanks for your answers, Kaya and Tixy. My husband is very anti credit. He has a credit card, purely for the Section 75 protection using it gives on big purchases. The house - and the mortgage - are both in my husband's name only. My biggest fear is him finding out about my foolish debt. It makes me sick just thinking about it.

Dear IrishEyes

Not so long ago I was having the same conversation with myself as you are having. I didnt want to start a DMP because I was worried aboutthe long term effect on my credit rating, but I actually had no choice as I was struggling to make the minimum payments, had no moneyto live on and was becoming increasingly stressed.

I dont know if the DMP was the right answer for me, but it was ONE option. Its going ok, but not perfect. I have no savings, no credit card and from midway through the month have very little money. This can be quite awkward with work as I cant travel with work as I used to for conferences and meetings, (no money for train tickets/petrol/hotels etc). I found that a bit embarrassing BUT I know exactly what money I do have each month and my debt is slowly reducing.

I eventually told my partner, we have only got together fairly recently, and he is understanding. If there is an unexpected bill, like car repair, he has paid for it & I pay him back so thats a big relief.

Try loking on the DMP thread. There are hundreds of us doing DMPs - all with different stories.

Good luck with whatever you decide to do and use the support of the forum. There are some great people on there.:)

Alice_in_Welfareland

Irisheyes wrote: »

I'm just about all ready to go with a DMP, but I'm wondering if I'm making a big mistake?

In total I owe 41K on credit cards. Stupidly sucked in by an apparently never ending stream of 0% offers. Since the offers dried up, I've got through my savings just keeping up with the minimum payments ... as soon as the card companies saw I was making minimum payments they vastly increased the "standard" interest rate on my card.

No one but myself to blame however.

I'm married; but my husband doesn't know. It would be the end of our marriage if he found out.

I'm a self-employed freelance and have recently been diagnosed with a medical condition, making it harder to get contracts. I'm in my 50s.

About a month ago I decided I was in trouble enough to ask for a breathing space on my card repayments. I spoke with StepChange, but I was reluctant to enter into something so seemingly permanent - especially in terms of damage to my credit rating. I have never missed a payment, or (until I followed advice from StepChange) had I made a reduced payment. I still hope things will pick up.

I decided to approach the card companies myself. However, the very first one - LTSB - refused to do anything about the interest rate and charges unless I went through StepChange.

So I've now completed the StepChange paperwork and signed an authorisation contract. I've also spoken to all my other card providers, with varied results.

LTSB have been the worst ... by a long, long way. In January, I paid off my monthly minimum payment to them early. I paid online via my bank and, once I had seen the money had left my account, I cancelled my direct debit the next day. What I didn't spot until the very day the direct debit was due was that my early payment had been bounced back to my bank account a couple of days after it left it.

I immediately phoned LTSB and explained what had happened and that I was concerned because my direct debit was cancelled and was due that day. LTSB reassured me that the direct debit had been paid. There was no question of my being charge late fees. I took the full name of the person who had reassured me. He was based in Belfast. It was a snowy day and the Customer Support Unit was closed. This gentleman was in a general customer services department.

Next thing, I get a phone call from Collections Department complaining I've not made my minimum payment. They have no record of any such conversation with the named person in Belfast. He apparently just recorded I had phoned about my direct debit. I have been charged £12 and am now in errears with LTSB.

So that's the state of play with LTSB. I'm now officially in default with them. With all my other cards, I made reduced payments on my last bills - following the advice of StepChange. The accounts are now all on hold, while they wait to hear from StepChange.

All except HSBC. I "only" owe £900 on that card, so I have been able to make the whole minimum payment and am not in errears. But any day now they will hear from StepChange and today I was told that as soon as a card company enters an agreement with StepChange the cardholder automatically enters "default" mode and that this stays on record for a minimum of six years.

I have applied to take my occupational pension early. I think it will start paying in April. I will receive a lump sum of approx 5K.

I would like to keep up my minimum payments with HSBC and, as soon as I receive my pension lump sum, pay off the entire amount owing to them and close the account. StepChange have said I cannot do this, as they will share it pro rata with all the card companies.

That's going to make my credit rating even worse. I know it will be bad anyway - and this is not a good end to my life. But at least I could have had one card recorded as "settled", with a good record.

I'm really now thinking I've done the wrong thing.

My apologies for the length of this post.:o:eek

The information you have heard on defaults is not correct entering a DMP does not automatically lead to the default mode and may not for many months or even to years.

MissMaths

Just thought I'd chip in, I can honestly tell you I owed more than you do but now am in a DMP and don't constantly worry about the finding the money to make my credit card payments. Although it is a major step, I at least feel I'm reducing the debt on my cards(most stopped or reduced interested drastically),this didn't happen when I was scrapping together the minimum payments.

Michelin

Irisheyes, when you posted a few years ago, you said you had a lot of equity in your house (around £290k). Is this still the case because if so, could you increase your mortgage to pay off the £40k debt. Might be a very cheap way of doing it and you wouldn't have to enter a DMP.