DMP - What if the monthly payments are too low

Coinmachine

I am in the process of setting up a DMP. I have in the past few weeks felt positive at times reading posts on here and then equally negative and it is so stressful.

My debt stands at £53k. I have done the debt remedy tool as realistically as I can being careful not to overstretch myself. My hope is that once it is up and running I can make extra payments if I budget carefully but I do also need to build up some sort of contingency fund to start with just to cover the major what ifs such as the boiler going or car repairs etc.

My main worry is that stepchange calculate that a payment of £320 each month will clear the debt in 14 years. I know it may take less time as this is calculated on my pay/circumstances staying the same. I have 11 creditors, although for one of them I have credit card/overdraft and for another personal loan/overdraft so 9 companies in total if that makes sense.

£320 a month means £29 per creditor. My worry is that the creditors will deem this amount to be too low and will rejcet the DMP. I have emailed StepChange to ask about this and await an answer but I just wondered if any others have faced a similar scenario?

Sedge123

I'm no expert but I would imagine your creditors will be happy to receive any monthly payment and will be encouraged that you are dealing with the matter through a company such as Stepchange.

seanavfc92

Coinmachine wrote: »

I am in the process of setting up a DMP. I have in the past few weeks felt positive at times reading posts on here and then equally negative and it is so stressful.

My debt stands at £53k. I have done the debt remedy tool as realistically as I can being careful not to overstretch myself. My hope is that once it is up and running I can make extra payments if I budget carefully but I do also need to build up some sort of contingency fund to start with just to cover the major what ifs such as the boiler going or car repairs etc.

My main worry is that stepchange calculate that a payment of £320 each month will clear the debt in 14 years. I know it may take less time as this is calculated on my pay/circumstances staying the same. I have 11 creditors, although for one of them I have credit card/overdraft and for another personal loan/overdraft so 9 companies in total if that makes sense.

£320 a month means £29 per creditor. My worry is that the creditors will deem this amount to be too low and will rejcet the DMP. I have emailed StepChange to ask about this and await an answer but I just wondered if any others have faced a similar scenario?

It won't be £29 to each creditor. It will be pro rated, so the creditor with the biggest contractual repayment will get the biggest percentage of the money.

To ease your worries, £320 is not too low to pay each month. As long as you can pay £5 to each creditor you can afford to be on a DMP. At the end of the day, you can only pay what you can afford. Living expenses have to come first.

If you get over time at work regularly, you can always ring SC up and make an extra manual payment, which would obviously reduce the term of your plan.

Coinmachine

Thanks Sean I am not thinking clearly at the moment and hadnt picked up that it would be pro-rata rather than an equal payment for all. Thank you for taking the time to reply.

kiwikaz

Hi Coinmachine,

Well done on contacting Step Change.

My OH and I started our DMP back in Dec 2009. We started off with 14 creditors with a mix of loans, credit cards and overdrafts. Our debt was just short of £ 89k.

For the first 2 months while the DMP was being set up we paid token payments of £ 5 to each creditor.
Our initial payment was £ 294 which meant all things staying the same would mean it would take 20 years + to repay.
Our payments a while later changed to £ 370 a month and then to £ 620 thus altering our repayment period.
Our boiler broke completely and we needed a replacement so had to make token payments for 2 months as we didn't have enough saved in our emergency fund to cover the cost. An emergency fund will be built in to your budget to help cover these instances.
Our circumstances have unfortunately changed yet again so we're only able to pay £ 99 a month at the moment.

Step Change will do regular reviews with you and help you on your journey to become debt free.
Your payments to your creditors are on a pro rata basis according to how much you owe each of them.

Please note that your creditors can't have what you don't have !

Good luck.
Karen.

Coinmachine

Karen,

Thank you so much. Its a help to know that others have used DMPs successfully even with larger debts. I feel a bit more positive now. Once I am set up I will keep in contact on the on the support thread as it is such a help even though some of the posts can scare you there are others that provide reassurance.

I cant remember who posted it but I also recall reading that very few people regret taking out a DMP.

I expect I will have more worries along the way but I feel determined to make this work. This site is a godsend!

National_Debtline

Hello there,

Did Stepchange outline all potential options to you - such as Individual Voluntary Arrangements and Bankruptcy? Whilst a 14 year DMP isn't uncommon it's certainly longer than most. Also, it's important to bear in mind that the freezing of interest and charges isn't guaranteed under a DMP - though many creditors generally do agree. If your circumstances improve over time it may be possible to reduce the time you're under the DMP - in addition, if you start with the DMP and decide one of the more formal routes could be a better option, there is nothing to stop you switching at a later stage.

Best wishes,

David @ NDL.

Coinmachine

National_Debtline wrote: »

Hello there,

Did Stepchange outline all potential options to you - such as Individual Voluntary Arrangements and Bankruptcy? Whilst a 14 year DMP isn't uncommon it's certainly longer than most. Also, it's important to bear in mind that the freezing of interest and charges isn't guaranteed under a DMP - though many creditors generally do agree. If your circumstances improve over time it may be possible to reduce the time you're under the DMP - in addition, if you start with the DMP and decide one of the more formal routes could be a better option, there is nothing to stop you switching at a later stage.

Best wishes,

David @ NDL.

Thanks David,

The first option was IVA, then a DMP, but I really cannot face the thought of an IVA and would like to give the DMP a chance first.

I do feel a bit better now just for posting on here, its cathartic.

schmalf

Hi Coinmachine - meant to say as well that when I did the Debt Remedy tool on SC website it kept saying IVA to me too. I was horrified at this as really don't want an IVA. I asked the question too about whether I could do a DMP when it was saying IVA and everyone on the mutual support thread said yes you can still go for the DMP, it's only advice not written in stone. So thats is what I am doing. I think this is pretty common. Good luck I am sure you will be OK with the DMP. FYI my payment is lower than yours, and as I said mine is due to last about 10 years so ages as well.

Monkeyballs

Hi Coinmachine,

I commented re. your post over on the DMP Support thread too but thought I'd check this one out too in case you had any other more specific concerns

Sounds like you've received a lot of sound advice already here - I just wanted to chip in and say yeah, don't worry about it

What you can do is speak to SC and they can tell you how much is going to each creditor each month if it helps put your mind at rest? Honestly it doesn't matter but I found it quite interesting and actually gave me a little bit more confidence when I did speak to my creditors in te early days.

Also, when your account is all set up you can log into the SC site to see your plan which shows statements, payments made, etc which makes it feel like a proper account that you can manage which I actually quite like

Good luck and keep posting

MB

Puzzcat

Hi Coinmachine.. we meet again from the lovely dmp support thread..


I my DMP... I've been in debt over 20 years, by debt hasn't really moved over the last 5 years but now it is finally going down... I owe 60k and pay £561 a month at the moment so am also in it for the long term (10 years.), although like everyone else hope to up the payments as we go along... Just make sure you give yourself a budget with plenty of wriggle room.


If you need any help with letters to send creditors etc just pop over to the dmp thread and we will point you in the right direction. It is true that creditors do not have to stop interest and they do hammer it on whilst you are setting up, but out of my 9 creditors only 1 is charging interest and I have already gone into battle with them..


Good luck with your journey.
Puzz. x