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Advice on debt management plans

I have recently been signed off work due to illness. I have racked up close to £20K in credit card debt over the years and have just been servicing the debt by paying the minimum amount each month. This was sustainable while I was working as I earn good money. However, I am self employed and have no immediate prospect of work. I am applying for ESA and housing benefit which will take time.

In the meantime, I have contacted stepchange in order to work out a debt management plan and discuss my options.

I am interested to hear from anyone in a similar situation or with experience of Debt Management Plans / IVA arrangements. I also have one initial question:

If my debt is across three credit cards and my credit limit on one card would allow me to to transfer the smallest card’s balance on to it, would I then be in a better position? Or would this just make negotiating DMP more difficult. Also, once a DMP is in place, would the creditor who has been paid off discover this and cancel my account anyway?

Comments

  • GCP
    GCP Posts: 2 Newbie
    edited 9 October 2014 at 10:19AM
    I was in similar situation.
    It may simplify things if credit was with one card company. However once a management programme is in place card interest is usually frozen anyway and any payments come off total.Initially you would still be dealing with the credit provider unless the account is sold on. Some of my debts have been written off and some give you an opportunity to pay off a reduced amount if they feel the debt repayment will go on for a long time. This wont happen immediately but probs will eventually.
  • National_Debtline
    National_Debtline Posts: 7,998 Organisation Representative
    Tenth Anniversary 1,000 Posts Combo Breaker
    I have recently been signed off work due to illness. I have racked up close to £20K in credit card debt over the years and have just been servicing the debt by paying the minimum amount each month. This was sustainable while I was working as I earn good money. However, I am self employed and have no immediate prospect of work. I am applying for ESA and housing benefit which will take time.

    In the meantime, I have contacted stepchange in order to work out a debt management plan and discuss my options.

    I am interested to hear from anyone in a similar situation or with experience of Debt Management Plans / IVA arrangements. I also have one initial question:

    If my debt is across three credit cards and my credit limit on one card would allow me to to transfer the smallest card’s balance on to it, would I then be in a better position? Or would this just make negotiating DMP more difficult. Also, once a DMP is in place, would the creditor who has been paid off discover this and cancel my account anyway?

    Hi roadtohappy

    I think that doing a balance transfer at this stage might seriously undermine your negotiations with the company to whom you had transferred it. If you're embarking on a DMP or similar then you are looking to get interest frozen across the board anyway, whether on 2 debts or 22.

    Regards

    Dennis
    @natdebtline
    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
  • Puzzcat
    Puzzcat Posts: 4,200 Forumite
    Wise words spoken by Dennis, don't start doing balance transfers or using the cards whilst setting up a plan as the creditors will not take kindly to it..


    Why not pop over here..


    https://forums.moneysavingexpert.com/discussion/4988866


    We are all at different stages of dmp's, lots of information so make a cuppa, pull up a chair and start reading.. If you have any questions there is usually someone around who can answer.


    Good Luck
    Puzz
    Christmas 2020 £109
    I love my dmp started in Nov 13 with SC. Self Managed 2016 57% done
    £60062/25384.84 - 13222.60k UE

    MY DIARY
    http://forums.moneysavingexpert.com/showthread.php?t=4768685
  • roadtohappy
    roadtohappy Posts: 7 Forumite
    edited 14 October 2014 at 10:37AM
    Many thanks for the replies. Stepchange have advised a Temporary payment arrangement and given me a template letter to send to each creditor. I have not messed with balance transfers etc. The template letter doesn't include that I have been signed off with illness and am applying for benefits but this is in the budget they provided. Template follows. Do people think it is worth adding anything to the letter? It just seems very generic to me.

    Dear Sir/Madam
    Temporary payment arrangement
    I have received advice from StepChange Debt Charity to help solve my debt problem.
    I am in financial difficulties at the moment and not able to meet my normal monthly payments. I will make a monthly payment of whatever I can afford until more money is available.
    I have enclosed my monthly budget and a list of creditors. After paying my household bills, I can pay you £ . I will pay this each month and tell you when my circumstances change.
    I will continue working with StepChange Debt Charity to improve my circumstances and find a more permanent solution to repay my debt. In the meantime, please consider reducing or stopping interest or any other charges on my account to help me during my financial difficulties.

    Also is there a particular department to whom I should send my letter at each creditor?
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