Offered DMP by stepchange

Solve-it

Hi all,
My better half has recently been performance managed out of her job earning 18K so we are now going to be short for our 41K debts.
Stepchange have said that they will complete a DMP for us and we should open a new account to take my salary (24.5K) to stop problems with main bank.
I have no experience of this situation as we foolishly thought it would not happen.
Can anyone share what they have done or what I need to do to make sure things are safe before entering into any agreement.
Also ---would an IVE be more appropriate?
The would be around £460 pcm to go into payments to creditors.
Any advice appreciated.

sourcrates

Hi,
An IVA is a more formal agreement than a DMP.

An IVA is run by an insolvency practitioner and is one step down from Bankrupcy, it can be beneficial to you, depending on your debt level.
You are protected by law from your creditors taking further action against you, wear as a DMP is an informal agreement with no
Legal protection, and may take a lot longer to complete.

Suggest you speak to National Debtline about your options, step change do a good job, but ND better suited to advising on IVA's.

A new basic bank account opened with a bank with whom you have no debt is a good plan.

Solve-it

Thanks for your reply,
Have to be honest I am cacking myself over this.
We can sustain probably one month more payments and thats prob how long it will take to set up.
Never ever missed a payment on anything before.
Even if My wife gets another job sharpish the debt still needs tackling.
I thing bot and IVA and a DMP will take about 6 years.
What happens with credit - is it all imediately taken away? NOT that we want to borrow anything again if poss - I was thinking more about paying for things and having protection?
Its all rather scary and I feel quite sick.

Tixy

Whatever option you chose the first step is setting up a new bank account with a bank you don't currently owe any money to.

Whether an IVA or DMP may suit your circumstances best, or be an option depends on quite a lot of fine details but its worth talking through both options with one of the charities. For a couple it can sometimes make sense for one to do a DMP and the other an IVA even (depending on the spread of debt etc).

With either option you won't be able to use credit until the debts are repaid. In terms of section 75 credit card protection there is an option - which is to use a particular prepaid credit card see this link - http://www.moneysavingexpert.com/shopping/section75-protect-your-purchases, you want the "I can't get a credit card. Can I still get Section 75 cover?" bit

DorisTrousers

The main thing I would say is to check and then double check your budget. There is one wage coming in now, and according to a rough calculation that will bring you around £1640 per month net.

Have you made sure that there is enough to pay rent/mortgage, council tax, all utilities and insurances, tv licence, travel costs, food and clothing, and I would always advise setting an amount to cover "other", maybe £50 to £100 per month for 2 would be about right.

The most common mistake made in the early stages of a problem like this is, in a desire to throw as much as you can at the debts, over estimating your affordability. Sod's law then says that the car breaks down, or the washer goes, or the boiler etc. Remember that credit to provide a short term fix to any of these things won't be available so getting the budget right is absolutely key. Far better to be safe than sorry.

If you can afford £460, then at that rate, and assuming interest and charges freeze, and no change in payments then you would be looking at around 7.5 years I reckon. Not too bad for a DMP, not great but not too bad.

The imponderable is your good lady. She may or may not qualify for benefits, and she may or may not get back into work swiftly. I don't have a crystal ball, and for that reason you should probably put the IVA on the back burner. I'm a big fan of IVA's, especially when compared to seriously long DMP's, but you should have as firm a base as possible if you enter into one, and at the moment you don't. The good news on that though is that as and when she does start bringing more in, then you can throw some more at the debt to clear them quicker, but crucially at your own pace, i.e. you decide. An IVA would not give you that choice.

As for the credit, forget it. What does a good credit rating get you? More debt, or at least access to more debt. Do you want more debt? I don't believe you do really. Most people I have spoken to in this situation over the years, and I must have spoken to tens of thousands, have very little to show for the debts they have, bar maybe the memories of a nice holiday or maybe a car, but precious little else in the vast majority of cases.

January2015

If you are definitely going down the route of DMP or IVA do not make any more full payments to your creditors - keep the money and put it away in an emergency fund. Remember you will no longer have access to credit facilities should any thing go wrong in future.

You just need to contact you creditors in writing and advise you are working with stepchange (or whoever) and are negotiating whether a DMP or IVA is the best route for you. Advise you are making a token payment of £1 at this time. Advise you will keep them updated and request they stop all fees and interest.

Do not be tempted to try and pay more than £1 this month to each creditor - it makes no difference to them if you pay £1 or £100 - if you are going onto a DMP/IVA they will be okay with this.

If you think your partner will find work again then DMP may be a better solution. It is voluntary and can be cancelled at any time - so if your partner got a job and you found you could meet all your credit commitments again you could just let creditors and stepchange know.

Don't panic - creditors are not ogres and understand situations such as yours.

Solve-it

Ive looked over our budgetting again and here it is:

Unsecured debt (loan and CCs) =£870pcm 6 items 5 creditors

Overdraft £750total with HSBC

Ongoing DDs for insurance, car tax, water electric TV license etc £356.33pcm

My income after Rent and Ctax £1000pcm

Poss JSA based on contributions to NI = £316.77pcm

Income therefore 1314.00
Fixed outgoings 1226.33

UURRGGHH

Tixy

Well it sounds like you definitely do need some form of reduced payments, as by the time you have factored in other living costs you would obviously not be able to afford the £870 debt repayments.

But the good news is you should be able to afford a few hundred each month towards your debts (which is far better than people who have a shortfall without factoring in any debt repayments).

Honestly try not to panic, there are lots of people who have found themselves in a similar situation to you, the good thing is that you are tackling it. Whilst it all feels scary at the moment it is a far better feeling to be in control of things than to start missing payments with no plan of action.

The £460 figure presumably came from running through your income & outgoings in detail with Stepchange?

Solve-it

Yes the £460 was from the stepchange plan.
Better half has a basic current account with another bank that we could use.
My pay will go into my account this month though so should I wait until after payday to start this up so it doesnt get swallowed?
I still kinda wish I could consolidate in one loan at £460-£500 but nothing to secure it with.
:-(

Tixy

Its best not to write any letter to your own bank advising them of making token payments or talking to debt charities until you have been paid and chosen what to do with the money (withdraw it etc).

But for others then I would cancel any DDs now and write to them offering them a token payment whilst you seek advice.

Solve-it

Yes - back to reality so...
If I get paid move the money to other bank acc and transfer all DD's bar Debtto the other account.
I think Im right in saying stepchange will do the writing to the debtors?
Just an quick ask... If I managed to clear the debt with my own bank first could I keep banking with them and just put the other debts into the mangement plan? Or.. do I have to sort all the debt in the one place - Im thinking relatives assistance possibly? Cant hurt to ask.