DMP what's the deal with settlement deals?

scubavic

Hi

We were forced to arrange a DMP with Step Change when my husband lost his job and it was obvious we weren't going to cover all our outgoings. So we did the right thing; the creditors bill went right down and we have an arrangement over 16 years.

I'm happy to report he now has a job and starts on Monday so our financial worries are much alleviated.

My question is; would we be better paying the relatively small amount we have agreed; saving what extra we can afford and waiting to see if we ever get an offer to settle debts by paying lump sums? Or should we increase the amount we pay Step Change to bring the length of the agreement down as far as we can afford?

Do these settlement deals exist and how likely are we to be offered them with year 1-5 of our agreement?

I want to get back to being credit worthy as soon as possible - not so we can get more debt, obvs, but so that we can have access to normal things like re-mortgaging our house when our fixed rate expires. etc.

Thanks

ScubaVic

sourcrates

Hi,
Sometimes a creditor will offer you a discount to settle the account early, but more often, its the customer that make the first move in this process.
There are no hard and fast rules governing this, they will settle for much less, if the debts are old, or there are enforcability issues, such as no paperwork, or if a creditor is faced with a long drawn out DMP.

If you can save up an emergency fund over time, there is no reason why you cant make individual creditors a full and final offer to settle.

Do this yourself, don't involve stepchange, as its a private arrangement between you and the creditor, you will be able to negotiate a better deal than they have the time or manpower to do.

As i said before the status of the debt is an important issue when considering making offers to settle, as a rule of thumb, you would start at around 30% of outstanding balance at the time, remember, its all a matter of negotiation, be prepared for some letter tennis, and don't be afraid to ask.

National_Debtline

Hi scubavic


I can only echo what sourcrates has said, but just wanted to add that you might find our fact sheet on settlement offers of use:


https://www.nationaldebtline.org/EW/factsheets/Pages/24%20EW%20Full%20and%20final%20settlement%20offers/Default.aspx


Dennis
@natdebtline

rising_from_the_ashes

Congrats on hubby getting a new job

Personally, I'd stick with the low payments for a few months until you're totally back on your feet - and have built a pretty decent 'fallback / bills / emergency fund' amount

I'm afraid your credit ratings will be awful just now and while you want to start paying things off and rebuilding this, do remember that it will be a while before you can access credit again .... you therefore need to take the opportunity to put a decent amount aside in case it's needed (appliances / car etc etc)

Sazzie23

Congratulations on the new job for hubby, must be a great relief. Depending how long you've been in a DMP it could be possible just to restart normal payments but you'd probably have to cover missed payments if you want creditors to amend what's on your credit file.

I'm with rising, keep to the low payments for now, save a fund for emergencies and then pick the creditors off one by one, possibly starting with any that are still charging interest or perhaps any smaller debts that would free up extra payments.

SC ask you to review at least every year, so consider how this is going to affect what you do. They didn't ask me for any evidence of income reduction when I had to drop my payments.

Good luck, and I think maybe in the long run, having to get a DMP might have been a good thing for you