DMP + 5 Defaults versus DMP + 2 Partials + 3 Defaults

Tony_S_3

I'm about to enter into a DMP through StepChange to pay my personal loan, overdraft and 3 credit cards. I'm currently 2-3 months behind on both the loan and 2 credit cards, as yet I do not have any default notices.

I have recently sold my car and have just under 30% of my total debt (~£20k) as a cash lump sum. StepChange do not think this is sufficient for a total settlement and so have advised me to try talking to my creditors directly.

I have spoke to two of my credit cards today and have verbally agreed to a partial payment, which will mean the debt is settled, won't be sold on but will result in a Partial market on my credit file for 6 years. They are sending letters stating what has been agreed.

Obviously, for the other debts I will still have to go on to the DMP and will then eventually get 3 default notices.

Would a better course of action be to continue with the DMP, keep the cash, possibly add to it a little with the sale of some more possessions, get the defaults, then be in a slightly better position to negotiate F&F settlements of all the debts once they are in default?

Is 3 defaults and two partial settlements really any better than 5 defaults?

DandelionPatrol

A partial is very little better than a default and arguably a bit worse than a default you are still paying on.

In your position [never actually been there myself], I think I would let them all be sold on and hope for a better settlement from the DCA's who buy them - but if the settlements are good, then perhaps I would take them now.

If you did partials on these, would you be able to keep up with the other debts?

fatbelly

What settlement % have you agreed on?

Tony_S_3

50% on one card (£5k balance) - not yet accepted.
80% on another (£4k balance) - accepted, just waiting for confirmation.

I was just in the mindset of minimising the number of defaults, but after both companies said it would only go down as Partials I started to wonder whether it was worth it.

With those gone/settled I would still have to go into the DMP.

fatbelly

You're spending a disproportionate amount of your cash on that one debt if you go for 80% as a settlement.

Although you did well to get any sort of deal pre-default.

With 20k debt and 6k cash you need to be making the cash work harder.

Whatever strategy you use there is going to be damage to your credit file so the main aim should be to get debt free by the quickest route.

Tony_S_3

Thanks, that's pretty much exactly the same conclusion I've been coming to.

I think the best course of action is for me to enter the DMP, maybe try and save a little more, then try and negotiate a better settlement deal.

The one thing I am still undecided on is whether to pay off my Halifax card with £1300 on it before I start the DMP. I know it doesn't make too much sense to do, but I'll be screwing myself (probably blacklisted) with Lloyds, Virgin and Barclaycard - so I like the idea of saving myself a bad history with a fourth potential future lender...