Going independent - any advice!

essexinthenorth

I'm 3 years into a DMP with Payplan, paying around £480 per month, and currently have around £15k to pay back. My plan is due to end around August 2019. However, I'm thinking of going it alone and using my own repayment plan that I have written up.

One of the downsides of a DMP, I have found, is that they seem to have unrealistic parameters for current costs of living. For example, they seem to expect me to spend less than £100 per week on food. I have 3 growing teenage children and despite my efforts, I find it incredibly hard to stick to their budget. Every month there is always some extra thing (school trips, car needs new tyres etc) I feel that we live a very basic life and there is very little spare money for anything.

Plus, I would rather pay off the creditors to whom I owe the least as soon as I can, rather than pay them all a pro rata amount for the next 2 and a half years! With my independent plan I would pay back increased amounts to each creditor in turn, paying them off one at a time..

So, I want to take more control over how I pay off my debts and this is what I am thinking of doing:

1. Write to each creditor and ask if they will allow me to continue paying my pro rata amount. According to my new schedule, they would all be paid off sooner and I will include that information in my letter.
2. Starting with the creditor that I owe least to, I will pay in a regular extra amount of around £50-70 a month until that debt is paid off. Then I will increase my payments to the next lowest creditor and so on.
3. I calculate that after 4 months I will pay off my first creditor with the others all paid off fully in 21 months instead of 31 months with Payplan.

So these are my questions for others who may have done the same:

1. Are creditors open to this kind of deal - ie do they look favourably on people leaving a DMP to go solo? I guess they will get their money back sooner so I can't see any major objections here!
2. Am I fixed to any kind of long term agreement with Payplan - if I'm honest, I haven't actually dug out the paperwork to check this so just wondering if anyone else might know off their top of their heads...
3. Has anyone else done this before and got any tips?
4. Will my credit rating increase each time I pay off a creditor? This is one of my main reasons for throwing money at them one at a time!

Sorry for the long post. I spent along time this morning looking into this and the thought of taking more control of my payments and paying off my debts earlier has thoroughly cheered me up!

Thanks in advance for your thoughts fellow wannabes!

Karonher

I am sure that you can go it alone, and as long as each creditor is getting at least what they get now I can't see them complaining.

The only thing I don't understand is where the extra money is coming from. You say that you are already living a basic life. It may be best not to let them know you will be favouring some debts.

essexinthenorth

Yeah I won't tell them that I'm favouring any creditors - not sure they'd appreciate that one. The money comes because my income has gone up slightly so rather than put that extra into the DMP and continue the pro rata payments, I thought I'd use it to constructively pay back what I owe as soon as I can.

Thanks for the reply.

sourcrates

Hi,

Taking back control of your DMP is a good idea, lots of people self mange.
This thread has lots of good advice on it, good Sunday night reading for you :

https://forums.moneysavingexpert.com/discussion/5285089

Another thing I must mention, don't write to creditors asking if it's ok to do X or Y, you tell them what your intentions are, and how your going to run things, that's the whole point of self management, your the boss, you decide who gets what, how much, and when.

January2015

sourcrates wrote: »

Another thing I must mention, don't write to creditors asking if it's ok to do X or Y, you tell them what your intentions are, and how your going to run things, that's the whole point of self management, your the boss, you decide who gets what, how much, and when.

I definitely agree with Sourcrates on this point. It's your DMP, you know what it costs you to live and have a reasonable amount to put by for regular expenses/maintenance etc.

We were with Stepchange at the beginning of our DMP but have been self managed for a year. It's been great. Personal circumstances recently meant we needed to drop to token payments for a while. We wrote and told creditors this would be happening. We didn't ask. We did explain our reasons, but we said it would be happening regardless. They were all fine, but the important thing is we had control - not Stepchange, nor the creditors.

Definitely pop over to the mutual support forum - as linked by Sourcrates above. It's a mine of valuable information from other folks who have been there, or are currently going through the DMP experience themselves. :beer:

essexinthenorth

Thanks for the advice - I'll ensure the tone of my letter shows that I'm in control. I'll look up the thread that you have suggested too.

Cheers!

another_casualty

Everything seems means tested today, more now than ever. Creditors have their reasons I guess . I hope you don't get expenditure forms etc.
Good luck

fatbelly

Why not put your extra income into a 'fighting fund', continue paying everyone their pro-rata amounts, then pick them off one by one with full & final settlement offers?

That would seem more cost-effective.

On your questions:

1. Are creditors open to this kind of deal - ie do they look favourably on people leaving a DMP to go solo? Yes, the Lending Code says they cannot discriminate against you if you choose that route
2. Am I fixed to any kind of long term agreement with Payplan? No
3. Has anyone else done this before? Loads. Some use NEDCAB as a tool
4. Will my credit rating increase each time I pay off a creditor? Yes, a settled default is better than one not settled. But don't expect a spectacular improvement until it drops off altogether.

essexinthenorth

fatbelly wrote: »

Why not put your extra income into a 'fighting fund', continue paying everyone their pro-rata amounts, then pick them off one by one with full & final settlement offers?

That would seem more cost-effective.

On your questions:

1. Are creditors open to this kind of deal - ie do they look favourably on people leaving a DMP to go solo? Yes, the Lending Code says they cannot discriminate against you if you choose that route
2. Am I fixed to any kind of long term agreement with Payplan? No
3. Has anyone else done this before? Loads. Some use NEDCAB as a tool
4. Will my credit rating increase each time I pay off a creditor? Yes, a settled default is better than one not settled. But don't expect a spectacular improvement until it drops off altogether.

Thanks for all your points. I may well consider the 'fund' although I know that I'm not good at building up funds - I'm a single parent and I just always seem to get hit with costly issues out the blue like my car was written off last year when the cam belt went (cost more to repair than the value of the car!) and my boiler broke and needed repairing. I know I'd end up dipping into a fund for emergencies so, for me, I think my current plan is the best route personally. Thanks again though for taking the time to go through my questions! Much appreciated.

The_Debt_Expert

If you save up money and offer settlements one by one you risk compromising your plan. If your other creditors learn you've offered lump sums elsewhere and not them, they may end the agreement with you (all they'd have to do is a credit check, or notice when you did an updated budget and list of debts). This behaviour is classed as preferential treatment and is frowned upon. For example, there have been companies who have taken DMP-style payments from people, paid creditors £1/m and saved the rest into a pot to offer settlements. All I'll say is that none of them exist any more as far as I'm aware.

In terms of budget guidelines - advice agencies like payplan base their guidelines on what creditors are likely to see as reasonable and acceptable, it's not what they think you should spend. In any case, they wouldn't say you can't spend that much on shopping, they could only advise against it.

All the best of luck if you fly solo but for me the benefits of a supported plan far outweigh any perceived disadvantages (none of which I agree with).

abby1234519

The_Debt_Expert wrote: »

If you save up money and offer settlements one by one you risk compromising your plan. If your other creditors learn you've offered lump sums elsewhere and not them, they may end the agreement with you (all they'd have to do is a credit check, or notice when you did an updated budget and list of debts). This behaviour is classed as preferential treatment and is frowned upon. For example, there have been companies who have taken DMP-style payments from people, paid creditors £1/m and saved the rest into a pot to offer settlements. All I'll say is that none of them exist any more as far as I'm aware.

In terms of budget guidelines - advice agencies like payplan base their guidelines on what creditors are likely to see as reasonable and acceptable, it's not what they think you should spend. In any case, they wouldn't say you can't spend that much on shopping, they could only advise against it.

All the best of luck if you fly solo but for me the benefits of a supported plan far outweigh any perceived disadvantages (none of which I agree with).

It's not preferential treatment if someone else settles it though.

For example - my husband is on a DMP, he's considering self management. Once he is done that, I could settle the smallest debt for him and it wouldn't be preferential treatment as it's not him doing it.