Credit cards - can you ring them and ask to reduce payments?

survivor84

So with what you're saying about breathing space, should I phone the card companies and explain? Would they let me reduce my payments? Or is it better to go through someone like step change or citizens advice, Thank you so much x

Willing2Learn

Yes, of course your creditors would allow reduced payments. That would, in effect, be a DMP (Debt Management Plan). A DMP is an informal agreement between the borrower and their creditors that allows payments to be made at a lower level than stipulated in the original credit agreements. The accounts will often be defaulted (as the borrower has defaulted on the original agreement). This is good, because as soon as the accounts are defaulted, the interest and charges are frozen.

It would be good for you to speak to one of the quality free debt counsellors. It may help you decide which plan you want to move forward with. This advise could be from CAB, StepChange, National Debtline or PayPlan.

The first thing you need to do, whether you take the DMP route or bankruptcy, is to open a new current bank account with a different banking group (not with any bank to whom you money). This will ring-fence your income as your overdraft could be withdrawn without notice.

Have a look at the DWP Child Maintenance Options website. Your ex-husband should be making his financial contribution toward the day-to-day care of your children.

Your outgoings should reduce once you get single persons' discount on your council tax.

If you decide to embark on a DMP journey, then I recommend writing to all your creditors stating that you DMP will commence in November and that you will be unable to make any payments prior to this date. This will allow you six months breathing space, which is plenty of time to build a sizeable pot of money for your Emergency Fund (EF). An EF is a vital component of any successful monthly budget as it covers you against any unknow expenses that will crop up from time to time.

The other advantage of delaying the start of a DMP and withholding payments for six months is that your creditors are much more likely to default you early, thus freezing interest and charges. Early defaults will mean your credit file will repair itself quicker too.

survivor84

Thank you so so much for all of this advice, I really appreciate it. Unfortunately due to the abuse we are zero contact with my husband, he doesn't work and has stated categorically that he will not pay for the children, which is fine by me, I just want him out of our lives. Can you tell me with a debt management plan does this stay on your credit history? I'm in no position now but keep working my way up the ladder at my job and would like to think that someday I can buy my own home and worry about the effect a bankruptcy etc would have on this in the distant future. Would I have to contact one of the advice services before writing to the creditors and explaining? Thank you so much for the idea about accruing the money in the next 6 months, such a good idea. I guess I need to know more about a debt management plan.

Also re the new bank account would I need to have my wages and direct debits etc transferred there, or do I wait until I'm in the DMP? Thanks again, you've been so helpful. xx

survivor84

Also can you tell me who decides how much you pay back each month in the DMP? The more I read about it the more I like the idea of the DMP. Thank you.

Willing2Learn

When an account defaults, this is marked on your credit files. The mark remains on your file for six years from the date of default. That is why it is good to have the accounts defaulted nice and early. Some MSEers have successfully applied for a mortgage with defaults on their file, having used the services of a good mortgage broker. Others wait the six years and then apply for a mortgage direct with a high street bank once the defaults have automatically been removed from their file.

Most people arrange a DMP via an agency such as StepChange, who will manage the DMP on their behalf. Others decide to self-manage their own DMP. You do not have to contact an advice service before writing to your creditors. But I recommend you speak to one of the advice services tomorrow morning or whenever is convenient for you.

Your new current account needs to be set up asap. You can transfer all your DDs across and notify your employer so that your salary can be paid into it. You could even claim a switch incentive of up to £175 if you switch banks using the new banks switching team. Just make sure the new account is not with any of the banking groups to whom you owe money

You decide the repayment amount for each creditor, based on your income and expenses. Obviously, if your DMP is being managed by an advice agency such as StepChange, then you will decide together the exact amounts. The most important thing is to ensure the repayment amounts are realistic and affordable. (ie Your SOA would balance if you were to enter in your DMP payments).

survivor84

Thank you!

survivor84

Can I just check am I opening a new bank account, not switching? Thanks

Willing2Learn

Either. If you use a bank switching service then the DDs will be transferred for you automatically. Just make sure it is with a different banking group and remember to decline any offer of an overdraft

enthusiasticsaver

Great advice there from Willing2learn and it does sound like a DMP would be the best option for you. It will stay on your file for 6 years but that will give you a chance to get your finances sorted and save up a deposit if buying a house is your ultimate gain.

I agree opening a basic clean bank account with a bank you have no borrowings with at the moment is the first thing you need to do along with informing your creditors you are sorting out your finances and need 6 months breathing space which most will give you. Defaulting is good because it freezes interest and use that 6 months to save up a decent emergency savings account as you will have no access to credit after taking a DMP on.

What you can afford to pay depends on the soa agreed with stepchange, national debtline, cab or indeed direct with your creditors if you decide to go self managed. Don't skimp on the soa. There are guidelines online on what you can put on it and allow as much as they will agree to on the soa to keep the DMP payment low. You can always save up and offer F and Fs further down the line to get rid of the debt earlier. Check out the DMP mutual support thread on here.


Good luck. Maybe start a diary on here to document your journey.

sourcrates

survivor84 wrote: »

Also can you tell me who decides how much you pay back each month in the DMP? The more I read about it the more I like the idea of the DMP. Thank you.

Payments are decided by the amount of your disposable income, so in your case you would have around £500 a month to throw at a DMP.

Your options.


Debt Management Plan

You would be looking at a period of around 5 years to pay off what you owe, assuming creditors stopped all interest and charges, but there is no guarentee that they will do so, it is a gamble you take, also assuming there were no major changes to your situation.
That is a pretty reasonable time frame.


Bankrupcy

If you went bankrupt, it would cost you £680, and due to your income, there would be an IPA (income payment arrangement) for up to 3 years.
After 12 months you would be discharged, your debts extinguished, and you would be free to start again, the IPA would continue for a further 2 years, and that would be that, so 3 years in total.

Both options would see defaults on your credit file, obviously a bankrupcy too, if you chose that option, but the good news is after 6 years, all would disapear from your file, as though it was never there.

So your choice, 5 years for a DMP verses 3 years for bankrupcy.