Struggling with debt? Ask a stepchange debt adviser a question

GGGX

I have been in a similar situation for many years. I’m now considering IVA or bankruptcy. My name will show in insolvency register for a while but at least the debt is written off. They affect your credit rating but so does DMP. I’m worried about loosing my car though  

StepChange_Aidan

bekah89 said:

Hi, I just wanted some advice about my debts and whether I should consider a DMP. I owe just over £10k over three credit cards and a little bit of a overdraft. £4k at 21% and the rest is interest free although £3k is ending in January 2022 but I think I'll be able to get another balance transfer card at 0% to transfer some of it. At the moment I can afford just over £300 per month which covers the minimum payments and a bit more. But it will leave me a long time in debt, I think atleast 4 years depending on how much I can transfer. I didnt know whether I should consider a DMP or not as it's not so bad that I cant afford the payments but I just cant seem to get the balances down very quickly. I dont want to default as it will affect my credit rating, my credit score is quite good. Should I carry on as I am and try and get a balance transfer or apply for a DMP? I'm just worried about the increase of interest that will come in January so not sure what my minimum payments will rise to. 

Thank you

Hi,

Thanks for posting.

We tend to recommend Debt Management Plans (DMPs) if someone is struggling with the minimum payments to their debts. It would allow you to pay an affordable amount which is then shared among your creditors, but the downside is that reduced payments would show on your credit file.

If you want to avoid affecting your credit score and can afford the current payments, it could be better to continue paying the creditors directly for now. However, if you’re only paying the minimum, there is a risk that your lenders may view the cards as ‘persistent debt’ and contact you to discuss increasing the payments.

Balance transfers could be an option to reduce the clear the debts faster, but I wouldn’t be able to recommend this without knowing more about your specific situation. I’d suggest completing a budget and getting debt advice before you decide. I can see from your other thread that you’ve entered your details into the StepChange website, if you need any further help with this or you’d like to discuss your options with an advisor, please give us a call.

I hope this helps.

Aidan

StepChange_Aidan

GGGX said:

I have been in a similar situation for many years. I’m now considering IVA or bankruptcy. My name will show in insolvency register for a while but at least the debt is written off. They affect your credit rating but so does DMP. I’m worried about loosing my car though  

Hi,

Welcome to the forum.

Any debt solution can impact your credit score, unless you’re able to continue making the full payments to your creditors. Please be aware that the credit score is for your information and is rarely seen by your creditors. Lending decisions are usually based on the full details on your credit file.

You may be allowed to keep your car in a bankruptcy if the Official Receiver agrees that it is essential for your household and of low value (usually under £1,500 in England and Wales). If it’s worth more, they may ask you to sell it and buy a cheaper replacement.

You’ll normally be allowed to keep your car in an IVA, but if it’s worth a lot your creditors may challenge this or ask you to sell it.

If you haven’t already, I’d recommend getting independent debt advice and review your options before going ahead with an IVA or Bankruptcy. You can get help from StepChange online or give us a call to speak with an advisor.

I hope this helps,

Aidan

GGGX

My car is worth £3.5k would you say it will be at risk in IVA?

Abbafan1972

Hi there,

We have 2 credits cards on our DMP with Stepchange, the payments get made at start of the month and the one credit card is fine, but I've received the statement for the other one dated 7th Nov and the November payment has been applied early, so there's 2 payments showing on the statement, one for October and one for November. 

I realise there is a minimum payment each month - so if the payment for December is not applied before that statement is issued, will it register as a missed payment?

Thank you in advance for your help. 

StepChange_Allen

GGGX said:

My car is worth £3.5k would you say it will be at risk in IVA?

Hi there

Thanks for your reply.

I can't give you a guarantee, but generally only vehicles worth over £5000 are likely to be at risk of being sold in an IVA. However, if there's more than one vehicle, an explanation of why any further vehicles are required may be needed, and then any non-essential vehicles sold.

As Aidan says though, please make sure you get some debt advice before seriously thinking about any debt solutions.

Best wishes

Allen

StepChange_Allen

Abbafan1972 said:

Hi there,

We have 2 credits cards on our DMP with Stepchange, the payments get made at start of the month and the one credit card is fine, but I've received the statement for the other one dated 7th Nov and the November payment has been applied early, so there's 2 payments showing on the statement, one for October and one for November. 

I realise there is a minimum payment each month - so if the payment for December is not applied before that statement is issued, will it register as a missed payment?

Thank you in advance for your help. 

Hi Abbafan

Thanks for your post.

It's almost certain that if you're on a DMP, then the original minimum payments on your credit cards won't be applicable any more, because a DMP is almost always making reduced payments to debts. Creditors will still send statements periodically, but the time they apply payments that we send on your behalf should have no bearing on anything. As long as you make your agreed payments to your DMP on time, and your creditors have agreed to the plan, then it should be fine.

As always, please get in touch with our Client Support team should you ever have any concerns about your payments, plan itself or creditor contact.

I hope this is helpful.

Allen

Abbafan1972

StepChange_Allen said:

Abbafan1972 said:

Hi there,

We have 2 credits cards on our DMP with Stepchange, the payments get made at start of the month and the one credit card is fine, but I've received the statement for the other one dated 7th Nov and the November payment has been applied early, so there's 2 payments showing on the statement, one for October and one for November. 

I realise there is a minimum payment each month - so if the payment for December is not applied before that statement is issued, will it register as a missed payment?

Thank you in advance for your help. 

Hi Abbafan

Thanks for your post.

It's almost certain that if you're on a DMP, then the original minimum payments on your credit cards won't be applicable any more, because a DMP is almost always making reduced payments to debts. Creditors will still send statements periodically, but the time they apply payments that we send on your behalf should have no bearing on anything. As long as you make your agreed payments to your DMP on time, and your creditors have agreed to the plan, then it should be fine.

As always, please get in touch with our Client Support team should you ever have any concerns about your payments, plan itself or creditor contact.

I hope this is helpful.

Allen

Many thanks for your reply regarding this.

I am only posting again now because, we have had a letter each about both credit cards that are on the DMP saying that the payments and interest will be returning to normal in 2 months time.  We previously had the same letter about 3 months ago, I sent the letters onto Stepchange and religiously checked the c/c statements and they haven't charged us any interest yet.

Is this just a standard letter?  I know you have said the minimum payments don't apply, but our agreed payments are exceeding the minimum payments.

Is there a maximum term they can suspend interest for, before they say enough is enough and they will have no choice but to charge the interest?

Thanks in advance. 

StepChange_Aidan

Abbafan1972 said:

StepChange_Allen said:

Abbafan1972 said:

Hi there,

We have 2 credits cards on our DMP with Stepchange, the payments get made at start of the month and the one credit card is fine, but I've received the statement for the other one dated 7th Nov and the November payment has been applied early, so there's 2 payments showing on the statement, one for October and one for November. 

I realise there is a minimum payment each month - so if the payment for December is not applied before that statement is issued, will it register as a missed payment?

Thank you in advance for your help. 

Hi Abbafan

Thanks for your post.

It's almost certain that if you're on a DMP, then the original minimum payments on your credit cards won't be applicable any more, because a DMP is almost always making reduced payments to debts. Creditors will still send statements periodically, but the time they apply payments that we send on your behalf should have no bearing on anything. As long as you make your agreed payments to your DMP on time, and your creditors have agreed to the plan, then it should be fine.

As always, please get in touch with our Client Support team should you ever have any concerns about your payments, plan itself or creditor contact.

I hope this is helpful.

Allen

Many thanks for your reply regarding this.

I am only posting again now because, we have had a letter each about both credit cards that are on the DMP saying that the payments and interest will be returning to normal in 2 months time.  We previously had the same letter about 3 months ago, I sent the letters onto Stepchange and religiously checked the c/c statements and they haven't charged us any interest yet.

Is this just a standard letter?  I know you have said the minimum payments don't apply, but our agreed payments are exceeding the minimum payments.

Is there a maximum term they can suspend interest for, before they say enough is enough and they will have no choice but to charge the interest?

Thanks in advance. 

Hi,

Normally, creditors will agree to freeze interest and charges while you’re on a DMP, but as it’s an informal agreement we can’t guarantee that they will.

There’s no maximum amount of time that the creditors can suspend interest, but if you’re technically able to meet the contractual payments to the credit cards, there’s less incentive for them to agree.

It sounds like this is a standard letter, but as Allen has suggested it would be best to contact our Client Support team who’ll be able to review the payments to your debts and discuss your plan in more detail.

I hope this helps,

Aidan

Abbafan1972

StepChange_Aidan said:

Abbafan1972 said:

StepChange_Allen said:

Abbafan1972 said:

Hi there,

We have 2 credits cards on our DMP with Stepchange, the payments get made at start of the month and the one credit card is fine, but I've received the statement for the other one dated 7th Nov and the November payment has been applied early, so there's 2 payments showing on the statement, one for October and one for November. 

I realise there is a minimum payment each month - so if the payment for December is not applied before that statement is issued, will it register as a missed payment?

Thank you in advance for your help. 

Hi Abbafan

Thanks for your post.

It's almost certain that if you're on a DMP, then the original minimum payments on your credit cards won't be applicable any more, because a DMP is almost always making reduced payments to debts. Creditors will still send statements periodically, but the time they apply payments that we send on your behalf should have no bearing on anything. As long as you make your agreed payments to your DMP on time, and your creditors have agreed to the plan, then it should be fine.

As always, please get in touch with our Client Support team should you ever have any concerns about your payments, plan itself or creditor contact.

I hope this is helpful.

Allen

Many thanks for your reply regarding this.

I am only posting again now because, we have had a letter each about both credit cards that are on the DMP saying that the payments and interest will be returning to normal in 2 months time.  We previously had the same letter about 3 months ago, I sent the letters onto Stepchange and religiously checked the c/c statements and they haven't charged us any interest yet.

Is this just a standard letter?  I know you have said the minimum payments don't apply, but our agreed payments are exceeding the minimum payments.

Is there a maximum term they can suspend interest for, before they say enough is enough and they will have no choice but to charge the interest?

Thanks in advance. 

Hi,

Normally, creditors will agree to freeze interest and charges while you’re on a DMP, but as it’s an informal agreement we can’t guarantee that they will.

There’s no maximum amount of time that the creditors can suspend interest, but if you’re technically able to meet the contractual payments to the credit cards, there’s less incentive for them to agree.

It sounds like this is a standard letter, but as Allen has suggested it would be best to contact our Client Support team who’ll be able to review the payments to your debts and discuss your plan in more detail.

I hope this helps,

Aidan

Hi there,

Thank you - I have called the client support team and the lady said she would send a letter to the creditor.