Reached breaking point

Jediricky

Hi All,

so ive reached breaking point and have now unfortunately have to swallow my pride and begin the process of getting help with my debts.
over a few years i have accrued 25k worth of debt!
i have no one else to blame apart from my self but its a mixture of over committing as well as loosing work bonus (i used to use this to clear my balances.
i have tried to take out 0% cards i have 4 but i didn't use these well and began using my main card again.
im at a point now where all my 0% cards will be expiring and i will start getting charged interest on them.
i have always been very careful with my credit file when it comes to making sure all my payments are made even if it meant me borrowing money from family.
We already struggle to make ends meet, this is another reason why i have been spending on the credit card!

last month my car broke down and i was stuck with no funds to fix it.
a week later my boiler broke down, luckily i have cover and they managed to fix it but i was stuck thinking if i needed a new boiler we haven't got any savings and will more than likey get refused credit due to my utilisation and we would be without heating and hot water in winter!
I have now got to a point of realisation that if i dont do something now it will all fall apart!

we own our own home which is mortgaged, havent got enough equity to release to help clear the debts.
i contacted step change and worked out a budget plan and they sugested i sign up for a DMP which i agree with.
They work out it will take me approx 4 years to clear the debt.

i have a few questions if someone can help please.

firstly, i am currently on a fixed rate for my mortgage which still has another year left on it. when it comes to the deal ending i understand i will be put on their SVR but if i wanted to contact my current provider for a new deal they the DMP impact that? it would only be for a new fixed rate deal i wouldnt be borrowing any more or changing providers.

-- car insurance. i need a car, i always shop around for the best deals but when it comes to my renewal will the DMP or my credit rating impact being able to get car insurance and pay it monthly?

-- I have always paid my debts and have never missed a payment. however i always only pay the minimum amount. my credit file is currently in quite a good a good state i have a decent score but my credit utilisation is high. i dont have any defaults or CCJ's. i have read in places about cancelling my DD's for my debts now before i start the DMP that way i will be able to build up a bit of a cushion in case of emergencies but would that not damage my credit file more and put me in the creditors 'bad books' because i have just not paid them?

-- would i be best calling step change first and getting it all ready and in place to start, leave them to contact my creditors or should i call them all now?


Thanks in advance

sourcrates

Hi,

You must change the way your mind works when it comes to debt, credit, credit files etc, you are looking out for number one now, your creditors will accept whatever proposals you put forward, or they simply sell on the debt, so what they think, is really of no consequence whatsoever.
Debt mangement is a whole new ball game, take everything you think you know about how you mange your accounts, and then turn it on its head, that will be your starting point now.

When you enter any arrangement where you are not paying your contracted monthly payment, the agreement betwen you and your lender, is eventually going to break down, its standard procedure, now if you start a DMP before your accounts are defaulted, then its most likley you will have AP markers put on your credit file instead, AP means arrangement to pay, and these markers stay on your file a further 6 years after the debt is re-paid, wearas a default drops off your file after 6 years regardless of what you do.

So we always encourage you to default first, this is done by non payment obviously, save a good emergency fund, so that lifes little bumps do not become mountains, then, when you are ready, you can start your plan.
You can send letters to your creditors explaining your position, and the reasoning behind it, by all means, expect to get a lot of computer generated material in return, most of it will not be relevant to you, so can be ignored, or you can ask about it on here.


What about the creditors I hear you cry ?

Well they are prety much used to things like this, 30 days breathing space is currently mandatory, this is been extended further under new ledgislation due out soon, in reality you can take as long as you like as debt collection is a very slow process.

You insurance will be fine, everyone needs car insurance regardless of circumstances, as its a legal requirement, even monthly payments will be available to you, mortgage renewed with current provider should not trigger a credit check, so you should be fine there also, many people are in your shoes, mostly its homeowners that take out debt mangement plans, as its the only option open to them, so its a well worn path for many, you may be new to it, but the system isnt.

EssexHebridean

OK - Sourcrates has already covered the "what if I default" angle which has hopefully set your mind at rest a bit. It is a good thing that you've not got the equity on your home to clear the debts by the way as it sounds like if you had you might just have gone that route and that is pretty much NEVER a good plan!

First things first - you need to learn to budget - it sounds as though that is part of the problem which has lead you to the point that you currently find yourself. Easiest way to tackle that (and you already have a rough idea thanks to the Stepchange contact) is to use the SOA (Statement of Affairs) calculator that we recommend - you can find the link in my signature - and get that filled in. You might find a years worth of bank & credit card statements are handy to help with this as you're going to be getting together an accurate picture of what you've been spending in various categories across the year, so you can work out where you have been over spending and under allowing.

You need to make the first attempt at the SOA as open and honest as possible - don't worry about what you "think" you should be spending, or what you "think" we expect to see - and bear in mind that from what you've said, you ARE very possibly going to see a deficit figure at the first attempt - that's fine. Personally I would also start keeping a spending diary so you can tally up your spending on a day by day basis - this will also help you to reduce spending by making you stop and think! Format the SOA for MSE at the end and post it into here and we can take a look and start helping you put together a household budget that, going forwards, will help you to stay on track.

The issue with starting a DMP without addressing the issue of learning to budget is that you will likely end up adding further debt down the line - and so end up worse off (as well as causing your DMP to fail). The budget will mean that you are setting money aside for expenses so that things like car maintenance have money stashed aside ready to pay them. You'll also be budgeting to put money aside into an emergency fund which, in the longer term, will mean that things like that threatened boiler breakdown aren't a problem!

enthusiasticsaver

Jediricky wrote: »

Hi All,


i have always been very careful with my credit file when it comes to making sure all my payments are made even if it meant me borrowing money from family.
We already struggle to make ends meet, this is another reason why i have been spending on the credit card!
This is unsustainable long term. If you are using the credit cards because you cannot afford all your outgoings this will make your situation worse.

last month my car broke down and i was stuck with no funds to fix it.
a week later my boiler broke down, luckily i have cover and they managed to fix it but i was stuck thinking if i needed a new boiler we haven't got any savings and will more than likey get refused credit due to my utilisation and we would be without heating and hot water in winter!
I have now got to a point of realisation that if i dont do something now it will all fall apart!

we own our own home which is mortgaged, havent got enough equity to release to help clear the debts.
i contacted step change and worked out a budget plan and they sugested i sign up for a DMP which i agree with.
They work out it will take me approx 4 years to clear the debt.

i have a few questions if someone can help please.

firstly, i am currently on a fixed rate for my mortgage which still has another year left on it. when it comes to the deal ending i understand i will be put on their SVR but if i wanted to contact my current provider for a new deal they the DMP impact that? it would only be for a new fixed rate deal i wouldnt be borrowing any more or changing providers.
You can usually move to a new deal with your current provider even if on a DMP

-- car insurance. i need a car, i always shop around for the best deals but when it comes to my renewal will the DMP or my credit rating impact being able to get car insurance and pay it monthly?
It should not affect your premium but a bad credit record may affect the interest paid if you choose to pay it monthly. Car insurance is always cheaper if you pay annually.

-- I have always paid my debts and have never missed a payment. however i always only pay the minimum amount. my credit file is currently in quite a good a good state i have a decent score but my credit utilisation is high. i dont have any defaults or CCJ's. i have read in places about cancelling my DD's for my debts now before i start the DMP that way i will be able to build up a bit of a cushion in case of emergencies but would that not damage my credit file more and put me in the creditors 'bad books' because i have just not paid them?

-- would i be best calling step change first and getting it all ready and in place to start, leave them to contact my creditors or should i call them all now?


Thanks in advance

As EH and Sourcrates have said budgeting is something you will need to do going forward. Your credit file will be affected for 6 years minimum and the sooner you default the better. An emergency fund is a must and saving for things like boiler or car repairs and car insurance and maintenance will help you get on a more even footing. I would write to your creditors advising them of your intentions. Save the emergency fund first before starting the DMP.

Jediricky

Thanks for your help and answers to my questions. I think what I’m most nervous about is the non payment and defaulting in them all at the same time. As well as that is being hounded with debt collection and the fear of getting people knocking on my door asking for payment, probably far fetched but it’s a worry for me, that’s why I was thinking about going down the route of contacting Stepchange now to get the process moving before it goes to debt collection.
Another worry is that the creditors don’t freeze the interest.
I have an overdraft on my main account, the same bank I have a loan with, would I be best contacting them to advise I’m struggling and will adding them to my dmp? And should I now change where my salary gets paid into? We have a joint account with no overdraft so maybe best getting my salary paid into there?

Sorry for all the questions here ��

sourcrates

Jediricky wrote: »

Thanks for your help and answers to my questions. I think what I’m most nervous about is the non payment and defaulting in them all at the same time. As well as that is being hounded with debt collection and the fear of getting people knocking on my door asking for payment, probably far fetched but it’s a worry for me, that’s why I was thinking about going down the route of contacting Stepchange now to get the process moving before it goes to debt collection.
Another worry is that the creditors don’t freeze the interest.
I have an overdraft on my main account, the same bank I have a loan with, would I be best contacting them to advise I’m struggling and will adding them to my dmp? And should I now change where my salary gets paid into? We have a joint account with no overdraft so maybe best getting my salary paid into there?

Sorry for all the questions here ��

What you are asking is contradictory, any arrangement you make means you are not making your contracted monthly payment, which automatically leads to collections.

It also risks AP markers, as I said above, both roads lead to the same place, but by defaulting first, you get to take control of the situation instead of them, making the arrangement work for you, rather than against you.

When an account defaults, all interest and charges stop automatically.
If you bank where you have debt, then another new basic account is standard practice.

zippygeorgeandben

Don't apologise for all the questions. This is precisely why this forum is excellent!

Jediricky

Understood, again thank you. So first step for me now is to do the SOA as mentioned above. Transfer my Salary to a new account or my joint account. Cancel all my cc loan and catalog dds and wait for the accounts to default, this is usually 6 months right? I imagine once I miss the first payment I’ll be contacted by them all asking for payments etc, is it at this point I make them aware of my intentions? Say directly that I intended to default and once I’m in a better position a few months down then line I will be setting up a DMP with step change to clear it.

sweetpea26

Just bumping this

[Deleted User]

Jediricky wrote: »

Understood, again thank you. So first step for me now is to do the SOA as mentioned above. Transfer my Salary to a new account or my joint account. Cancel all my cc loan and catalog dds and wait for the accounts to default, this is usually 6 months right? I imagine once I miss the first payment I’ll be contacted by them all asking for payments etc, is it at this point I make them aware of my intentions? Say directly that I intended to default and once I’m in a better position a few months down then line I will be setting up a DMP with step change to clear it.

Not just a new account, it has to be a new account with a banking group to which you do not owe money.

Jediricky

Yeah thats fine we have an account with Yorkshire bank which i have no links to apart from the joint account so i will use this account.
Regarding when to contact my creditors to let them know i intend to default should I do this now or wait to default first