First timer here - need advice please credit card debt

crm23

kimwp said:

crm23 said:

Thanks all for your input, with regards to the takeaways I’d factored that into grocery spend anyway. I do run a real tight ship when it comes to food and always shop around and hate food waste. I think it helps that we don’t drink or smoke so my ‘big shop’ consists pretty much purely of food and not wines and beers etc that do add up. 

Maybe you should be the one writing a food budget blog! I don't think I can help much then, but I'll be cheering from the sidelines  

Haha, thank you. I’m obviously terrible in the debt sense but do try when it comes to stuff like that. I’m just so sad that in the case of 3-4 years we’ve gone from no debt at all to this. Bigger house, kids, and reduced income never a good factor. At least I know that we do have the ability to save when we have spare money at the end of the month to do so, as we have done so before, so that is giving me some hope for the future. 

trex227

Could crm23 not use covid payment holidays on some accounts to use the payments they would be making on those to reduce the accounts that have the highest interest? I know that payment holidays will increase your payments going forward a bit but maybe this would give some breathing room and reduce the overall amount of interest being paid per month going forward?

fatbelly

crm23 said:

Thanks all for your input, with regards to the takeaways I’d factored that into grocery spend anyway. I do run a real tight ship when it comes to food and always shop around and hate food waste. I think it helps that we don’t drink or smoke so my ‘big shop’ consists pretty much purely of food and not wines and beers etc that do add up. 

With regards to a DMP, if I was to receive an inheritance for example, god forbid I don’t want this to happen obviously, but it’s inevitable at some point we will receive a considerable amount of inheritance, again hopefully not in the life time of the DMP, but if so, would I be penalised for that or would it just be a case of settling all debts in full at that point?. Also, again if we were to re-mortgage in 4 years when our deal is up could we look to release some equity to then settle that way, or do you think I’d struggle mortgage wise anyway in terms of deals we are offered?

Ultimately the only thing that concerns us is the house and I really don’t want anything to affect that which is why now I know more about IVA’s and how they work I am moving away from that option. 

I think you've got it.

If you get an inheritance when you are in an IVA, all the debts are paid in full, plus interest plus all the IP's fees and charges, provided the inheritance is big enough.

A debt management plan is an informal solution,  you don't have to do anything, and tidying things up with full & final settlement offers is definitely the way to go.

I wouldn't raise money from a remortgage though, even if possible. Keep the house and its equity out of this.

crm23

Thank you all again for your advice.
just a couple more questions if you’d be so kind.. 
Do I now just contact Step Change and say we want to set up a DMP? Presumably I continue to pay all debts until told otherwise? 

Do all lenders have to agree? I’m just trying to get my head around the fact that on paper I’m a perfect customer for them as such - keep spending, but also keeping up with repayments. Are they obliged to enter this arrangement even though I wouldn’t have any red flags with them as such at the minute? 

Our HP’s on the car wouldn’t be affected would they? (Happy we can afford to pay these as current) 
would the DMP repayment amount change each year? So suddenly if we look like we have some disposable income will it get eaten by revised repayments, or is that more common with IVAS? 

Does it work whereby smallest debts are cleared first? Just thinking for example, our hitachi finance for sofas only has roughly £800
left and 12 months to repay. Would stuff like that drop off my credit file first? (Appreciate we’re still looking at 6 years after settled?) 

BabyStepper

I think it's 6 years from default, so the quicker you do that, the quicker it all drops off your file. I'm definitely no expert though. 

fatbelly

crm23 said:

Thank you all again for your advice.
just a couple more questions if you’d be so kind.. 
Do I now just contact Step Change and say we want to set up a DMP? Presumably I continue to pay all debts until told otherwise? 

Do all lenders have to agree? I’m just trying to get my head around the fact that on paper I’m a perfect customer for them as such - keep spending, but also keeping up with repayments. Are they obliged to enter this arrangement even though I wouldn’t have any red flags with them as such at the minute? 

Our HP’s on the car wouldn’t be affected would they? (Happy we can afford to pay these as current) 
would the DMP repayment amount change each year? So suddenly if we look like we have some disposable income will it get eaten by revised repayments, or is that more common with IVAS? 

Does it work whereby smallest debts are cleared first? Just thinking for example, our hitachi finance for sofas only has roughly £800
left and 12 months to repay. Would stuff like that drop off my credit file first? (Appreciate we’re still looking at 6 years after settled?) 

Personally, once you've made the decision, I think you should stop paying non-priority creditors and start to build an  emergency fund. It'll take a couple of months to set up a dmp and you get 30 days breathing space (soon to be 60) anyway

Lenders don't have to agree but they will.

HP can be treated as a priority payment if the car's essential - the alternative is voluntary termination if yo're interested.

It's good form to have a review every 12 months, but this is not set in stone.

A normal dmp makes payments pro-rata so that all debts clear at the same time. I think stepchange have a more complicated way of doing it and (as I said earlier) you might want to go the d-i-y route at some time.

Babystepper's right - the entry drops off 6 years after the default so the sooner you default the sooner all this is over.

sourcrates

Or you can do it your self, its simply a case of contacting all your creditors, explain your struggling to meet contractural repayments, and after taking advice you would like to enter into debt management, you then enclose a copy of your budget, and a list of whose getting what and when, ask them to stop charging you interest so you can get the debt down quicker, and obtain their payment details.

Thats what i would do, gives you much more flexibility.

You must make certain that any payment you say your going to make is less than what the contracted repayment would be, otherwise they will not entertain you, they will say if you can afford the contractural repayment then you don`t need a DMP.

The difference can be saved towards settlement at a later date.

crm23

Hi, just thought I’d update you.
We’ve decided to go down the debt management plan route. Step change have taken us on as clients and we have provided requested documents today. I’ve been feeling fairly upbeat about it all week, but tonight having spoken to NatWest about my overdraft/current account, I’m feeling rather rubbish. I’ve achieved so much for my age, got a good job, good salary and wonderful family yet i find myself in this mess. I’ve been offered a foundation account and my Reward current account will be closed. This is fine, I don’t want credit or overdrafts again, but I still feel like a failure. Is there a specific part of this board for people on DMP’s? When I do a google search I only find very old posts. I feel like I’ll probably have lots of questions and need a bit of support over the coming months so if there is one that would be great. 

monetxchange

There's a thread pinned to this forum called "DMP mutual support thread", plus having a look around the debt free diaries is worth it as many are on DMPs.

Congrats on taking the first steps and good luck in your debt free journey 😊

enthusiasticsaver

I am glad you have decided to take this route and I think you will find the stress will ease considerably once you are established on it.  First thing is to default and build up emergency savings.  The defaults are necessary as someone else said so the lender stops charging interest and the defaults fall off your credit file after 6 years.  The emergency savings are because you will not have access to credit. Good advice from sourcrates above.  
As said above there is a sticky thread at the top of this forum for holders of DMPs.  Don't feel a failure.  It can happen to anyone and luckily you do have a job and this will be a blip in your financial journey.  Just remember how this feels and avoid credit in the future.