Is a DMP my best option?

SBS_88

Hello

I have CC's, overdrafts and a loan which amount to approximately 23k. I have been sailing very close to the wind each month and finally contacted StepChange last week after realising I am running out of options (I have got to the point where I am using credit cards for day to day expenses because as soon as I have been paid, my direct debits come out and I'm back at my maximum overdraft limit).

SC went through my budget and concluded I have £135 per month to spread amongst my credits (Barclaycard, Virgin, MBNA, Next and Lendable) and said a DMP is the option which best suits my circumstances. My income in total is £2,200 per month. 

I just wanted to check on here really that entering a DMP with SC is the best thing to do. I know I need to do something - I am a single mum with a mortgage and 3 young children to support & my financial situation is on my mind constantly and keeping me awake at night. But I'm so new to this debt management world that I want to be sure I am choosing the right option. 

My main concerns are:

1. When my fixed term mortgage expires in November 2025, will I be resigned to going onto a SVR with my current lender (Barclays)? If so, this would increase my monthly mortgage payment by around £200 per month based on my interest rate now and their SVR. 

2. The advisor at SC said that the defaults will stay on my file for 6 years after the last payment to clear each debt is made which as of now will be in 14 years. If this is the case, does that mean I'll have a bad credit history for the next 20 years? 

3. My last concern is a bit more vague. I just feel like a complete failure and so embarrassed. I can't see myself ever meeting a new partner as I would be so ashamed to tell them about my debt problems. I'm also really close to my mum and she has no idea about my financial problems so I feel horrible concealing all this from her. To those in a DMP, does it feel like you're carrying around a guilty secret? I really want a weight lifted and it feels a bit like I'll be replacing my current burden with a new burden. 

Sorry for going on a bit, any advice is appreciated. 

Grumpelstiltskin

Yes a DMP could be the best choice for you BUT don't rush into it.
Nothing terrible is going to happen in the short term.

Put your SOA up on here and the good people on here will help you.

Suseka97

Firstly I wanted to say that you are not a failure, but I also completely understand how debt can make you feel embarrassed and stressed.  The fact that you have now reached out to SC is a positive step forward and shows you are taking control of the situation.  

I would also say once things are up and running (although do note my comment below about not jumping in too quick) you'll settle into a routine and your debts will no longer be on your mind constantly nor keep you awake at night  

I can't answer whether a DMP is the best option for you, there are others who have CAB expertise on here who will hopefully come along to comment.  What I can say is that it will not affect your ability to switch your mortgage at the end of its fixed term and you won't have to sit on their SVR.  I switched twice during my DMP years, all done online in a matter of minutes and I had access to the same fixed term deals as anyone else.  You won't be able to change lenders, that's all.

More importantly here I want to correct the information you have been given regarding defaults.  A default sits on your credit file for 6 years from the date it was applied then it disappears.  It is the AP, AR or DMP markers that will stay on your file for 6 years after the date the account was settled.  I'm not sure why she said this, but maybe there was a miscommunication (I hope).   This is why we encourage people entering into a DMP to make sure their accounts are defaulted first, which means you stop paying until they default you and don't be persuaded to rush in to the DMP.  This has two benefits, one is obviously the necessary default and two is that it gives you breathing space and an opportunity to build up an emergency fund and get some breathing space.

Please head over to the DMP mutual support thread, grab a cuppa and have a good read.  There are a lot of people on there in your position and lots of great advice and support.

Disney_Princess85

I too felt a sense of shame about my debt, but honestly once I set up the DMP and started making payments I felt.much freer. 

I was no longer worried about calls or letters and it's just something that I pay each month without thinking about.

Iam so much happier now that I know I am tackling my debts.

fatbelly

The stepchange adviser was assuming that there would be Arrangement to Pay markers on your credit file. The entry then stays with its marker until the debt is paid off, then remains a further 6 years.

As you indicate this is not great.

It is preferable to get a default marker. The entry then drops off in full (whether paid or not) six years after the default.

In practice most will apply a default but the AP ones will be what cause problems down the road.

I think most on here would recommend to stop paying the non-priority debts, build an emergency fund and give your creditors a few months to sort themselves out.

I do agree a dmp sounds best as there is no danger to your house, and all your debts are non-priority. If you haven't done this already you need a bank account not connected to any of your debts. You can wave goodbye to the overdrawn one you're currently using and put it in the dmp.

SBS_88

Thank you for your replies, they're really encouraging. 

I had a good read through the DMP thread yesterday but still don't feel entirely clear on what I am doing. How do I make sure that defaults are applied rather than AP's? 

Naomim

From my understanding, you stop paying your accounts completely. Any money you would have paid, put into an emergency fund. After 6 months or so, the accounts should default you then you set up the Stepchange agreement and start making the payments you can afford.   Don't enter into a DMP immediately or you will end up with AP markers.

The emergency fund will leave you with money ready so if anything happens - like needing a new washing machine etc, you have some savings ready so do not need to resort to credit as it will be unlikely to get credit once you have any defaults.  Also it can help but you in a position to make full and final settlements towards your debts later down the line if you are able.

Suseka97

The only effective way to achieve defaults is to stop paying anything until they do.  So it's important you don't rush into setting up the DMP until your accounts are defaulted.  Some may do so quickly, whereas others may not - there is no rhyme nor reason as to why.  Some creditors think they are helping by not defaulting and others know that it means your credit file will be impacted for far longer, and so play silly beggars.

It will feel a bit strange to stop paying altogether, but if you have looked at the DMP thread you'll have seen posts where people are already in a DMP and struggling to get a creditor to default them.  You will also see that it can take many months before a creditor applies the default, so its a case of waiting it out.  Once done you can set up the DMP and just sit back and let things run along.

MalMonroe

SBS_88 said:

Thank you for your replies, they're really encouraging. 

I had a good read through the DMP thread yesterday but still don't feel entirely clear on what I am doing. How do I make sure that defaults are applied rather than AP's? 

Hi, it might be a good idea to contact StepChange again to ask about a Debt Relief Order. Although you didn't qualify before, you may do now as the total debt allowable has been increased from £20.000 to £30,000 very recently.

I had a DRO eight years ago and it was the best thing for me since I was drowning in a sea of debt. Like you, I was embarrassed and ashamed but there really is no need to be. 

With a DRO, your debts are wiped out and you don't have to pay anything monthly. The DRO lasts for a year and is on the Insolvency Register for 15 months and of course, from start to finish it's on your credit report for 6 years and then it drops off. 

I'm not sure if there will be room to tweak the money you have left over each month but you can discuss that with SC, or any other free debt help agency. Citizens Advice is also good but I dealt with StepChange and they really did change my life for the better. If you're not sure about anything they've told you or you want to go over it again, do phone them. That's what they are there for. 

Here's some info from debt camel : https://debtcamel.co.uk/proposed-dro-changes/

Just some food for thought. Whatever happens, good luck and do remember that many people - some on this site just like me - have been in similar or worse situations, and survived.   

enthusiasticsaver

I would go down the default route and then this will stay on your file for 6 years from the default dates.  That means stopping all payments.  You can still move on to fixed mortgage deals with your current lender but it may be problematic to change lenders as you will need to be credit scored then the defaults will show up.  

Quite honestly though if you are having to use credit to live after all your essential bills are paid you have no choice other than to use a debt solution.  It may be a DRO would be another option and stepchange can advise on this. The usual advice before going on a DMP is to cease payments until the debt is defaulted and save up an emergency fund as you will not have access to credit. 

fatbelly

MalMonroe said:

SBS_88 said:

Thank you for your replies, they're really encouraging. 

I had a good read through the DMP thread yesterday but still don't feel entirely clear on what I am doing. How do I make sure that defaults are applied rather than AP's? 

Hi, it might be a good idea to contact StepChange again to ask about a Debt Relief Order. ...

The maximum surplus is now £75 per month, up from £50. But the major problem here is that the OP is a homeowner and so is disqualified on the asset criterion.