New to debt, please help

System

This discussion was created from comments split from: DMP mutual support thread part 13 !!.

kevoxshockwave

Hi all! I am new to this but i think I will be around here for a good few years... 

So I've finally removed my head from the sand about my debts... I am £35,000 in debt across 2 loans, 4 Credit Cards and 2 overdrafts. 

I have missed a few payments the past few months and realise I need to do something more sustainable. I am looking into a DMP. 

I have a couple of questions, if any forumites could help me out i'd be grateful!

1) Is it a good idea to contact my banks to tell them I am in financial difficulty? I mean its obvious coz I have missed payments, but -

2) I read a few pieces of advice saying DON'T enter into an 'arrangement' with the bank, it's better to -

3) Cancel Direct Debits, keep missing payments until they DEFAULT and then THATS the point at which to set up a DMP.

Am I on the right lines?

mcpitman

Before defaulting, i would suggest posting a "Statement of Affairs" (SOA). 

https://www.lemonfool.co.uk/financecalculators/soa.php

There may be ways to get out before then with careful budgeting.

Defaulting or trying to ay them down, you need to understand what accumulated the debt and if that problem/issue has been resolved. Otherwise you'll end up in a worse place years down the line.

enthusiasticsaver

Yes you are on the right lines.  It is difficult to be more helpful without seeing an soa (statement of account) but if you are struggling to make minimums and are paying interest and juggling payments then a DMP is one solution. 

An arrangement to pay has no real advantage to you and just delays the defaults.

A DMP has the advantage of normally stopping the interest and if you go managed through stepchange or another free debt charity then the monthly repayment to debts should be affordable and allow you to live.  However your credit record is trashed but if you already have missed payments then this will be damaged anyway.  The defaults drop off after 6 years so the sooner they default the better.  You can write to your creditors or you can contact stepchange and they will do that. 

The critical thing is to save up for emergencies after stopping the direct debits as you will have no access to credit after the DMP. If you have a mortgage though you can still usually get a new deal after an expired one finishes as long as you stay with your current lender. 

kevoxshockwave

mcpitman said:

Before defaulting, i would suggest posting a "Statement of Affairs" (SOA). 

There may be ways to get out before then with careful budgeting.

Defaulting or trying to ay them down, you need to understand what accumulated the debt and if that problem/issue has been resolved. Otherwise you'll end up in a worse place years down the line.

thank you. So i should fill in an SOA and post it to where?

peb

Yes, and on this thread. 

Naomim

Press the button to format for MSE also. 👍

kevoxshockwave

enthusiasticsaver said:

Yes you are on the right lines.  It is difficult to be more helpful without seeing an soa (statement of account) but if you are struggling to make minimums and are paying interest and juggling payments then a DMP is one solution. 

An arrangement to pay has no real advantage to you and just delays the defaults.

A DMP has the advantage of normally stopping the interest and if you go managed through stepchange or another free debt charity then the monthly repayment to debts should be affordable and allow you to live.  However your credit record is trashed but if you already have missed payments then this will be damaged anyway.  The defaults drop off after 6 years so the sooner they default the better.  You can write to your creditors or you can contact stepchange and they will do that. 

The critical thing is to save up for emergencies after stopping the direct debits as you will have no access to credit after the DMP. If you have a mortgage though you can still usually get a new deal after an expired one finishes as long as you stay with your current lender. 

Thank you, this is really helpful. 
So I am in the position now where I have stopped all my direct debits to my loans and credit cards. 
I do not have a mortgage.

I am not bothered about trashing my credit file, it is "Very Poor" anyway, I don't see how it can get any worse. 

I have a few other questions, if you (or anyone else!) can assist, I would be most grateful.

1) After filling in an SOA, where should I post it?
2) Should i inform my creditors that I am in financial difficulties, or just ignore them?
3) Should I contact StepChange now, or after my loans and CC's have all defaulted?

Thanks in advance!

sourcrates

You post your SOA to this thread, you will see a button entitled "format for MSE" click on that, and then post it on here.

Its up to you if you want to tell them, however you want to avoid arrangements to pay, so personally I`d just let them get on with the default process.

Debt repayment should only start once defaults are all confirmed, that way all interest is stopped, and you have a clear 6 year window till your credit file heals.

CapricornLass

I think I would keep quiet about your financial difficulties to your creditors.  In my limited experience working for a bank subsidary, if the bank knew you couldn't manage financially then they demanded immediate payment of all the money you owed them, even forcing  you to liquidate assets even if you lost money doing so.  

That was in the 1970s/80s.  I doubt if things have changed at all.  And I'll lay odds that all your other creditors will be exactly the same; ie, demand payment in full instantly, as soon as they are aware of your situation.

fatbelly

Fortunately the FCA's CONC guidelines set out in detail how creditors are supposed to act towards those in financial difficulties.

I don't go back 40 years in this business but things have greatly improved over 20 years.