Should I cancel payments while DMP is set up?

KCUndebtify

Following some invaluable advice on a previous thread, we have decided to pursue a DMP. What convinced us to do this rather than IVA was that StepChange advised that our DMP, unlike an IVA, could be set up based on my husband's basic pay, meaning that any overtime or bonus would be ours to save & eventually settle debts early, rather than at least half disappearing into an IVA. My question is, should we now stop paying creditors while the DMP is set up, or should we be making at least some payment in the meantime? When you've spent years struggling to make full payments, suddenly stopping feels a massive step. Just want to check it's the right one. 

EssexHebridean

Have the debts already defaulted? The usual advice is to get defaults by stopping payments, and only then enter into the DMP. 

sourcrates

Glad you have come to a decision, now the fun begins, so to speak.

What you do now depends entirely on your own preference really, dealing with creditors can be difficult, some can play ball, others can`t or won`t, basically there is no guarantee of conformity from any of them in how they treat you.

We normally advise stopping all payments until accounts default, before entering debt management, this ensures all interest is stopped, and it also gives you a clear 6 year window until your credit file heals, and the defaults drop off it, it also allows you to save your vital emergency fund, something that you must do, as you will have no access to credit, should something break down.

Enter a DMP too quickly, and your get no guarantee of interest been stopped, you will also get AP markers added to your file (arrangement to pay) which can stay for 6 years after the debt is eventually settled, so potentially a very long time.

Unfortunatly as good as the debt charities are, they will not take any of the above into consideration, they are part funded by the banks, and as such have an agreement to get arrangements up and running ASAP, this won`t affect the advice you get from them, but it will affect how quickly they will want you to start repaying your debts.

If having interest stopped, and the effects on your credit file are of little consequence to you, then by all means go ahead at your leisure, you will just be in debt for, and feel its effects for longer, that`s all.

KCUndebtify

That all makes perfect sense, thank you. We will stop payments. Eeek. 

peteuk

Although I bow to Sourcrates vast experience and reading his advice makes perfect sense (wish I had that advice some 16 years ago) I would add that in my experience talking to people helps.  I was advised to make token payments and at that point tell my debtors that I was entering a DMP. 

If you make a token payment or dont pay them, advising them your entering a DMP and that either TP or NP will continue until DMP is in place may help.   Hopefully they will be able to note this and stop some of the actions they take for non payment. 

Good Luck with the DMP. 

sourcrates

peteuk said:

Although I bow to Sourcrates vast experience and reading his advice makes perfect sense (wish I had that advice some 16 years ago) I would add that in my experience talking to people helps.  I was advised to make token payments and at that point tell my creditors that I was entering a DMP. 

If you make a token payment or don`t pay them, advising them your entering a DMP and that either TP or NP will continue until DMP is in place may help.   Hopefully they will be able to note this and stop some of the actions they take for non payment. 

Good Luck with the DMP. 

The only way to get your account defaulted as quickly as possible is to stop paying it.

If you make token payments, its likely your creditors will think you are at least trying to make some kind of effort, and hold off on defaulting you.

Writing to them asking for time to pay, or breathing space for that matter, again just lengthens the time they take to default you.

Even though standard debt advice approves and advises all of the above, that doesn't help you in your situation now does it, sometimes doing what you may consider to be the right thing, actually works against you.

Normal debt advice given by the debt charities consists of finding a solution quickly, making token payments if possible, and starting debt solution payments as soon as you can, in the hope your creditors will stop interest/charges etc etc.

Well that doesn't always happen.

There are many cases where the DMP payment has been more than the contracted payment, so creditors have started charging interest again, and this can happen with all your accounts, it can be a total nightmare for anyone who thought they were doing the right thing.

You can avoid all of this potential doubt, simply by disconnecting yourself from the relationship with your creditor, wait until your accounts get sold on and defaulted, and than making your payment arrangements.

You mention "further action" for non payment, collectors love to use that term as well, its so vague isn`t it, they also tend to refer to it as "collection activity" which in reality just means we will attempt to call you, we may write to you, and eventually if you don`t talk to us we will wash our hands of the debt and sell it on, again, just what you want to happen.

I would urge anyone thinking of debt management to take these steps, it just makes the whole process so much easier for you, you get to retain control of the situation, you have no further interest to pay, any interest that has been charged previously, can be offset by making full and final offers, further down the line, (incidentally another good reason why an emergency fund is so essential in debt management) and your credit file is healed in 6 years regardless, it really is a no brainer.