Newbie DMP Scared!

Scaredycatt

Hi Newbie, hoping for some reassurance!

After a couple of years of spending almost all my income servicing my debts, I have finally accepted I will need to enter into a debt management plan and I'm really scared I've never been in debt before, and now I'm drawing in it!

The main things I was hoping someone could answer is should I really cancel all my direct debits for a bit to build up an emergency fund/ get defaulted, and if so how many months should I do this for? 2? 3?

I'm also really worried about debt collectors turning up on the doorstep. Is this likely if I agree a payment plan with all creditors and stick to it?

Debts are around £40k credit cards and loans and I should be able to pay around £600 per month.

Thanks for any help and sorry for the long post!

BlueJ94

If you set up a payment plan that you can afford and keep paying it no one will turn up at your door. I'm currently on a self managed DMP. I've been doing it for a few months.

Personally if you're comfortable in doing so, I'd recommend going self managed. Make a budget, see what you can pay to who and go from there

Also, yes cancel direct debts etc and agree a payment plan with the creditors. 

Scaredycatt

Thanks BlueJ94 that was my biggest fear! I will most certainly be able to keep up the £600 monthly payments. I'm currently paying double that due to interest costs and unfortunately couldn't get a loan to consolidate despite a good credit rating and something's got to give, so DMP it is!

Do you know if I should get in touch with creditors right away or do I need to wait a month or two until they default me before doing so?

I would be happy to self-manage is there any advantage to doing so?

sourcrates

Hi,

What you have to keep in mind is despite what you might have heard, the debt collection process can be a very long, drawn out affair, lenders can take a long time to default you sometimes, some are quicker than others at doing so.

A month or two is nothing, expect to wait between 6-9 months for a default at least, the only reason we advise defaulting first, is because all interest and charges stop once defaulted, plus it also gives you a clear 6 year window till the entry drops off your credit file.

If your not bothered about how your credit file looks, then you can start a DMP much sooner, and use the complaints route if they don`t stop charging you interest, its just a whole lot easier doing the former.

Debt collectors work in call centres, there are a couple of them who still use doorstep collection agents, just normal self employed folk doing a job, no special powers, they are not bailiffs, but usually only operate in cities or large towns, where a lot of clients can be visited in a day, there use is not very common anymore.

A typical DCA employee these days is late teens, early 20`s, in their first job, hungry for a bonus, honestly debt collectors have no more power to do anything than next doors cat has, they simply deal with bad debt as original creditors cannot be bothered to do it themselves.

Self management means you remain in control of things, you decide who gets what and when, if you choose to go with one of the free to use debt charities, they decide all of that for you, honestly, if you can boil a kettle, you can self manage your debts.

Scaredycatt

Thank you Sourcrates, that has really put my mind at rest!

I should have been on DMP ages ago but the thought of debt collectors turning up has really put me off. I'm so ashamed of getting into so much unmanageable debt, but I'm self-employed and I was hospitalised for ages in 20§19 then the pandemic hit which means everything's come crashing down!

If you don't mind, can I ask one more thing? if I wait 6-9 months for a default how do I handle phone calls/letters until then? Do I just ignore? It seems wrong to just ignore somehow.

sourcrates

Granted it does require a different mindset yes, debt collection is not an ad hoc affair, there is a process all companies tend to follow, I`ll briefly go over the different stages with you.

If you miss a payment or two, and you don`t contact them, your account will be dealt with by the collections dept. of the creditor concerned, they will attempt to contact you to find out what`s going on basically.

If you continue to ignore, and more arrears build up, they will then consider passing your account to either an internal debt collector (if they have one) or an external agency contracted by them.

Then its rinse and repeat with letters/calls etc, they will run through there portfolio of standard collection letters with you, and if you still don`t play ball, eventually they will return the account to the creditor.

The creditor may then engage another agency, or they may sell the debt on, whatever action is taken, you will normally receive a letter informing you.

Default of the account can take place at any point during this cycle, so nothing happens quickly, and sometimes collection activity can drag on for ages, call`s you can block, take note of any letters that are sent, that`s it really, ideally you start to engage at the point the debt is both sold on, and defaulted.

Scaredycatt

Thank you so much, and sorry for taking up so much of your time! I've never missed a payment in my life so it's a scary prospect, but if that's the best way to deal with things, that's what I'll have to do.

sourcrates

40k is a lot, I take it your a homeowner are you ?

Scaredycatt

Isn't it just! Yes, I'm a homeowner. It's the classic sorry of being unwell and unable to work so using credit cards to cover bills. Then the pandemic hit shortly after which made matters worse (am self-employed) and then the 0% interest offers ended and I was out of options. Feeling a lot calmer about it all now though, so thanks.

sammyjammy

Scaredycatt said:

T unfortunately couldn't get a loan to consolidate despite a good credit rating and something's got to give, so DMP it is!

You will look back in a few years and realise that's the best thing that ever happened to you!  Financially I mean 

Scaredycatt

sammyjammy said:

Scaredycatt said:

T unfortunately couldn't get a loan to consolidate despite a good credit rating and something's got to give, so DMP it is!

You will look back in a few years and realise that's the best thing that ever happened to you!  Financially I mean 

I'm starting to see that. This forum has been very enlightening. Everything I thought I should be doing seems to be completely wrong. So glad I took the time to check it out.