Looking for some advice on starting a Dmp and applying for breathing space.

HannBanan

Back storey - 25k CC/overdraft debt (was 35k but a redundancy LY help me clear 10k). No assets or savings. Was coping until cost of living went up this year along with min payments and I’m now at position where I have £60 at the end of the month after essential bills and min payments. 

So I realised I cannot spend my life living on credit and I need a plan.

I’m looking at a DMP with Stepchange, have applied for a new bank account with first direct and I’m just awaiting that to come through before I proceed with stepchange.

In my Dmp application it asks If I want to apply for Breathing Space Scheme.

I am currently up to date with all my payments and have no defaults on any of my accounts, credit file is fairly ok despite the debt. So I’m not currently being chased for anything. 

However I was thinking of not payment my min payments to my creditors next month whilst stepchange are setting up the Dmp and also so I can put that money away as an emergency fund, as I said earlier I have no savings. 

a. Is not making payments next month the right thing to do?

b. Would applying for breathing space scheme be beneficial while I’m not paying my creditors?

I can’t find loads of info on breathing space scheme, also a bit concerned somewhere it mentioned being put on the insolvency register which I obviously don’t want hence why I’m applying for Dmp and not iva. 

Any guidance/advice would be most appreciated.

sourcrates

Breathing space is a fairy new concept, and only lasts for 60 days, so not very long really.

Your details appear on a private insolvency register, not accessible by the public, and is in no way linked to any insolvency solution, the process is just administered by the IS, that`s all.

If you want some respite from your debts, you can simply just stop paying them, or just make token payments, the debt collection process takes quite a while to kick in, you can easily get 6 months of non payment just off your own bat to save that emergency fund, no harm in letting your creditors know what your doing either.

Defaulted accounts stay on your credit file for 6 years, those that enter payment arrangements (DMP`s) are usually marked as such, and can show till you make your last payment, so potentially twice as long as a default would show for, which is why we recommend defaulting first.

No harm in applying for breathing space later on in the process to offset any potential further action, then entering debt management.

In essence, don`t rush in, think about how best this can benefit you, and also keep creditors happy.

HannBanan

This is really insightful, thank you so much for explaining it so clearly @sourcrates