Had the lightbulb moment...Any help appreciated

in Debt-free wannabe
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Beths68Beths68 Forumite
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Morning All,

I've had my lightbulb moment and I am scared. I have 39k unsecured debt and no idea how! I don't have anything to show for this and I've been living on credit cards at the end of the month for basic things like food and petrol. I am embarrassed and ashamed; I have a good job so people wouldn't have a clue this is the case.  Since last week when I realised, I need to make some changes, I have been in touch with step change. I have completed all forms and I'm just waiting to press the final button. I am not in any arrears yet, I am making the minimum payments (barely) my largest loan, with Halifax, I have applied for breathing space on and cancelled th4e direct debit. I had a useful conversation with Halifax last week and they were understanding and applied breathing space to my other products with them. I have some questions about DMP, wondered if you guys might be able to advise?

1) Can people find out about it? i.e., employers? 
2) are you informed if/when companies agree to payment plans? 
if you wanted to pay off more to smaller debts but keep the DMP amount the same is this possible and would I do that myself? for example one of the debts is £300, if I received a gift or similar and paid the balance directly to the company, am I able to inform step change and ask for the current DMP amount to be redistributed? 
3) credit files - I know it's going to be shot, probably not a bad thing as I clearly am not great with debt but, in peoples experience, how did this impact them longer term? My DMP is estimated to be 4 years 10 months.

Sorry for the ramble, this is my first post, and my head is going from clear... i.e., sign the DMP, go for it and make progress to moving on to weirdly thinking, can I sort this myself in some way? 

Thank 
B

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Replies

  • GrumpelstiltskinGrumpelstiltskin Forumite
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    Welcome  you have made the right move in coming here.

    You are making the common mistake of rushing into a repayment plan too quickly.

    Hold on, nothing is going to happen soon, you need to be sure you have your budget correct and also you need to build up an emergency fund up.

    First thing to do is put up an accurate SOA on here then you will receive advice as to exactly how and when to proceed.

    If you go down to the woods today you better not go alone.
  • edited 28 June 2022 at 11:34AM
    sourcratessourcrates Forumite
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    edited 28 June 2022 at 11:34AM
    Beths68 said:

    Morning All,

    I've had my lightbulb moment and I am scared. I have 39k unsecured debt and no idea how! I don't have anything to show for this and I've been living on credit cards at the end of the month for basic things like food and petrol. I am embarrassed and ashamed; I have a good job so people wouldn't have a clue this is the case.  Since last week when I realised, I need to make some changes, I have been in touch with step change. I have completed all forms and I'm just waiting to press the final button. I am not in any arrears yet, I am making the minimum payments (barely) my largest loan, with Halifax, I have applied for breathing space on and cancelled th4e direct debit. I had a useful conversation with Halifax last week and they were understanding and applied breathing space to my other products with them. I have some questions about DMP, wondered if you guys might be able to advise?

    1) Can people find out about it? i.e., employers? 
    2) are you informed if/when companies agree to payment plans? 
    if you wanted to pay off more to smaller debts but keep the DMP amount the same is this possible and would I do that myself? for example one of the debts is £300, if I received a gift or similar and paid the balance directly to the company, am I able to inform step change and ask for the current DMP amount to be redistributed? 
    3) credit files - I know it's going to be shot, probably not a bad thing as I clearly am not great with debt but, in peoples experience, how did this impact them longer term? My DMP is estimated to be 4 years 10 months.

    Sorry for the ramble, this is my first post, and my head is going from clear... i.e., sign the DMP, go for it and make progress to moving on to weirdly thinking, can I sort this myself in some way? 

    Thank 
    B

    In answer to your initial questions -

    (1) No, not really, a DMP is an informal arrangement between you and your creditors, as such it won`t officially appear on your credit file, but any arrangement to pay markers or defaults associated with your debts will obviously show on your credit file, but that is all private, unless you are credit checked.

    (2) It doesn't really matter if a creditor agrees to your request or not, they get paid anyway, and if they don`t like it, all that will happen is the debt may be sold, or it may be passed to a collector to manage, either way it won`t affect you in the slightest, you still keep paying your monthly agreed payment.

    (3) This is why we encourage those entering debt management to try and get all their accounts defaulted first, that way they will know for certain that 6 years from that date, those defaults will drop off your file, and your credit worthiness will return to what it should be.

    (4) Any smaller debts you can settle yourself, if you wish, you would then just ask stepchange to remove that creditor from your arrangement. However, they take the view that all creditors should be treated equally, so you may need to be as assertive if they make any fuss over it, most people do so with no problems.

    Lastly, make sure you have a good emergency fund saved up, it will be needed, trust me, as you will not have access to credit once the defaults start to hit your files.

    Good luck.
    Ex MSE Board Guide.

    More than a third of IVA`s fail....fact.
    Could A Debt Relief Order help you ?
    Never pay a fee for a Debt Management Plan.
    For free non-judgemental debt advice, contact either : Stepchange, National Debtline, or CitizensAdviceBureaux.
  • EssexHebrideanEssexHebridean Forumite
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    Well done for deciding that change is needed. I'd say the first step here is probably to post your SOA (Statement of Affairs) and let the regulars here see if they can spot any savings you may be able to make in your budget. You will likely already have done something similar for StepChange anyway I guess - so it's probably just a case of punching the numbers into one of the calculators we suggest - there is a link in my signature to one of them if that helps. 

    The main thing is to know HOW the debt has arisen, and to tackle the cause to make sure you don't just find yourself back to square one in a few years time.  Your budget will become your new best friend - as will learning to stop and think before you spend - a pause to ask yourself whether you really want to spend "that" money on "that" thing can quite often leave you thinking that actually, no, you don't! 
    🎉 MORTGAGE FREE 30/09/2016 🎉
    SOA CALCULATOR (for DFW newbies): SOA Calculator
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    she/her
  • RASRAS Forumite
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    Hi, well done for recognising the issue now.

    As everyone else has pointed out, you will be agreeing not to take out further credit (even if you can). Stepchange can reduce your monthly payments in an emergency, but is much better to build up an emergency fund before you start a DMP. And to build a small amount of savings into your budget, as well as the essentials like dental care.

    And to minimise the effect of your debt arrangement, you need to persuade the creditors to default your accounts as soon as possible. The big advantage is that it stops interest being charged.

    We've seen too many people making continued payments for years with good intentions but never getting defaulted and extending the period when they have poor credit. So bite the bullet, stop paying your creditors and let them default you. And if you have things like utility debts, use the money to cover those before you start the DMP.
    The person who has not made a mistake, has made nothing
  • Beths68Beths68 Forumite
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    Thanks Everyone, I am in a bit of a ... stuck situation. just ready to press send on the DMP but haven't missed any payments apart from the Halifax loan and CC as these are the ones I have had a separate conversation with Halifax about. 

    I am wondering if I should try and enter into a payment arrangement for these three debts directly with Halifax ( Loan , CC and  overdraft) and prevent the DMP , meanwhile coming up with a plan to clear the other debts? Or do i just add all debt into a plan and then ill have a solid plan to get out of this whole situatuion?


    MY SOA is below. Any advise gratefully received. 

    [font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

    Household Information[/b]
    Number of adults in household........... 2
    Number of children in household......... 2
    Number of cars owned.................... 1[b]

    Monthly Income Details[/b]
    Monthly income after tax................ 2600
    Partners monthly income after tax....... 0
    Benefits................................ 145
    Other income............................ 0[b]
    Total monthly income.................... 2745[/b][b]

    Monthly Expense Details[/b]
    Mortgage................................ 391
    Secured/HP loan repayments.............. 29
    Rent.................................... 0
    Management charge (leasehold property).. 0
    Council tax............................. 68
    Electricity............................. 60
    Gas..................................... 60
    Oil..................................... 0
    Water rates............................. 30
    Telephone (land line)................... 0
    Mobile phone............................ 150
    TV Licence.............................. 12
    Satellite/Cable TV...................... 0
    Internet Services....................... 68
    Groceries etc. ......................... 400
    Clothing................................ 60
    Petrol/diesel........................... 80
    Road tax................................ 0
    Car Insurance........................... 0
    Car maintenance (including MOT)......... 10
    Car parking............................. 10
    Other travel............................ 40
    Childcare/nursery....................... 0
    Other child related expenses............ 60
    Medical (prescriptions, dentist etc).... 15
    Pet insurance/vet bills................. 0
    Buildings insurance..................... 30
    Contents insurance...................... 0
    Life assurance ......................... 0
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 30
    Haircuts................................ 50
    Entertainment........................... 60
    Holiday................................. 40
    Emergency fund.......................... 40[b]
    Total monthly expenses.................. 1793[/b]
    [b]

    Assets[/b]
    Cash.................................... 0
    House value (Gross)..................... 250000
    Shares and bonds........................ 0
    Car(s).................................. 1
    Other assets............................ 0[b]
    Total Assets............................ 250001[/b]
    [b]

    Secured & HP Debts[/b]
    Description....................Debt......Monthly...APR
    Mortgage...................... 165000...(391)......0
    Hire Purchase (HP) debt ...... 0........(29).......0[b]
    Total secured & HP debts...... 165000....-.........-   [/b]

    [b]Unsecured Debts[/b]
    Description....................Debt......Monthly...APR
    HALIFAX LOAN...................15138.....433.7.....0
    MBNA CC........................6174......138.......0
    AFSLAFS Loan...................5465......243.......0
    Barclaycard CC.................80........5.........0
    La Redoute Catalogu............135.......10........0
    Tesco CC.......................280.......16........0
    Very Catalogue.................531.......40........0
    Halifax Overdraft..............1400......50........0
    Paypal.........................1750......63........0
    HSBC CC........................2070......69........0
    Virgin CC......................3293......105.......0[b]
    Total unsecured debts..........36316.....1172.7....-  [/b]

    [b]
    Monthly Budget Summary[/b]
    Total monthly income.................... 2,745
    Expenses (including HP & secured debts). 1,793
    Available for debt repayments........... 952
    Monthly UNsecured debt repayments....... 1,172.7[b]
    Amount short for making debt repayments. -220.7[/b]

    [b]Personal Balance Sheet Summary[/b]
    Total assets (things you own)........... 250,001
    Total HP & Secured debt................. -165,000
    Total Unsecured debt.................... -36,316[b]
    Net Assets.............................. 48,685[/b]

    [i]Created using the SOA calculator at www.LemonFool.co.uk.
    Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]
  • GrumpelstiltskinGrumpelstiltskin Forumite
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    As I said earlier do not start your DMP yet, nothing terrible is going to happen.

    Hold on until the experts digest your SOA and make suggestions.
    If you go down to the woods today you better not go alone.
  • stymiedstymied Forumite
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    Is your partner aware of the situation? One or both of you has been living outside your means which is understandable as you work hard and are possibly used to having had 2 incomes in the past? Now both of you need to become thrifty together.

  • peteukpeteuk Forumite
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    Are you still in contract with your mobile phone (£150) and internet (£60) if not look at lowering these.  Talk to your provider and see what they can do with a discount.  That might not be cash off it might be added data.  

    Proud to have dealt with our debts
    Starting debt 2005 £65.7K.
    Current debt ZERO.
    DEBT FREE
  • Beths68Beths68 Forumite
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    OK so thank you for all the helpful advice given previously. I am at the point now of almost finalising the DMP. I've calculated that moving from current position  - paying min amounts on CC's etc , going into the DMP will provide me with £494 extra per month. Almost equivalent of the monthly payment on my biggest loan which has approx. 4 + years to run. I am currently not missing any payments apart from this Halifax loan last month which I did with them setting up a hold on all fees and interest. I've also applied for and am now in the middle of, breathing space.  The fact I haven’t had that 400+ to pay has made a massive difference this month for me.

    The thing is IF there is another way, I.e. I continue to make these minimum payments , counting down the months until the loans are complete and I have more surplus as a result, living with barely any free money each month, I have now no way to pay back the missing payment on the loan.  

     I have re completed the SOA as yes, you are right it was probably aspirational. I've included the APRs. I have a husband, he is aware I am in a mess and covers 50% of all the joint bills, thus these might look low – I have applied a 50% to things like mortgage, utilities etc… Virgin media are yes having my life, this price includes broadband, TV and landline monthly too. He also picks up a lot of day to day bills for the kids , food, clubs etc. I haven't included his income in the SOA I know ill get shot down in flames for this but I want to make this about me as honestly, without going into too much detail I would rather have a healthy and planned for financial situation as a standalone person. 

     I cant tell you how much I appreciate the help and feedback, this is my horrible secret that I've told no one about fully and its eating me alive to not see a clear way forward. The DMP will of course give me a route to being debt free ( that seems like a long off dream at the moment) – I know its at the cost of having a credit score of any worth in the future but I just have this niggling question- 'is there another way?' probably not, just want to be sure I have exhausted all avenues you know? Also I am scared that once it's in place they are going to issue CCJ's and all sorts, how often does this happen? I am currently not missing any payments apart from this Halifax loan last month which I did with them setting up a hold on all fees and interest. I've also applied for an am in the middle of breathing space. The things is IF there is another way, I.e. I continue to make these minimum payments , counting down the months until the loans are complete and I have more incoming, I have now no way to pay back the missing payment on the loan. The fact I haven’t had that 400+ to pay has made a massive difference this month for me.

     So appreciate anyone's advice on what , looking at the numbers seems to be the right way forward for me, 

    Yes mobiles are still in contract sadly. That price is for 2 one is mine and the other is my daughters.

    I car share with my mother so the insurance is paid for my her its a £35 per year tax bracket and I pay for the things like MOT and tyres etc. 

    Getting quotes on life insurance but I do have this through my employer too. 

    [font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

    Household Information[/b]
    Number of adults in household........... 2
    Number of children in household......... 2
    Number of cars owned.................... 1[b]

    Monthly Income Details[/b]
    Monthly income after tax................ 2600
    Partners monthly income after tax....... 0
    Benefits................................ 145
    Other income............................ 0[b]
    Total monthly income.................... 2745[/b][b]

    Monthly Expense Details[/b]
    Mortgage................................ 391
    Secured/HP loan repayments.............. 29.110000000000014
    Rent.................................... 0
    Management charge (leasehold property).. 0
    Council tax............................. 68
    Electricity............................. 60
    Gas..................................... 60
    Oil..................................... 0
    Water rates............................. 30
    Telephone (land line)................... 0
    Mobile phone............................ 150
    TV Licence.............................. 13.37
    Satellite/Cable TV...................... 0
    Internet Services....................... 68
    Groceries etc. ......................... 300
    Clothing................................ 40
    Petrol/diesel........................... 80
    Road tax................................ 0
    Car Insurance........................... 0
    Car maintenance (including MOT)......... 20
    Car parking............................. 10
    Other travel............................ 40
    Childcare/nursery....................... 0
    Other child related expenses............ 60
    Medical (prescriptions, dentist etc).... 15
    Pet insurance/vet bills................. 0
    Buildings insurance..................... 30
    Contents insurance...................... 0
    Life assurance ......................... 0
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 30
    Haircuts................................ 20
    Entertainment........................... 60
    Holiday................................. 40
    Emergency fund.......................... 40[b]
    Total monthly expenses.................. 1654.48[/b]
    [b]

    Assets[/b]
    Cash.................................... 0
    House value (Gross)..................... 250000
    Shares and bonds........................ 0
    Car(s).................................. 0
    Other assets............................ 0[b]
    Total Assets............................ 250000[/b]
    [b]

    Secured & HP Debts[/b]
    Description....................Debt......Monthly...APR
    Mortgage...................... 160000...(391)......0
    Hire Purchase (HP) debt ...... 300......(29.11)....0[b]
    Total secured & HP debts...... 160300....-.........-   [/b]

    [b]Unsecured Debts[/b]
    Description....................Debt......Monthly...APR
    HALIFAX LOAN...................15138.2...433.7.....20.9
    Admiral Loan...................5292.16...242.3.....16.5
    MBNA Credit card...............6058.83...186.......22
    Halifax Overdraft..............1400......35........39.9
    BarclayCard....................80........5.........23.97
    La Redoute.....................126.......10........39.9
    Tesco Credit card..............350.......20........18
    Very...........................531.44....48........51.9
    Paypal.........................1712.94...64........25.9
    HSBC Credit Card...............2590......68........24.9
    Halifax Credit Card............2078.58...68........30.69
    Virgin Credit card.............3189.18...104.......24.9[b]
    Total unsecured debts..........38547.33..1284......-  [/b]

    [b]
    Monthly Budget Summary[/b]
    Total monthly income.................... 2,745
    Expenses (including HP & secured debts). 1,654.48
    Available for debt repayments........... 1,090.52
    Monthly UNsecured debt repayments....... 1,284[b]
    Amount short for making debt repayments. -193.48[/b]

    [b]Personal Balance Sheet Summary[/b]
    Total assets (things you own)........... 250,000
    Total HP & Secured debt................. -160,300
    Total Unsecured debt.................... -38,547.33[b]
    Net Assets.............................. 51,152.67[/b]

    [i]Created using the SOA calculator at www.LemonFool.co.uk.
    Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]
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