Had the lightbulb moment...Any help appreciated
Beths68
Forumite 
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
Replies
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.
(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.
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.
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!
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.
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.
Hold on until the experts digest your SOA and make suggestions.
I'm afraid I think this is an aspirational SOA - ie you've completed it either based on what you would like to be doing financially, or what you think you "should" be doing - and that is NOT a good basis to work from as it gives you a completely false idea of where your money is going. I'd suggest getting together all bank and card statements and actually working out your real expenditure, and redoing the SOA using factual information so you know where you really stand.
Stop using things like catalogues and the devil's instrument that is PayPal credit. Open a new bank account with a provider not linked to anyone you have debt with, then stop making debt payments and focus first on getting a budget in place that actually covers all your priority bills. THEN you can consider something like a DMP - if you do it now then all that will happen is you will still find you run out of money each month because you don't actually have a functioning household budget. That also gives the debts time to default - although it's unclear from the above whether in fact they already have allowing everything shows with no interest?
This is fixable - but ONLY by actually getting everything straight, setting a proper budget and learning to stick to it.
Current debt ZERO.
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.