Debt Management Plan - what do I do first?

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Hi,

I thought I had my debt under control but with all the rising costs it's got away from me.

I went through StepChange's online tool. They're suggesting I do token payments for 5 months and then a DMP.   The budget feels so generous after scraping by for so long! I've been making the minimum payments on everything, but at the expense of getting more in debt each month and not paying enough towards my rent arrears. I'm so embarassed I haven't managed my spending better.

It's payday this week.

How does this work, do I just stop making any payments to my creditors now and wait for the StepChange plan to be set up? Or do I have to make the payments until it's set up? 
Is there anything else I should do first?
Should I talk to the the creditors, or apply for breathing space so they can't hassle me until it's set up?
How much hassle am I going to get from them, I'm a bit scared about that? CCJ's could affect my job, is there anything I can do to make them less likely?
Feeling really nervous about this!

Thanks

Comments

  • peteuk
    peteuk Posts: 1,380 Forumite
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    If your planning to go through SC for the DMP, then they will advise you what to do.

    If your planing to do your own DMP then bear in mind. 

    Prepare to change banks if your pay/benefits are going into an account held by one of your debtors.
    Token payment - contact each debt and advise them of token payments, you may need to cancel DD and make manual payments.  At the same time you can advise. Them of the DMP.
    Once calculated contact them with the offer and start paying it.
    These will default and may be passed internally to collection departments and/or debt collectors.

    To avoid CCJ’s ensure you communicate.  With a DMP in place it shouldn’t get to the CCJ stage, as long as you are paying them.

    Good luck. 
    Proud to have dealt with our debts
    Starting debt 2005 £65.7K.
    Current debt ZERO.
    DEBT FREE
  • RAS
    RAS Posts: 32,819 Forumite
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    Hi PurpleMouse.

    We'd recommend that you halt the token payments.

    You need the creditors to default your accounts as soon as possible which halts interest and ensures your credit record starts to improve in 6 years time. Token payments may encourage the creditors to delay the default and keep charging interest.

    Use the time to build up any emergency fund, somewhere where you do not have an associated debt, and start the DMP when your creditors have defaulted.
    The person who has not made a mistake, has made nothing
  • sourcrates
    sourcrates Posts: 29,006 Ambassador
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    First, forget the scare stories, forget legal action, CCJ`s, and phone calls galore, all that is mostly reserved for those who ignore there debts completely, and take no action to rectify matter`s.

    These days, creditors are well used to customers getting into unaffordable debt, its everywhere Unfortunatly, and they are extremely well geared up to deal with those who enter debt management, or any of the insolvency solutions, so don`t worry on that score, they will be OK to deal with, and stepchange do most of the comm`s between you anyway, so it won`t be a problem.

    Yes, you should stop all your non essential debt repayments, and yes again, ask for breathing space, also I would not bother with token payments, the debt collection process is quite a long, drawn out affair, nothing happens quickly, you will be better served saving an emergency fund, as you will need it.

    You must make sure your essential debts are serviced, that is a priority, cards/loans etc etc can wait, they are last on the list for payment.

    Lastly, there is absolutely nothing to be nervous about, all you are doing is simply repaying what you owe, at a more affordable rate, that`s it, millions of folk are in the same boat as you are, you make your reduced monthly payment, and life will carry on as per normal, and hopefully your creditors will stop all interest on your accounts as well (a letter from you asking them too, won`t go a miss, if they haven`t).

    So its no big deal, you are doing absolutely the right thing, you have admitted there`s a problem, and are taking action to sort that problem, its all good.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • PurpleMouse5
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    Oh that's great, thank you very much
  • Rob5342
    Rob5342 Posts: 1,525 Forumite
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    I was apprehensive when I started my DMP, but it went extremely smoothly. I went on breathing space to start with and heard nothing at all. Once that had ended I got a few letters, but when I phoned to say I was using Stepchange they apologised for sending the letter and that was that.

    Dont worry about CCJs - you can still get one on a dmp but it pracrice most lenders just want their money back with no expense or hassle, and and if you are in a repayment plan they are unlikely to want the cost and hassle of getting a ccj which will probably just say you have to repay the same amount each month anyway.
  • creditcardchaos
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    Hi I am in the same boat! Have just spoken to stepchange today and have been given advice about DMP. Having read this forum I think I will also stop payments to hopefully default accounts. I will contact the credit companies to advise I am struggling and arranging a dmp - are you going to mention when you contact them that your hope for a default and want to avoid a CCJ? 
    Oct 19 £16,670.40 /  Dec 20 £11,925
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  • PurpleMouse5
    PurpleMouse5 Posts: 45 Forumite
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    Hi Creditcardchaos. I didn't mention the default or the CCJ specifically but I said I'd appreciate it if they froze charges and interest.
  • PurpleMouse5
    PurpleMouse5 Posts: 45 Forumite
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    Good luck with yours !
  • enthusiasticsaver
    enthusiasticsaver Posts: 15,684 Ambassador
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    I would stop worrying about CCJs.  That is extremely unlikely especially if  you communicate. If they take the legal route that costs and they are unlikely to get any more back so it is unusual for them to go to court when debt is unsecured.  If you are decided on the DMP route I would cease payments to your creditors as you want them to default.  You can advise them that you are unable to meet the payments and ask for interest and charges to be frozen.  Then stepchange (if you are using them) will help you come to an affordable monthly repayment which they will distribute to your creditors.  Alternatively you can go self managed. You need an emergency fund first though as you will not have access to credit so my advice is stop repaying the debt and save up an emergency fund instead. 
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
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