Considering DMP/Trust Deed Advice … 29 June 2022 at 2:44PM in Debt-free wannabe 7 replies 181 views

creditcardchaos

I have spoken to Stepchange who have advised a DMP is more likely option for me as with what I owe and can afford to pay the creditors wouldn’t accept a Trust Deed. 

I owe approx £25,000 and can afford to repay £200 per month. 

This is the first month I have missed a payment (on my loan). I have one loan and 4 credit cards. 

Having read the forums I see a lot of advice to stop making payments for the moment before the plan begins to save an emergency fund. 

My question is when I contact creditors to explain my situation - that I am getting g help to set up a DMP and can’t afford payments meantime - do I advise I am stopping payments in the hope they default and interest is frozen? Do I say I don’t want a CCJ? Or am I literally just advise that although I’m not making normal payments and offer of payment will be forthcoming from Stepchange?

thanks! 

sourcrates

Hi,
Essentially there are two ways to do a DMP.

(1) The stepchange way - you start your plan almost straight away, your budget is worked out, and your disposable income is used to pay your creditors on a monthly basis, so allowing you to repay what you owe, at a reduced rate. Sometimes using this method a creditor will default you, which is all well and good, as it gives you a clear 6 year window till your credit file recovers, however others may mark your file as "AP" (arrangement to pay) those markers stay on file for 6 years after you make your last payment, so potentially quite a while longer. 
Also under an arrangement, interest is not always stopped, especially if your monthly repayment is a similar figure to the contractual repayment, can be a headache.

(2) What we normally recommend - wait for a period of time whilst you gather a good emergency fund, this also allows time for the accounts to default, legal action can only be taken after an account defaults, and the collection process is sufficiently long enough to give plenty of warning of things like that.

What usually happens in the vast majority of cases is the debts will either be passed to a collection agency to collect, or they may be sold on, it doesn't matter to you who owns your debts, once your happy with the situation, good emergency fund saved, and as many accounts defaulted as possible, then go ahead and make your DMP arrangements.

Option 2 will see your credit file clear quicker than option 1.
If your not bothered about your credit file, then go with your gut feeling.

You have the option of asking for breathing space, you can if you wish write and tell your creditors your intentions, tell them your taking advice from a debt charity, non of this should be a bother to you, debt management is a well recognised way of repaying unaffordable debts off, and so creditors will treat you fairly.

There is also no harm in making the system work better for you by just being slightly more pro-active in the way you do things.

creditcardchaos

Thanks @sourcrates! I think I’ll go with option 2, would you recommend a simple ‘I’m struggling at the moment but seeking advice regarding a solution’ message or mentioning allowing the debt to default to freeze interest? 

sourcrates

creditcardchaos said:

Thanks @sourcrates! I think I’ll go with option 2, would you recommend a simple ‘I’m struggling at the moment but seeking advice regarding a solution’ message or mentioning allowing the debt to default to freeze interest? 

At this early stage, I wouldn`t mention anything about defaults or interest freezing just yet, that`s really for a bit further down the line once you are ready to start payments, as hopefully this will happen without any prompting from you, but be prepared to say something if they haven`t done so.

creditcardchaos

sourcrates said:

creditcardchaos said:

Thanks @sourcrates! I think I’ll go with option 2, would you recommend a simple ‘I’m struggling at the moment but seeking advice regarding a solution’ message or mentioning allowing the debt to default to freeze interest? 

At this early stage, I wouldn`t mention anything about defaults or interest freezing just yet, that`s really for a bit further down the line once you are ready to start payments, as hopefully this will happen without any prompting from you, but be prepared to say something if they haven`t done so.

Ok thanks, one more question 😂 …do I warn them now I’m struggling and will miss a payment or do that after the payment is missed? I guess I just miss a month or two try to save as much as possible and contact Stepchange again to set up DMP at the point the credit cards start chasing it?

sourcrates

Its a tough one, as you are looking for defaults here, if you start communicating with them, they are more likely to put you into an arrangement to pay, rather than defaulting you, thinking that they are in fact helping you, when really, they are not.

Its best just to let the collection process kick in, as I said before, it doesn't matter who owns your debts going forward, your ideal scenario would be an early default and sale of your debt to a debt purchasing company such as Lowell or Cabot, PRA group or other similar company, where your interest has been stopped completely and they are ready to deal with you, that, is where you want to be with each account, and the route to that point is to ignore the collection process completely.

Obviously you keep an eye on anything that comes in the post, but otherwise, that`s the route to take.

creditcardchaos

I have started to miss payments so have had a few calls about them. Am I right just leaving it as is and going forward until I am defaulted? And at that point doing a DMP?

i did the Income/outcome calculator thing for my loan that zopa requested and it resulted in a negative balance so they asked what I plan to do / where I will find the money ti pay them but it was only negative because it took in too account payments to other cards which I wouldn’t be making as high as they are in a DMP.  

sourcrates

As I said in my post above, just allow the collection process to kick in, it can take a while sometimes, but you need to focus on what you are trying to achieve here, don`t do anything for now, watch and observe.

You may get to a point where not all your creditors have defaulted you, at that point you need to make a choice as to whether its worth waiting on the rest of them, or going ahead with the DMP, and using the complaints process to get the interest etc stopped.

Its your DMP, so your choice.