Missed payments, defaults and credit score with DMP

shoret

I have a debt of 28k and have been on a debt management plan for a few months now, recently I had a missed payment come through on my credit report, even though I'm paying off a certain amount it wasnt enough or the minimum payment, should I ignore letters? Could I call my creditors to expand? Will this now continue and mean I have bad credit until I'm out of debt? 

sourcrates

When you enter debt management, you are agreeing to repay what you owe at a reduced monthly rate.

So yes, as you are not paying the original contracted payment, missed/late payments will be recorded, as will defaults, it`s all perfectly normal, letters are required to be sent under the terms of the consumer credit act, all this should have been fully explained to you at the start.

Who is your DMP with, one of the debt charities, I hope.

I get the distinct feeling you have not researched this much beforehand, the basic first requirements of debt management are swap to a bank with whom you have no debt, save up a significant emergency fund prior to starting the DMP, and hopefully have all interest stopped by having accounts defaulted.

shoret

I'm with Stepchange, I have opened a new bank account and making regular payments as part of the dmp, interest and charges have stopped. I guess now I'll continue to get late payments and defaults, is that normal for a dmp? It wasn't clearly explained to me. 

sammyjammy

Read this excellent post from Sourcrates (sorry didn't know how to quote from thread to thread)

Debt collection is a very, very slow process, missed payments may be allowed to accrue for up to 3/4 months on an account without much in the way of contact, any longer than that, and the letters will start to arrive, creditors will also try to phone you, to ascertain why you have not paid.

Next, your accounts would be transferred over to your creditor's collections dept, who will again attempt to contact you, this collection activity may continue for some months.

The next stage will likely be an external debt collector may be engaged to obtain payment, they will run through their series of collection letters with you, and attempt to call you as well, usually after around 3 months of no contact, the account would be returned to the original creditor.

At this point a commercial decision is made, either the debt will be passed to another DCA to attempt collection, or it may be sold to a debt purchasing company, or it may be deemed uncollectable and side-lined, it`s the creditors decision to make.

Somewhere along the way, the account will (hopefully) have been defaulted, so all interest will have stopped, original creditors very rarely take action through the courts, that is left to debt purchasing companies, if you ignore them for too long, the best point in time to start debt management is when your debts have been defaulted, it can take a long time for this to happen sometimes, so its best judged on a case by case basis.

I re-call you mention "bailiffs" in an earlier post, any and all legal action for consumer debt must adhere to the civil procedure rules, this involves a process where a "letter before action" is the first step in the legal dance, if arrangements are not made at this point, next will follow a claim form, should a CCJ be awarded against you, and you make no attempt to pay it, then a creditor has a few further options, they can garnish your wages, they can engage a bailiff to call on you, they can place a charging order on your home.

None of this should be a worry, because once up and running, as long as you are paying your DMP, no further action will usually be taken to recover the debt, as a homeowner you have to be careful about how far you push things with creditors, as your home is a valuable asset, and non-payment of an unsecured debt can, very rarely, lead to a charging order being issued, so you must keep that in mind with every decision you make.

Makingabobor2

@sourcrates always explains things so well. I personally found that SC never really explained things properly when we started and I found out so much more from elsewhere, which is why we eventually went self managed. 

sourcrates

shoret said:

I'm with Stepchange, I have opened a new bank account and making regular payments as part of the dmp, interest and charges have stopped. I guess now I'll continue to get late payments and defaults, is that normal for a dmp? It wasn't clearly explained to me. 

Yes, completely normal, as I said, you're not making your original contracted repayment, you are paying less, so therefore the procedures for paying less than the contracted repayment come into force, so each payment will be recorded as either late, or missed, it doesn't matter that your DMP payments are up to date, that fact is not one that is ever recorded, this will continue till the account defaults, or has "arrangement to pay" markers added, then it will just show that status for 6 years.

By entering debt management, you have effectively broken the terms of your agreement, and so no matter how proactive you are at keeping up your DMP payments, it is still recorded on your credit file as been a missed or late payment.

Stepchange should have told you this, or it should have been something you would have been aware of, anything less than full contractual repayment will be dealt with in this way.