Advice needed for upcoming payments

LemonHead0102

So I've recently applied for a DMP through StepChange so that I can finally sort my debts out. I'm yet to hear back from them about the application but my next payment date is currently upcoming for my debts which I can pay with what's left from my wage but after that I'd be left struggling for the rest of the month.

What would be the best course of action for me to do in this situation. Do I just wait to hear from StepChange? Do I just cancel the direct debits? Or should I contact the creditors?

If the best thing to do would be to contact them, how would be best to approach them?

EssexHebridean

Cancel the DDs in my opinion, and let Stepchange know you have done so - and put the money you're not paying to the debts into your emergency fund. Ideally it's best to have the EF saved up ahead of entering the DMP as you'll obviously have less available to put towards it once the DMP is up and running (albeit hopefully the budget you are using does allow for at least something to be added to the EF each month!) 

RAS

OK, you are right to do the DMP but the advice of a lot of MSEers is that you stop paying immediately and build an emergency fund before you start payments on the DMP.

You need the debts to be defaulted before you start the DMP because that ensures your credit record improves in 6 years' time. If you just start the DMP, you'll get Arrangement to Pay markers that stay on your file for 6 years after the debt is paid off, in your case potentially tripling the length of time you have an impaired credit record.

The other issue is that you face a decade with limited opportunity to get credit. You are a homeowner so you need to be able to pay for urgent repairs up front. You can always defer some DMP payments if you are hit by a big ticket repair or replacement but that would still mean saving up for a few months.

So, stop all this this month's payments, and defer the start of your DMP until you have some savings. And ensure that you have built both an emergency fund and housing maintenance into your budget.
 

LemonHead0102

RAS said:

So, stop all this this month's payments, and defer the start of your DMP until you have some savings. And ensure that you have built both an emergency fund and housing maintenance into your budget.
 

Okay, that all makes sense. Would you say not to tell the creditors then or just cancel the DD's and let StepChange know as EssexHebridean said?

Rob5342

If you want them to default then it's best to ignore your creditors completely. If you engage with them then they will try and help you which means it may take longer to default you, or they may put you on an arrangement to pay instead. It's completely counter intuitive, but ignorining them completely to begin is far better for you in the long term than engaging with them (since you get defaults with a fixed drop off date 6 years from the default date, instead of arrangement to pay marker that drops off 6 years after to repay the loan). Once defaulted then engage with them and start repaying.

 

RAS

Looking at your other thread, it'll take you the best part of a year to save £2K. Stop the payments now, transfer the amount you would have paid Stepchange into a savings account.

Send an email or letter to the creditors telling them you are in financial difficulties. Do not speak to them on the phone.

When they write to you, engage and tell them you are planning to deal with Stepchange. You need to hold them off as long as possible to build up the emergency fund but may not be able to do so for the whole year. If anyone defaults you, consider a token payment even if you're not with Stepchange formally. 

If you get a letter before action, you'll need to come back here.

Mean-time go round the house, work out whether you've got anything that you can sell, and do so to boost the emergency fund.