Setting up DMP

chullbulla

Dear All,

I am in serious debt of around £40k for CC and unsecured loan and struggling to pay, I tried the StepChange budget and it is showing I cay pay around £200 a month, so it will take more then 10 years to clear, I have few questions which I believe I can get better answers here then from SC,

• I read here I should cancel payments first for few months then go for DMP so I get default quickly on my account, my main concern is I own house and I am worried it will impact my house or I may get court letters/Bailiff's specially if one default me in 3 months and another take like 6 months.
• I can pay £200 a month on around £40k debt which will take around 16 years, do creditors usually accept this? also my plan is to clear all debts well before 5 years by offering partial settlement of under 50% if I can get some money, can it be possible?
• My fixed mortgage ends in Dec 25, can I stay with same lender under new fixed deal?
• just to mention IVA is no option for me as it can impact my job, also I have cancelled my direct debits to creditors already.

Thank you for your help

fatbelly

Court action isn't as common as you think. If you make no payments it's a possibility but tends to be a few years down the line, as they have 6 years to secure their position.

They'll accept what you can afford

You should be able to get a new deal from your existing mortgage lender

IVAs have a lot of downsides so that's no bad thing

Rob5342

You should always default debts first so they come off your credit report earlier. Some lenders can be very difficult and take a long time to apply them though.

Court action can be very slow as they try and make arrangements with you first. If you do a self.managed dmp then you can start paying the ones that have defaulted while you wait for the others to default.

You can stay with the same mortgage lender and get a new fixed rate as they don't do a credit check for that. I have four defaults and three payment arrangements on my credit file and got a new fixed rate from with Santander with no problems. It took about 2 minutes via online banking.

chullbulla

Thank you both for your reply

So based on your advice, I will not go to stepchange until the accounts have defaulted, relief to know that I can get new deals from the same mortgage advisor.

@Rob5342 you mentioned self-managed DMP, how does it work? I am not really good with creditors on phone, can I do it in writing? also, are there any templates, etc? 

As I mentioned I have around £200 to pay a month to creditors, how I can agree with creditors on what to pay if I am doing it personally, for example, I have £40k debt, one creditor with £5k showing default now while others are not yet when I send them the income & expenses I will have £200 spare ( as not paying creditors ) based on % I should not pay them more then £25 a month.

Until I get defaults, I will receive lots of letters and phone calls, should I simply ignore them?

Rob5342

I used this site for my self managed DMP, you type in the same details you did with Stepchange and it generates all the letters for you. You don't have to agree anything, you just send them the letter saying what you will be paying, set up a standing order to pay them, and then they'll just sell it to someone else if they don't like it. I'd do the DMP as if I was paying everyone, and then just send the letters and payments to the ones that had defaulted, adding the others as they default. You can use Stepchange if you prefer, it depends how you view having someone do it for you vs having lots of creditor contact to ignore.

https://nedcab.cabmoney.org.uk/dmp.asp

They will try and contact you a lot, but If you want defaults then it's best to simply ignore them. If you contact them then they will try and help you which sounds good, but they will be more likely to put you on a payment plan which stays on your credit report for 6 years after the debit is paid off. If you ignore them they are more likely to default you, and a default drops off 6 years after it was applied, no matter what you have and haven't paid. Also once defaulted the debt is likely to be sold to a debt purchaser, who would be more likely to accept a reduced payment, but on an arrangement to pay with the original creditor they are more likely to want the full amount. It's a bit counter intuitive, but they want an arrangement to get the whole sum back and don't care that it's worse for your credit rating, and you can make things a lot better for yourself by ignoring them for a while. 

chullbulla

Thank you Rob for your help much appreciated, I will ignore it for now, and let's see, will update here if I need any more advice, I think it is better to deal myself with creditors rather than DMP, also I have 4 creditors to deal with so I believe I can manage, I definitely have a plan to partial settled in a couple of years if the option comes. I was more worried about impacting my home if I ignore and not paying at all.

RAS

I'm not sure I've understood what you are saying? How do you think not paying will impact on your home?

And are you aware that a default, caused by not paying at all in the short-term, drops off your credit record 6 years after it is issued? Regardless.

If instead you make smaller payments, even intermittently, the creditor may well put an Arrangement to Pay (AP) marker on your credit record.

The problem with AP markers is that they stay on your credit record for 6 years after the debt is paid off. So you could wreck your credit rating for 16 years rather than just 6 years.

chullbulla

@Ras thankyou for your reply, what I mean by impacting on home means if creditors decide to go for CCJ and then charge order on the property.

Yes, I am aware that default drops after 6 years, hence I decided to stop paying or contacting creditors until debts have defaulted.

RAS

It's not impossible BUT creditors know that if they win a CCJ, they'll get paid the same as if you were paying the DMP.

They can't go for a CCJ until they default your debt, so you'll be paying them anyway. So why waste money?

Sure others with more experience will come along.

chullbulla

@Rob5342, you shared the link https://nedcab.cabmoney.org.uk/dmp.asp

However, it is saying Derbyshire and also I generated a letter just to see, it says' I took advice for CAB North East Derbyshire. 

@RAS, I understood your points, was not aware that they can't go to court until default, and I plan to start paying as soon as accounts have defaulted.

fatbelly

If you've been on their website, then in a sense you have 'taken advice for CAB North East Derbyshire'. If you're not comfortable with it you should be able to edit that bit out

I see very few charging orders. They're nothing to worry about anyway. The debt just sits there until you move house.