Debt Management Plan - StepChange

Kerplonker

Hi guys, newbie here and as the user name suggests, I've made an ar*e of my finances. £65k in unsecured loans and credit cards (COVID and cost of living though have pushed me into the unaffordable level of debt), so looking for feedback from anyone who has used StepChange Debt Management Plan.

I've provided all the deets requested, budget, outgoings, income, personal deets and they have recommended DMP as the way forward, repayable over 14yrs (gulp), but looking for a neutral's views on pros and cons.

Will spouses credit score be affected? What impact on mine when it comes to renewing mortgage (presume mortgage companies will give me a wide berth if looking for a fixed deal, due to renew this summer) forcing me onto a variable rate with current provider? I have a decent LTV ratio on my home, less than half the value of my home is left to pay(about 45%), is that a negative when creditors assess an offer from StepChange (mortgage in joint names with wife)? i.e they'll come looking for the deeds with their lawyers. 

More generally, were StepChange hands-on, feels a bit like and automated on-line service, anyone had direct experience? Any info welcome, cant think of more Qs at the minute, I'm sure I think of them though.

Kerplonker

RAS

Let's start with the big bit.

You should be able to select a new mortgage deal with your current provider just by logging on and researching the offers. And there be no credit check.

You are financially linked to your spouse because you have a joint mortgage. Do you have any other joint accounts? Even worse, a joint account with a company or group with whom you personally have other debts (apart from the mortgage)? If so, those need sorting rather than risk off-setting.

One thing you need to understand is that it takes time to get creditors to default your accounts. Meantime, you set up an emergency account into which you put every brass farthing in case the boiler blows up, etc, because you won't have easy access to credit.

Once the debt is defaulted, it drops off your credit record in 6 years, what ever happens.

Step change may suggest you start paying small sums now to creditors. You risk getting Arrangement to Pay (AP) markers; those stay on your credit record for 6 years after you settle the debt. So potentially 20 years.

You may want to hold out for the defaults first?

You can then let stepchange manage things for a while. But in a few years you may start getting offered discounts to settle.

Then you could take charge of the DMP, hold your nerve and settle one by one for a substantial discount (providing it's not with PRA).

Kerplonker

Thanks RAS, yes I have one joint account, never over £100 overdrawn, just used for paying the shopping bill (I pay in, she does the shopping online), it's been consistently that way for years, so spending pattern is routine month to month. No other joint accounts of any kind. 

On creditors defaulting my accounts, I could avoid making any payments on all of my accounts, wait for creditors to default (meantime squirreling money away in a 'contigency' account)? Will my wife's credit record record be hit (given she's financially linked, i.e have no access to credit either)? 

Rob5342

I used Stepchange to start with. They are good but they are funded by the creditors and recommend that you start making payments straight away. That sounds like a good idea when you are new to it but that's bad for your credit record as you risk getting arrangement to me pay markers which stay on your credit record in until 6 years after the debt is paid off, potentially a very long time. You are better off completely ignoring the creditors for a while so they default you as the debt will drop off completely 6 years after the default date. Also if a debt defaults it will usually get sold to a debt collector who would be much more likely to accept a reduced settlement offer.

You can switch to a new fixed rate with your current mortgage lender with no credit check so it doesn't matter how bad your credit record is. I have 4 defaults and switched to a new fixed rate with Santander with no trouble at all.

fatbelly

I'm not a fan of IVAs mostly because they are hugely over-sold by companies whom just want a cut of the huge fees built in to them.

However, they do have a place and that place is where someone has large debts, significant surplus income and can't go bankrupt for some reason.

As long as you research them so that you understand how they work, and choose a reputable IP, then that could be an option for you.

ManyWays

Your situation will get worse after your new mortgage fix. If you want to look at an IVA wait until after your mortgage has gone up or the IVA may run into problems very quickly. 
In a DMP winning any irresponsible lending complaints (https://forums.moneysavingexpert.com/categories/reclaim-bank-credit-card-charges) will speed up the DMP. In an IVA it typically doesnt.