DMP advice - maybe move to self managed

Firhil

Hi all,

Hope everyone is well! I don’t think I’ve posted on here before but have been a member for a while  

I got into a lot of debt primarily due to a gambling addiction which I got treatment for last year through the NHS and have (touchwood) knocked on the head ever since. However as a result of this I accumulated around £20k of debt on top of other debts such as my car PCP and a few smaller ones, totalling around £34k.

I contacted Stepchange last November and set up a DMP through them, to my 5 creditors, and have been making monthly repayments since December. The creditors and current estimated balances are :

Barclaycard (Defaulted & Transferred debt to another company) £6k 
MBNA £7.3k (Seems to think I am up to date - unfreezing interest)
LLoyds £7.1k (Not yet defaulted)
Creation £1.5k (Agreed to payment plan)
Tesco Bank £8.6k (Defaulted)

So since setting up my payment plan through Stepchange, I have been reading some of the threads on here and was unaware previously it would’ve been better to default everything first before doing the plan. Obviously, this may still happen with LLoyds, but Creation agrees to the payment plan and MBNA, as my payment happens to be above their minimum payment, sent me a letter this month saying Im back on track and that they will be unfreezing the interest from next month.

I contacted Stepchange to see if they could send MBNA a letter to explain I am still on a DMP and the only reason I’m making over their minimum payment is because it is just the way my payment has been split, and that their share happens to be higher. Stepchange responded with what seemed to be a generic email saying they can’t do anything as it’s up to the creditors whether they want to freeze the interest or not … but surely they could ask them? 

Anyway. I’m just wondering if I should start self managing this and if so how to go about it. Would I continue paying Lloyds,Barclaycard & Tesco Bank the already agreed monthly payments based on my budget, and stop paying Creation and MBNA to get them to default me?

Im pretty confident I could manage my own DMP. I’m just not sure of the best way to go about it with me already being on a DMP and having some creditors defaulted, one not defaulted and agreed to the payment plan, one thinking I’m back on track, and one not yet defaulted. It’s all a bit all over the place.

I appreciate any advice anyone can give and thanks in advance!

Russell

Rob5342

Yes it's best to get them defaulted before you start a dmp, that freezes the interest and gives you a clear date when they will drop off your credit report regardless of anything else. I made the mistake of starting paying straight away as that's what Stepchange advised, but I now have arrangement to pay markets on my credit report which will stay for a lot longer than defaults would have done.

I'd switch to managing it yourself and work out what your offer to each creditor will be. Make those offers and payments to the defaulted debts and stop payments to the non defaulted ones. As they default then start making the payments to them and in the meantime save those payments to go towards your emergency fund and/or a fund for making full and final offers.

This site is useful for working out your budget and for generating the letters you send. DMPs are informal and have no specific requirementsz but this site provides.w good base which you can alter as you like:

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

RAS

It looks like self-managing would be better for you.

Pay Barclays and Tesco and stop paying the others. Pop the rest of the payment into an emergency fund. Then start paying the others as they default 

Best of luck.

Rob5342

One thing to bear in mind is that lenders often take 3-6 months to default and can sometimes be very difficult and take even longer (Virgin haven't defaulted me after nearly two years). You haven't said what your repayments are but it may be worth using the money you are saving by not paying some of them to clear the creation one. If you could clear that in say 5 months before the others default then it may be off your credit report sooner than if you leave it and it takes them 6 months or more to default it.

Firhil

Thanks both for your advice, much appreciated 

I’ve written to Stepchange and said I’m moving to self managed DMP, using the template letter provided on the CABmoney website.

My repayments total £545, of which £320 go to the three not yet defaulted. So technically I could pay off the Creation one in a few months as you suggest Rob, but I don’t have any emergency fund built up as Stepchange never advised me to do that  

So if I stop paying Lloyds, MBNA & creation to get them to default, should I send them a letter of some sort or just not bother until they default? Will they accept a revised DMP in a few months after I stop paying them on my current one?

Also, I’ve been filling out the I&E on the CAB website. On the Stepchange one it let me enter money towards hobbies like my gym membership or even my phone contract, and also repayments I’m making to family members for money owed to them, and my student loan repayments, but there doesn’t seem to be anywhere on the CAB template for that. Oh the Stepchange statement they simply list the phone/gym under “communications and leisure - hobbies/telephone”, and the family repayments/SL under “other essential costs”. They do not add any additional info on their statement.  Should I just add extra lines and call them the same? 

Thanks again

sourcrates

Don`t get me wrong, Stepchange are very good at what they do, and have helped countless people recover from there financial woes.
However, they operate a "one size fits all" policy when it comes to treating creditors fairly, and this is not surprising, as they are almost 100% creditor funded, so there limit of influence does not extend very far.

Anyone who can use a computer, and has a basic knowledge of debt collection/management etc, can self manage a DMP, all you need are the right tools to do the job, and some spare time to organise things.

Non payment, or paying less than the contractual minimum, should encourage defaults, this is necessary for two reasons -

(1) all interest stops
(2) you have a clear 6 year window till your credit file recovers

and of course self management is much more flexible and removes any requirement to keep within certain budget constraints, you can pretty much run it as you see fit, so to your benefit, instead of your creditors.

Rob5342

DMPs are informal arrangements, you could just copy the existing Stepchange budget as it is and tell them you'll be making the payments now, or adjust it as you see fit. What the creditors think is irrelevant really, they get what you can afford so there simply isn't any remaining money that they could be given.

You could inform the non defaulted ones of your intentions, but I'd leave it there and ignore any other contact. They will write to you mentioning possible legal action and involving debt collectors but that's nothing to worry about. Usually once defaulted the debts will be sold to a debt collector who will just take the payments you offer them. That's what's happened with most of mine.

natlie

Hi,

I know they wouldnt necessarily do it to everyone but MBN* did the same thing to me and after a year they cleared the whole lot is as over £4k just completely written off, they had threatened to unfreeze it but never did it. 

Firhil

Morning all,

Thanks for all your advice. I think I will write to the 2 defaulted ones telling them I am now doing it self managed, using the CAB template, and that I will continue to make the payments as usual as per my previously submitted I&E, and submit an up to date I&E in 6 months.

I will write to the other 3 telling them I am now self managed and add that a large unexpected expense has come up and will be unable to make payments for 6 months, after which I will send them an up to date I&E. Hoping this gets them to default me, and also let’s me build up my emergency fund.

Sound like a plan?

RAS

I'd start by checking whether any of your defaulted debts belong to or are managed any company with whom you have debts that aren't defaulted.

Firhil

No, I don’t believe they are. Barclaycard defaulted and transferred the debt to PRA Group, Tesco Loans defaulted & haven't transferred the debt yet.

The non-defaulted ones are MBNA, LLoyds & Creation, all of which haven't transferred the debt yet.