Stepchange DMP

ForwardisForward

Hi. I've been hovering around this site for years with various attempts to get rid of debt but this time I'm closer than ever. I've been speaking to Stepchange about a large amount of debt and how to give it an end date because minimum payments are becoming a struggle so it's going nowhere especially as balance transfers are not offered to me anymore.

DMP is the solution they suggest and it all sounds like the right thing to do but I'm terrified of the defaulting and being chased by creditors.  I've never missed a payment no matter how much of a struggle. 

Does anyone have experience of DMPs?  I guess the alternative is debt for over 20 years longer (I'm 50) so I have to be brave.

RAS

Hi, you are in the right place. The stark reality is that most of the time debt collection just involves letters or text asking you to get in touch, or they will have to refer the debt for further action

Further action means their computer is set up to send a letter out in 2 weeks. They know even if they took court action, it would cost them and they can't get blood out of a stone, in fact they will probably get more by being nice.

What's your circumstances? Home owner, working, family? As these all affect your choices.

Others will be along later.

ForwardisForward

Thanks for the fast response. We are weirdly in a good position depending how you look at it!  I'm married and it's our debt. We both work full time and can actually give a decent amount a month meaning in 4 years all creditors will have been paid if they stop the charges and interest.  We do own our home and Stepchange agreed remortgaging, which we can't do on the High Street due to our level of debt, would be a mistake due to making the debt secure and if we couldn't pay that, we would lose everything. 

We are in persistent debt and not getting any younger with no inheritance in the future. We already work full time so it's not going to get any better financially. 

I've been in some kind of debt since I was 18 due to my parents having financial problems and so it's a massive black cloud over my head so any advice is appreciated. 

RAS

Thanks for the explanation. Securing debt is almost never a good idea. If you don't deal with the reasons behind the debt, you end up struggling with the secure debt and building up more unsecured debt. And risk your home.

Firstly do put up an SOA, so we can see if you can sort this without a DMP. Possibly not if you are struggling to pay the minimums, or maybe the choice of cheap pasta for two years would get you back on track .

Almost any debt solution will wreck you credit rating for a while.

If you stop paying and get defaults, the interest and fees are frozen. Your credit record will recover over the next 7 years (ish), assuming everyone defaults you within a year, as the defaults drop off your credit record after 6 years. So by the time you've paid off this debt, you'd be at the point where you might get a "credit-builder" card you pay off in full every month. 

If you dive straight into to reduced payments, there is no guarantee the interest and fees will stop and the AP markers stay on your credit record for 6.years after the debt is paid off. Which usually affects your credit rating longer.

It is essential you set up a new, or new basic bank accounts with banking groups to whom you owe nothing. And an account for your emergency fund; as you need to be able to manage emergencies without credit.

Do not use the switching facility as that also transfer all the DDs to your creditors.

ForwardisForward

Thanks again. That's a good point about the switching service a couple of the debts are DD.

I know the credit record will be ruined but having debt forever is a bleak prospect too.

I'm going to speak to Stepchange about whether I just stop paying now to build up the funds for the first DMP as my husband gets paid weekly and the DMP is a monthly payment. 

Anyway, I need to get to work but thanks again, I'll check back later.

Kakiste

I paid off a massive amount of debt using a Stepchange DMP from 2019-2022 and I would highly recommend them- The one thing I'd do differently would be to cancel all my payments and wait a few months - missing a few payments before starting the DMP as that forces the companies to default you quicker. (Two of my bigger loans took nearly a year to default me because I jumped into a DMP too quickly and one of my smaller debts never defaulted because my DMP payment covered the minimum so it continued to build up interest through the process- I would have saved money if I'd got the defaults before starting the DMP- in the long run it didn't matter but your credit rating will be trashed anyway but getting the defaults asap means it recovers quicker) 

ForwardisForward

Thanks for your input.

How scary just not paying creditors!  We have always paid on time so this is alien to me but I see where you are coming from but I'm terrified. I already get nervous when I see a text message and I haven't defaulted yet.

In a nutshell we currently pay around £1,800 a month on this debt and our Stepchange budget shows we would have £1,500 available in a DMP so it's not massively different.  If they were 0% interest we could pay them off in 4 years so I'm looking at a DMP from the point of view that the debt is going nowhere, its ridiculous and never going to end. We have persistent debt letters but cannot afford to increase payments. 

So if we just stop paying for a few months, do we just use the money we would have given creditors to build up a balance in a new current account or would this be seen as savings and expected to be put in the DMP when it starts?

I'll need to speak to Stepchange again about this.

Thanks again 

sourcrates

ForwardisForward said:

I'm going to speak to Stepchange about whether I just stop paying now to build up the funds for the first DMP as my husband gets paid weekly and the DMP is a monthly payment. 

That may be a very one sided conversation, as stepchange are creditor funded, and their modus operandi is to get you up and paying as soon as possible, they don`t really go in for the "default first whilst you save an emergency fund approach", they may suggest "breathing space" but that is only 60 days respite, not much can be achieved in 60 days debt wise, unfortunately.

So you may have to take the reins for a while here, we always recommend getting those defaults if possible, saving up a good emergency fund, and then going into debt management.

The only issue you may have is that creditors are resisting defaulting debtors too early, because of recent FCA guidance on treating those in debt fairly, which for those in your situation, doesn't help much.

If push comes to shove, and you feel you want to get started anyway, you can always go down the complaints route if creditors won`t stop interest, one thing to keep in mind is any repayment you agree to, must be less than the contractual minimum, or they will never stop adding interest.

Don`t allow stepchange to sway you from that path.

ForwardisForward

That's great advice, thank you.  Do you think I should just be approaching the creditors individually?  Are they likely to listen to me and agree to stop interest or is it best to just work with Stepchange?

It's so frustrating because if we didn't work full time, we would have even less money but they would be more likely to help us out!  We appreciate its our debt to pay off and are happy to but with no 0% balance transfers and increasing interest rates and cost of living its just not possible anymore......

sourcrates

ForwardisForward said:

That's great advice, thank you.  Do you think I should just be approaching the creditors individually?  Are they likely to listen to me and agree to stop interest or is it best to just work with Stepchange?

It's so frustrating because if we didn't work full time, we would have even less money but they would be more likely to help us out!  We appreciate its our debt to pay off and are happy to but with no 0% balance transfers and increasing interest rates and cost of living its just not possible anymore......

That`s what we refer to as "self management" and its a great way to go, its no different from paying your debts normally, except you negotiate a lower, more affordable monthly payment with each creditor, and ask them to stop your interest and charges.

Basically all stepchange do is forward your payments on your behalf, its really not rocket science.

ForwardisForward

Right so I guess I need to weight it all up.  There are 9 creditors so it's a lot of admin especially when I admin all day in my job.  Also half is in my husbands name and he works nights and sleeps in the day and phone call admin isn't something he would be great at tbh.

I shall ponder the situation....

Thank you