Some advice before going into a DMP

Skintbob123 · 1 August 2023 at 2:55PM

Hi all

So without boring you to death, I’ve managed to get myself into abit of a hole and owe approx £60k in unsecured debt in quite a short space of time (roughly 2.5-3years).

Not managing my finances well, taking on some of my ex partners debt, living beyond my means as well as a few emergencies that cost me an arm and a leg and then taking out loans to reduce my monthly payments but still using credit cards 🤦🏼‍♂️ so it’s my own fault.

Not defaulted on anything and it was all manageable up until approx 6 months ago but I’m at a stage now where 2/3 of my monthly salary is making payments to credit cards and loans, and it’s become unmanageable and resulting in further reliance on credit cards etc…. To be able to support myself each month.

I’ve been on the step change website and they’ve suggested a DMP with approx £1000 a month to be used to clear the debts, which will take approx 5-6 years.

Couple of questions though.

Im currently in a 2 year fixed deal on my right to buy mortgage. This coming December is the end of the 5 year period where any discount does not need to be paid back to council.

3 years ago my partner and I at the time split up and the agreement was that after the 5 year period is up she is entitled to her share of the equity.

Concern is that as I’ll only be a few months into a DMP will I struggle to remortgage and raise the extra capital to pay her, her share of approx £45k?

Other question is I’d like to take advantage of the breathing space that will allow 60days of no payments required. This will then enable to me to put some money aside for an emergency buffer, as I’ll obviously have no access to credit in case of an issue.

I’ve just made all my payments this month so when would be the best time to apply for it?

Asap or just before the end of the month when all the next payments are due?

Other option is do I just default on everything and then apply for breathing space?

Any help or suggestions would be appreciated.

thanks

sourcrates · 1 August 2023 at 4:03PM

Re-mortgaging with the same lender usually requires no credit check, home owners who are in debt management do report mostly being able to re-mortgage using a sub prime credit broker, so its not impossible.

As for breathing space.........hmmm, it has its place, but the debt collection process can run into quite some months with only the odd letter and a few phone calls to bother you, nothing happens that quickly once you stop paying.

You can get away with 6 months at least before your account is even passed over to a collector, so plenty of time to save an emergency fund, and if you need a further 60 days, its always there for you to take advantage of.

Defaulting first will have two benefits, firstly, all interest and charges will stop, and secondly, there will be a clear 6 year window till your account drops off your credit file, so it makes sense really.

RAS · 1 August 2023 at 4:09PM

You might be well advised to post on the mortgage for where there are advisors who can help you assess whether you will be able you to remortgage for an increased value?

If it was just the consumer debt, you could remortgage with your current provider without a credit check, possibly in the next month or two. The problem will that the even then the new rate is likely to be a lot higher than your existing deal?

Skintbob123 · 1 August 2023 at 4:39PM

Thanks both
concern with the remortgage though is it’s currently in both mine and the ex’s name.

I’ll need to raise additional capital and remortgage in my own name to pay her, her share of the equity at which point she’ll then no longer be on any deeds/mortgage etc……

even if I stick with my current provider will that not mean starting from the beginning again rather than just renewing a rate change?

sourcrates · 1 August 2023 at 4:46PM

You don`t say what your income is, but with 60k of credit debt already to service, affordability may become another issue, and that`s just as things stand now, unless your earnings are well within the 3 figure bracket.

Skintbob123 · 1 August 2023 at 5:18PM

Salary of £50k

LTV on house is good
with roughly £80k mortgage on a house valued at £180k
obviously to pay the ex that would need to raise to £125k mortgage