DMP Help

Hi,

New to this forum & hoping for some help & sorry for the long winded post.

I have just over £50k in unsecured debt, various loans & cc's. These have accumulated over a number of years due to breakdown in marriage, partial loos of income/employment due to some mental health issues, & covid. So far I haven't missed any payments but I am now at the point where my outgoings are more than earnings due to credit card 0% terms finishing, cost of living rises etc.

Currently I am living in a house my father owns rent free but this will be coming to an end very soon & I am going to be starting to pay rent in the near future which currently is impossible  so something has to change. I know I have only myself to blame for the situation I'm in & I don't disagree that these debts need paid, I just need to get myself debt free in a manageable way.

I have contacted stepchange, they have advised my best route is a dmp. I have been reading various posts for a while now on this forum & I think I prefer to self manage my dmp.

I have already cancelled all my dd's, cleared my overdraft, wages are now going into a new clean account & have set up all my priority dd's in this account.

I have read that it is best for all accounts to default but I have a few questions & obviously quite nervous.

Is it actually best to let all accounts default?

Should I make any sort of contact with any of my creditors to let them know I am setting up a dmp or completely ignore until the accounts default?

Should I make any sort of token payment or will this stop a default from happening?

I'm probably going to have a lot more questions & apologies if these have been asked before!

Thanks in advance & any help & support will be greatly appreciated!
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Comments

  • fatbelly
    fatbelly Posts: 20,199
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    When you say you will soon be paying rent, do you mean where you are now, or will you be looking for rented accommodation through agencies, and needing credit checks.

    Do you know why stepchange recommended a DMP rather than bankruptcy?

    Once your living situation is stable, if you could post an SOA, that would be useful

    https://www.lemonfool.co.uk/financecalculators/soa.php

  • For me it was a trade-off.

    Debts drop off your credit record 6 years after they default. Letting debts default before you start the DMP will reduce the amount of time they're on your credit record. So that can be a good option. But you're likely to get more letters etc from creditors during that time. Some people are pretty happy to just ignore those and not worry too much about it. Once it's in default they can't charge interest, but most creditors will freeze interest on a DMP anyway. 

    For me personally I preferred to get things sorted with the creditors as soon as possible. With a DMP starting immediately after 2 months of breathing space (which you can get stepchange to put you into), I haven't had any hassling letters and threats from the creditors, which was important for my mental health at the time. All my creditors still agreed to freeze interest straight away, but it did take longer to get defaults on my account. I started the DMP in August 2022 and one account only defaulted last month and my smallest debt still hasn't gone into default.  

  • Rob5342
    Rob5342 Posts: 1,338
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    A default drops off your credit record 6 years after it was applied, but an arrangement to pay marker drops off 6 years after the debt is repaid. That could be the difference between having a clean credit record in 6 years and having one in 12+ years. Also once defaulted a debt is more likely to be sold to a DCA, and once it hss been sold the DCA might be open to a reduced settlement offer.

    It sounds completely counter intuitive but in the long run you are treated better if you completely ignore your debts until they default than if you contact the creditors and make a repayment arrangement. It can be a long process and some lenders can be very difficult and drag their feet when it comes to defaulting the debt. Virgin were terrible with me and have only just defaulted me after a year in a DMP and 16 months of no payments at all.
  • @fatbelly
    Thanks for your reply, I will more than likely be looking at private rented accommodation closer to my workplace. I know I'll not pass any credit checks so hopefully find a property I can deal directly with the landlord.
    I think they have recommended a dmp due to the fact no payments have been missed & I would be able to clear all debts within 5 years on a dmp.
    Yes I can post an soa in due course, 
    Thanks again,

    @PurpleMouse5
    Thanks for your reply, so stepchange are managing your dmp? You are still getting defaults even with stepchange rather than arrangement to pay markers? I understand the reasoning behind wanting defaults rather than atp markers, just a little nervous at how long I would have to ignore the creditors for. Iv no issue in paying what I owe, I just need to make it more manageable with the least impact possible. Arrangements to pay would be ideal if they didn't hurt credit history for so long.
    Thanks,

    @Rob5342
    Thanks for your reply, I know, it just doesn't feel right ignoring them but I will have to do what is best for me in the long run & it seems getting defaults is best. Did you self manage your dmp? Did you let any creditors know you were in financial difficulty when you stopped paying? My plan would be to start an arrangement with each account as each one defaulted.


  • fatbelly
    fatbelly Posts: 20,199
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    If no payments have been missed then there's no reason why you wouldn't pass a rental agent credit check. Maybe get that sorted first, then start defaulting on the debts.
  • Rob5342
    Rob5342 Posts: 1,338
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    I used Stepchange to start with and then changed to self.managrd and stopped paying some of the ones that hadn't defaulted to get them to default. I wish I'd stopped paying them all at the beginning as I have one debt that's only just defaulted and that could have defaulted 2 years ago. You can still get defaults when you are on a payment arrangement (Barclaycard defaulted me within a few months of starting with Stepchange), but generally speaking making payment arrangements drags the whole process out for much longer.

    Dealing with the creditors chasing me when I stopped payments wasn't much of an issue, I just blocked the numbers and filed the letters. It was a great feeling when the default letters arrived.
  • Floss
    Floss Posts: 8,113
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    It's also a good idea to use the time waiting for defaults to save what you can into an emergency fund to cover things like washing machine replacement, car repairs, bathroom leak (in my case!)...
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  • Yes Stepchange are managing my DMP and I've got defaults 3/4 of the debts now. On the one that hasn't defaulted I get missed payments not 'arrangement to pay'. 
  • sourcrates
    sourcrates Posts: 28,508
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    Once accounts default, all interest and charges stop, it also gives you a clear 6 year window till the defaults disappear.
    One thing we are seeing these days is creditors reluctance to default, as per FCA guidance, in a somewhat mis-guided attempt at helping debtors.

    So that advice should be applied on an individual basis, as similar results can be gained by negotiation with lenders, but "AP" markers you should try to avoid if you can.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing [email protected]. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • Thanks guys for your help on this, it gives some reassurance knowing that defaulting is the best way to go.

    @fatbelly I'm going to look into some rental properties this week, I think it's a good idea to have something sorted before any payments are missed. 

    @Rob5342 how did you find stepchange & what were your reasons for going self managed?

    @Floss yes that's what I'm planning to do, would prefer to get defaults fairly quick to get the ball rolling but on the other hand I would like to have a decent emergency fund

    @PurpleMouse5 hope you get your last default soon

    Are there any creditors that are particularly difficult to deal with?
    Is there any sort of standard time frame for a default?


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