DMP Tips, any other options

Charlii__x

I have been in debt for years and just about managing, but with the cost of living crisis and other factors, I've recently accepted that it is now completely out of control, as while I'm still making all my payments, I'm regularly not buying food and struggling with other essentials. I'm having to borrow money every month from family members just to get through and it's completely unsustainable.

I went through the debt tool with StepChange and they recommended a DMP paying around £140 per month towards all my debts which include a £500 credit card, 2 £500 overdrafts and a £12,000 loan. This doesn't include thousands in loans from family members. I'm just really concerned about pulling the trigger on this. As I say, so far I haven't missed any payments and my credit is classed as fair, I'm on an interest freeze with my overdrafts but that's all. My plan was always to clear my debts and buy a house at some distant point in the future and I'm worried that will never happen now. I'm also terrified of defaults, CCJ's and bailiffs, which if I'm reading correctly are all still an option even with the DMP if the creditors don't accept the terms. At the moment my loan alone is £385 a month and now it will be splitting £140 with 2 other creditors. I can't see why they would accept this. I'm finding this whole process so insanely stressful that I'm tempted to just go back to burying my head in the sand. 

I guess my main concerns and where I'm looking for advice are:
- I've seen it's better to default before entering a DMP - is this correct? At the moment I've never even missed a payment and the thought of defaults make me feel sick.
- I've also seen on here that it's good to save some kind of emergency fund. At the moment I don't have a penny in savings and have no idea how I would even start with this other than just not paying my bills for a few months.
- Is it best to ask for 'Breathing Space' before entering a DMP? So this is in place while it's being sorted?
- How likely are the creditors to accept a DMP through StepChange? 
- If they don't accept, am I likely to be hauled into court regarding not paying the agreed payments?
- I didn't necessarily want to include my credit card in the list of creditors as I'm able to manage this and wanted to continue using this. Is this a good idea or not? Why? etc.
- Will this effect my job prospects in the future? A credit check is often part of the application process for roles in my field.

I'm completely new to all of this. I've always been taught its so important to make sure you pay your bills so this whole thing is completely anxiety inducing and stressful. I've managed to just about keep my head above water for years but now I am completely drowning. Any help you could offer would be appreciated. 

RAS

Ignore bailiffs unless you have Council Tax debts.

Get a new basic bank account from someone like Monzo and get your salary paid in there. As soon as that's done, stop paying the consumer debts now and stop getting subs from your family.

And get away from the idea that you haven't missed payments, unless you've been paying your family back without pleading for more money to cover those payments. I'm guessing the loan was to consolidate previous debts, unless it's a car loan?

Your consumer creditors can much better manage your failure to pay than your family and even when your relationship with your creditors fails, it doesn't wreck the more important relationships in your life.

You need those consumer debts to default, to stop the fees and interest charges. That includes your credit card. And they wont default until you've stopped paying for many months, perhaps over a year. Until the default is registered, your creditors can't take legal action.

It is very unusual for consumer debt that is being paid in part to lead to a CCJ. Creditors know that if they went to court, your SOA would result in very much the same repayment, so why bother? 

Once the default is registered, the debt falls off in your record in 6 years, regardless. If you start a DMP immediately, the payments are recorded as AP markers for 6 years after the debt is paid so wrecks your chances for much longer.

Mean-time, pay any priority debts like rent and Council Tax. Do an SOA, here if you wish as the biggest problem with them in debt situations is that people fail to make allowance for things that can upend their plans. It'll also help people advise on things like utility bills.

And put the money you are not paying your creditors into an emergency fund, somewhere other than with your new bank. Once you get a few months in, you should have enough to cover minor disasters like car repairs and family emergencies.

Family debts can make things difficult, so aim the first month to avoid asking for subs even if it means a lot of budget pasta with basic sauces and yellow sticker items. Then maybe make very small regular payments as people would probably rather have a regular fiver a month than uncertainty.

EssexHebridean

well done for realising that you cannot continue as you are - you've actually done the hardest bit now - everything else is just process and admin really - that lightbulb moment though, that is the point where things - though they might still be scary - become more manageable. 

Nobody can tell you that you won't get CCJs - but it really is SO unlikely as to almost be as good as "not going to happen". And in turn, without that, you can be assured that ANYONE your creditors sent to knock on your door can simply be asked - via a door-on-a-chain or through an open window - be asked to remove themselves from your property. they CANNOT come in unless you let them do so - you are in charge of that one. As for defaults - defaults mean the interest stops and the clock starts ticking on when the debts drop off your credit file - so nothing at all to be scared of there. 

Your first priority - and I mean urgently - is to stop paying to unsecured debts. And THAT is because financially - your first priority is your priority bills - so your rent, council tax, then utilities, food and any essential travel - for example to and from work. Any secured debts also - so if the loan was car finance and the car would be taken back if you stopped paying, for example. You MUST keep the roof over your head, keep yourself warm and fed and ensure that you can continue to earn a living if applicable before you pay a penny to unsecured debt. 

sparks_2023

Charlii__x said:

I have been in debt for years and just about managing....

....

- I didn't necessarily want to include my credit card in the list of creditors as I'm able to manage this and wanted to continue using this. Is this a good idea or not? Why? etc.

You could do that in a self-managed DMP. You are in charge. The advice on here will be overwhelmingly not to. If the card has a low limit then the risk of regretting not defaulting it is lower. Think carefully about this.

- Will this effect my job prospects in the future? A credit check is often part of the application process for roles in my field.

You'll need to accept that for the next 6 years those credit checks will be very challenging with defaults on your file.

Good luck. 6 years seems a long time but I'm suddenly a year forward in the blink of an eye.

RAS

Apologies, hadn't picked up on the credit check in your job. 

Can you confirm if this is a full credit check, or do they check for CCJs and insolvency? If you are not sure, can you look at your work contract or an application form for a similar job? With your firm and another? And report back?

Charlii__x

RAS said:

Apologies, hadn't picked up on the credit check in your job. 

Can you confirm if this is a full credit check, or do they check for CCJs and insolvency? If you are not sure, can you look at your work contract or an application form for a similar job? With your firm and another? And report back?

Hi, its a full credit check when starting the role. I'm in role atm and not planning on leaving but of course 6 years is a long time and anything could happen.

RAS

OK, that helps you a bit.

Others may have a different idea, but I'd revise my suggestions.

You appear to have three very small debts, the 2 ODs and the credit card? 

Making the assumption that if you had to move sometime into another credit checked job, a single (getting older) default is better than several, I'd rejig your budget to stop paying the 12k loan, only. That should leave you enough each month to pay off the credit card or one of the ODs in 3 months, which ever has the highest interest rate? Put any extra into an emergency fund. 

Then split the money you are not paying towards the loan half and half towards the next most expensive small debt and the emergency fund, aiming to clear it in about 3 months. And then clear the last of those small debts. You still need to new basic bank account however.

It's quite possible that the loan won't have even issued the default by that time, so keep saving into the emergency fund until they do. You will get some warning, as by law they have to write at least a month earlier and tell you the relationship has broken down and you have to repay the whole lot if you want to avoid the default.