Debt Management plan

gerrard88

Hi All

can anyone give me some advice on DMP with payplan?

i have 30k in credit card debts and they seem really good and can help

Rob5342

Its a good idea to stop paying debts completely and wait for them to default before entering a debt management plan. If they default then all interests stops and the default drops off your credit file after 6 years. If you engage with the creditors straight away then you are likely to get arrangement to pay markers which stay on your credit report for 6 years after the debt is paid off, which is potentially a lot longer..

Payplam and Stepchange are the two free DMP providers. They can be helpful in some ways but they advise you to start a DMP immediately which can be very harmful for your credit record in the long term. Use then if you like, but only once you have stopped paying and your debts have defaulted. Alternatively you could just manage it yourself which is very easy to do. In my experience Stepchange were helpful in getting things sei up initially, but quickly became a hindrance when I wanted to adjust my payments and they wanted to do it their way. I dropped them and did it myself which was a lot easier.

gerrard88

Thanks Rob

What do you mean? Stop paying my min repayments on my cards? What does it mean default?

confused by this. Thank you

EssexHebridean

We assume you are currently managing to pay something to each debt each month - probably the minimum payment, yes? If that is the case, then the usual advice ahead of entering a DMP is to stop paying altogether - this gives you the opportunity to save an emergency fund and perhaps also a “fighting fund” ready to make Full & Final offers in the future. After some months of non payment, you will be issued with default notices by the creditors - this has the effect of stopping interest from being added, and also means that the accounts will show as “In default” on your credit file. At that stage you would usually start making the payment as per the DMP. The alternative is that you pay the DMP amount without waiting and because that is below the contractual minimum you are likely to get an “Arrangement to pay” marker on your file. The reason that defaults are better is that an account with a default drops off your credit file 6 years after the date of default. A account with an AP marker will drop off 6 years after the debt is cleared. So if for example your DMP took 5 years, it would be 11 years (5yrs + 6yrs) before that will leave your file - does that make sense?

gerrard88

Kind of. Thanks for this

i am not sure what to do. So shall I stop paying the min repayments on my 5 cards? I pay about 600 a month

i thought the DMP would be good as it was working out £300 a month over 5 years

i have a joint mortgage with partner

thanks for the advice

stu12345_2

£300 a month for 5 years does not add up to £30k
are you sure this is a dmp and not an iva

gerrard88

304 per month for 5.4 years

Think all my credir card debt is actualy bit lower than 30k

payplan said after 6 years its gone of credit file?

i just honestly I am lost. Not sure what to do for the best. 

stu12345_2

it's off your credit file 6 years after the date of default. if your payments increase or decrease it could be slower or faster to pay debts off fully  depending on your wages 
but regardless , it still is 6 years from date of default.

but if you start a payment plan and they don't  default, then it's on your file for 6 years AFTER you fully complete all your payments.

that's why folk say pay nothing in the meantime, don't do a dmp until debts default 

have you read the sticky in the top of the threads
https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps/p1

gerrard88

Thank you. I have just read them now. I am worried about going months wirhoht paying anything rather than going into the DMP with payplan

stu12345_2

I'm sure others will add comments maybe in morning, but nothing bad can occur until defaults, then at that point you start your payments in a dmp.

creditors can't take any legal action until defaults, then probably months and months after that time if you make no payments from default dates.

default means you never kept up with min payments, hence broke your credit agreement contract. normally after 2 missed payments at  the earliest you will get a default notice to bring your account up to date.

but if you don't then it defaults, then interest stops, cards cut up, no credit available. then you start repayments 

you may get reminder letters and accrue interest until debts default, but it's the key to repairing your credit file faster.

Rob5342

The DMP is the long term plan to pay the debts off, we just recommend stopping paying and waiting for the accounts to default before starting the dmp as it's far better in the long run for your credit record. You might incur late fees and extra interest now, but once defaulted the interest stops comoletely. IOnce defaulted the account is likely to be sold to a debt collection agency, that sounds scary but is actually beneficial as they are more likely to accept a reduced settlement offer which in the long run means you can clear the debts for a lot less.

Stopping paying and ignoring the creditors initially goes against your instincts, but you actually get treated far better if you do that.