DMP serious stress and worry

annabelacbella

Basically we had so much interest to pay each month (but we were paying it) that everything else was completely unaffordable, so we went straight to the DMP so that it could be made affordable as quickly as possible.  

sourcrates

It`s a common misconception that no break in payments is a good thing, its not, you can`t open the door to debt help, i.e. the stopping of interest and charges, until an account defaults normally, this requires you to stop paying, and at least to have some history of missing payments.

Unfortunately its one of those things we tend to rush into in a bit of a panic and fail to think things through properly, pre-preparation is key to making any arrangement work for you.

The debt charities are funded by the creditors, and one of their terms of service is to get the debtors into a payment plan as soon as possible, regardless of whether an emergency fund has been saved or not.

Rob5342

I made the same mistake and started with Stepchange without building an emergency fund or letting my accounts default first. As a result I was in quite a precarious position for a while and my credit report has been harmed for longer that it needed to have been.

You aren't tied into Payplan. You could cancel and stop paying to build up an emergency fund, ideally defaulting first, and then start a DMP again (either with Stepchange or doing it yourself which is very easy)

RAS

OP

The debt charities do a good job. 

Whatever their motives, they are a lot better than fee paying companies. 

Regardless of who they choose, most people in this sort of debt are just so stressed out that anyone who offers an immediate solution which removes the fear of trying to deal with spiralling debt is almost a saviour. It allows people to sleep. Often people have already been making desperate decisions for some time.

What isn't made explicit before they decide what to do is that there are issues with going straight into a debt solution, and issues with delaying a debt solution. Some of these are around the legal framework, and some round financial reporting.

People have often been advised to avoid defaults, not always specifically, but by osmosis. The good thing about this is that creditors can't take legal action. The bad thing is that interest usually continues to be charged and it results in credit records being marked Arrangement to Pay.

If you are in spiralling debt, a DMP via a debt card charity often halts interest, which is a good thing. The unfortunate, unrelated, issue is that AP makers stay on a person's financial record for 6 years after the debt is paid off. If the debt defaulted then the credit marker is cleared 6 years after the default regardless of whether the debt is paid off.

That quirk means that someone whose debt defaults has a clear credit record about 6.5 years later, regardless. Someone who cleared the debt in the same time via a charity DMP only gets their credit record cleared in year 12. 

The downside in delaying a DMP is that interest and fees will rack up for a few months, and that the debtor has to deal with communications from the creditors. And legally some of those letters sound quite scary. Even before you meet some of the lower lives in the debt collection world whose letters are churned out automatically with the intention of staying just inside the regulations but scaring the bejesus out of people who think might, may and could happen once in a blue moon mean they are at immediate risk.

It's your ride and it's important to understand that you can make different decisions over time. Just make sure you understand the consequences of each decision, some are permanent, some reversible, some immediate and some slow burning. 

The key is research and knowledge.