Starting a DMP

Peters5468

Hi everyone, 

I am looking to start a DMP soon. Although I am up to date with my payments, I am struggling to maintain them. I have contacted StepChange, but the forums seem to suggest that it would be better to allow the relevant accounts to default before starting a DMP as this will reduce the length of time that my credit file is impacted. Please could someone advise me how to proceed? I currently have around £35000 in debt, mainly personal loans and credit cards. This is largely due to a lack of control over my finances and getting into a 'debt spiral' over the last few years. 

Thanks in advance for any responses - much appreciated! 

Grumpelstiltskin

Welcome to this board, you are in the right place.

The first ting to do is not panic, people panic and go into a DMP too soon.

Start by reading this thread.

In Debt and Wannabe Debt Free? First Steps! — MoneySavingExpert Forum

A SOA is a good start, also if you owe money to the banking group you have a current account with be prepared to move to a different bank with a basic account.

Keep posting we don't mind how many questions you ask, the more prepared you are the easier it will be.

2021rdsunshine

Hi Peters5468, the reading of the First Steps thread is definitely very helpful. I have started my journey last November and so far so good. First thing I done was cancel payment to creditors. Then I worked on my SOA , confirmed if my current bank account was linked to any of my creditors and I’m now waiting for creditors to default me. They already passed debts to debt collectors so hopefully defaults will start to happen sometime soon. There is been phone calls and letters that I’m just “ignoring “ filling them by order. Phone calls are now less than the first couple of months. When the defaults happen then I will start paying whoever owns or has the debt at the time . In the meantime all the extra money that is left from my budget because I’m not paying debts is safely accumulating in a separate account, we call it our fighting money. This will hopefully help when , later in the process, creditors are open to reduced offers to pay the debt. 

So really it’s not as scary as it sounds at first. What I think I’ve done was changing the way I looked at it. The first few weeks were a bit difficult because, like yourself, all the debt was being paid on time so stoping paying it was a big thing for me. But the advice on this forum definitely helped immensely. Good luck!

sourcrates

@Peters5468

Hi, and welcome to the forum, this time of year is always very busy with people trying to sort out their debt issues, and debt management is the ideal choice for most folk.

As you can imagine there are lots of new threads from those just like you, who want to know the in`s and outs of how best to approach a DMP, so to avoid having to repeat the same advice over and over again, why not try looking through some of the recent posts on DMP`s, everything you could ever want to know has already been said many times over.

Here are a few to get you going -

DMP mutual support thread part 13 !! - Page 520 — MoneySavingExpert Forum

this one a very, very long read, but everything you ever wanted to know is contained within it.

Credit card debts - Page 14 — MoneySavingExpert Forum

Good luck.

Peters5468

Thank you for the advice. I have cancelled the direct debits to my creditors and set up a new bank account unlinked to those I owe money to. Please could you confirm if I need to set up the DMP as soon as I receive a default or can I wait for all accounts to default? Do I also need to send a copy of my budget or will they accept whatever I can offer? Thanks again 

Grumpelstiltskin

Defaults are in the future you won't receive all of the at the same time some can take months longer than others.

You need to save as much as you can now you have cancelled payments, 2  reasons, 1 to save an emergency fund, no access to credit when the fridge freezer packs up and the car fails its MOT both in the same week and 2 to be able to offer F & Fs at a reduced rate in the future.

If you self manage your own DMP  ( not as difficult as it sounds )You decide what you pay your creditors and you are not forced to give the your SOA.

It is useful to complete a SOA and post it on here.

Peters5468

Thank you. Please could you point me in the direction of a link to complete the SOA? I’ll link and post it here. 

Martico

Here you go: https://www.lemonfool.co.uk/financecalculators/soa.php

Peters5468

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 1

Number of children in household......... 0

Number of cars owned.................... 0[b]

Monthly Income Details[/b]

Monthly income after tax................ 1900

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 1900[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 284

Secured/HP loan repayments.............. 300

Rent.................................... 0

Management charge (leasehold property).. 0

Council tax............................. 119

Electricity............................. 25

Gas..................................... 25

Oil..................................... 0

Water rates............................. 10

Telephone (land line)................... 0

Mobile phone............................ 10

TV Licence.............................. 13.25

Satellite/Cable TV...................... 0

Internet Services....................... 37

Groceries etc. ......................... 200

Clothing................................ 40

Petrol/diesel........................... 0

Road tax................................ 0

Car Insurance........................... 0

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 0

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 0

Buildings insurance..................... 10

Contents insurance...................... 0

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 20

Haircuts................................ 10

Entertainment........................... 80

Holiday................................. 100

Emergency fund.......................... 50[b]

Total monthly expenses.................. 1333.25[/b]

[b]

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 0

Shares and bonds........................ 0

Car(s).................................. 0

Other assets............................ 0[b]

Total Assets............................ 0[/b]

[b]

Secured & HP Debts[/b]

Description....................Debt......Monthly...APR

Mortgage...................... 60000....(284)......0

Secured Debt.................. 18000....(300)......0[b]

Total secured & HP debts...... 78000.....-.........-   [/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Santander Credit Card..........2000......31........0

Nationwide Credit Cad..........5900......100.......0

VM Credit Card.................2900......100.......0

Nationwide Loan................10000.....300.......0

Zopa Loan......................9000......300.......0[b]

Total unsecured debts..........29800.....831.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 1,900

Expenses (including HP & secured debts). 1,333.25

Available for debt repayments........... 566.75

Monthly UNsecured debt repayments....... 831[b]

Amount short for making debt repayments. -264.25[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 0

Total HP & Secured debt................. -78,000

Total Unsecured debt.................... -29,800[b]

Net Assets.............................. -107,800[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

Rud0lf

Make sure your secured debts are paid as normal as they effect your house, stop paying for the others and save that money. 

Make sure all your categories are filled in, you don't have a car or any money allocated for other travel, do you never get a bus, train or taxi? Not meaning to be picky but this is were plans fall apart if budgets aren't thorough. 

My best advice would be to open an account with chase or Monzo were you can have a different pot for each thing and allocate the funds each month so that they get a chance to build it's all to easy to borrow from allocations and then not have it when you need it. 

Use the time while you're waiting to decide on what percentage each company will get in your repayment plan, I'd be aiming to put the £166 in an emergency fund every month and giving a percentage of £400 to each of them. Once defaulted interest becomes 0 so calculate based on size of overall unsecured debt. 

If you round to £30000 then 1 percent is £300, for every £300 of debt with a company you would be paying then £4 a month. 

Good luck, remember your in it for the long haul so get your budget pots as realistic as possible to make it easier to stick to and build the emergency fund as much as possible so nothing can derail you.

RAS

Peters5468 said:

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 1

Number of children in household......... 0

Number of cars owned.................... 0[b]

Monthly Income Details[/b]

Monthly income after tax................ 1900

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 1900[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 284

Secured/HP loan repayments.............. 300 what is this? Is it secured on the house?

Rent.................................... 0

Management charge (leasehold property).. 0

Council tax............................. 119 are you paying over 10 months or 12?

Electricity............................. 25

Gas..................................... 25 both these are very low, have you checked against the actual metered usage

Oil..................................... 0

Water rates............................. 10 also low

Telephone (land line)................... 0

Mobile phone............................ 10

TV Licence.............................. 13.25

Satellite/Cable TV...................... 0

Internet Services....................... 37

Groceries etc. ......................... 200 you could reduce this for one person

Clothing................................ 40 You need to reduce this to a socks and pants budget in the short term

Petrol/diesel........................... 0

Road tax................................ 0

Car Insurance........................... 0

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 0

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 0

Buildings insurance..................... 10

Contents insurance...................... 0 you need this

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 20

Haircuts................................ 10

Entertainment........................... 80 you need to cut this back

Holiday................................. 100 you can't really afford holidays 

Emergency fund.......................... 50[b] where are the savings accrued in your assets?

Total monthly expenses.................. 1333.25[/b]

[b]

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 0 you to add this 

Shares and bonds........................ 0

Car(s).................................. 0

Other assets............................ 0[b]

Total Assets............................ 0[/b]

[b]

Secured & HP Debts[/b]

Description....................Debt......Monthly...APR

Mortgage...................... 60000....(284)......0

Secured Debt.................. 18000....(300)......0[b]

Total secured & HP debts...... 78000.....-.........-   [/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Santander Credit Card..........2000......31........0

Nationwide Credit Cad..........5900......100.......0

VM Credit Card.................2900......100.......0

Nationwide Loan................10000.....300.......0

Zopa Loan......................9000......300.......0[b]

Total unsecured debts..........29800.....831.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 1,900

Expenses (including HP & secured debts). 1,333.25

Available for debt repayments........... 566.75

Monthly UNsecured debt repayments....... 831[b]

Amount short for making debt repayments. -264.25[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 0

Total HP & Secured debt................. -78,000

Total Unsecured debt.................... -29,800[b]

Net Assets.............................. -107,800[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

A few comments but the big issue is that this looks like an aspirational budget, not one based on your actual expenditure.  And some of these figure are incredibly low, £25 per month barely cover the standing charge for utilities.

It's also not clear what this secured loan is, but I note that you've also got two consumer loans. Have you been running up debt for years, consolidating into loans, and they that doesn't work, securing the debt on the house? If so, this has to stop. Securing consumer debt on the house is dangerous, you can default on consumer debt  with limited consequences, but do that to secure debt and you end up homeless.

Do you never travel? You can't afford a holiday, but do you never visit family or friends? Go to a family event?

You need to start with the last six months statements, allocate every last spend to a category and revise your  SOA so you know what you have been spending. Read the meters and check against the bills. And list the APRs for you debts.