Unmanageable credit card debt, defaults, mortgages and DMP

Morgyface

I've found a few threads focused on DMPs but none that mirror my circumstances and was hoping for insight and advice. I've tried other forums but got little from it other than criticism and pedantic comments on the explanation of my situation which just resulted in me deleting my post. It looks like the people here on MSE might be a bit more gentle and helpful. I realise I've made bad decisions but now desperately need to find a solution. 

Some to-the-point context; around 18 months ago I started a new business. I struggled to find a decent business loan and so ended up using personal credit cards I already had. I'd recently done balance transfers so most were still within 0% intro offers. 

My naive plan was to repay them over the following 12 months once the business was making profit. 

This didn't happen, I spent more than I expected (current combined balances of £30K) and, of course, predictably, the business didn't make any money. 

So I tried to transfer balances, but any card applications I made failed. This meant that what was a just-about-manageable £400-ish a month rocketed to £1,000+. 

Whilst the business is gradually improving, my income is still relatively low and I just can't afford the payments, not to mention the stress which is wearing me down. 

Initially I spoke directly to the card companies, some were more helpful than others and I did get some respite. However, most of what they offered has now come to an end and I'm back in the same situation. 

I tried speaking to StepChange but 'computer said no' as soon as I identified as self-employed. So I then tried Money Wellness who seem great. They're suggesting a DMP which, initially sounded ideal. 

The first person at Money Wellness I spoke to, gave me the impression a DMP "might" result in a default on my credit file. The more recent advisor told me it definitely would result in a default. 

I want to avoid a default purely because of our mortgage. It was difficult enough to get initially so I can't imagine how tricky it will be to switch with bad credit. 

As far as I can tell, it looks like I'm running out of options and that I'm just going to have to accept  defaults for 6 years and do the DMP. 

I've also read something about allowing defaults to happen before giving Money Wellness the go ahead but I'm not sure I've understood this correctly. 

Any advice would be much appreciated!

peb

Money wellness don't appear to be a charity?  So you'd be paying them. 

The experts will no doubt be along but you can't protect your credit score so mortgage will be with your current provider, you should be able to chose from their products.  

You can do a dmp yourself of course 

Sly72

Your only option re mortgage is to stay with current provider when you deal runs out and choose another one with them they do not do credit checks, switching to another provider defaults or none they will do a credit check.

Let debt default and do self managed DMP, as its classed as un secured unless you have some of this as secured debt on your house in that case you will need to continue paying that secured payments.

Morgyface

peb said:

Money wellness don't appear to be a charity?  So you'd be paying them. 

Thanks for the response. I can't quite suss out Money Wellness, it appears they're part of a bigger group (Gregory Pennington) and Money Wellness is their 'charitable' operation. They definitely don't charge for DMPs but do charge for other things. They're apparently Government Approved for DRO's. Can't help thinking they'd be better off being transparent and having a more in-depth about page which explains their business model. Lots of good reviews as of late though. I did ask an advisor how the business stays afloat if the bulk of what they do is free, and whilst a vague response it sounded like it's their pay-for services and funding from the group.

Morgyface

Sly72 said:

Let debt default and do self managed DMP, as its classed as un secured unless you have some of this as secured debt on your house in that case you will need to continue paying that secured payments.

None of it is secured, though some balances are over £5K. I did consider doing it myself since it sounds like the mail and calls will continue, it's not as though Money Wellness can intercept to reduce stress. 

I'm guessing there are guides/posts on a self managed DMP?

RAS

As Sly72 says, you can remortgage with your current provider without a credit check. So maybe not the best deals, but manageable. 

Have you got any HMRC debt, or might you accrue this this tax year?

Next is that you need to get away from Money Wellness, who were Gregory Pennington. They have a massive Government contract for DROs, for which you are not qualified. Otherwise you pay them fees.

Payment of less than the minimum will result in AP markets or defaults.

An AP marker damages your credit record for 6 years after the debt is paid off. The creditor may continue to charge fees and interest.
A default damages your credit record for 6 years and interest stops. 

So the quickest way to repair your credit record is to stop paying and encourage defaults ASAP, knowing that at a defined time, you'll be able to look at whole market mortgages.

As far as I can see your debt is all consumer credit, so Stepchange obviously got confused by the fact that you took the debt to fund business activity. But their way of managing DMPs make AP markers more likely at this stage. 

So stop paying unsecured debt, stash the money into an emergency fund. You need to ensure you can cover any HMRC liability, and in future things like boiler failure, MOT costs etc.

Try and keep your personal and business finances separate in future. An SOA would be a good idea, as much as a business plan.

13thlegion

Firstly, you are in a friendly corner of the internet here. There are sometimes tough love posts but it is all well meaning.

I'd suggest reading this https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps

Typically the advice here around DMP is to:

• Overcome your concern of defaults. You are not the first to come concerned about them, but done right can be one of your most powerful tools.
• Prepare to live in a way that means not using consumer credit.
• Prepare for your mortgage renewal. You can get a remortgage with defaults, with your current provider. Yes this limits options but is better than nothing. 
• Manage the DMP yourself. It is simpler than it may at first seem.
• Ignore anything that is not in writing, and even then only engage with actual legal matters - not bullying tactics. At the start there will be many calls and emails and warning letters. 
• When you start paying again the debts are likely to be owned by different companies than they are now as the original creditor will have sold them on.
• Pay small amounts.
• Save as much as you can of your income so that in the future (potentially a few years) you can take advantage of settlement offers that are less than the total owed. As your debts will be sold for less than the original value the new owners will still make a profit on them and many have successfully payed off huge sums early this way.

fatbelly

Money Wellness don't charge for dmps

https://www.moneywellness.com/dmp

I think it's part of the deal they did with MAPS in return for a shedload of cash

Brie

There are other organisations other than StepChange.  NationalDebtline is good and so is CMA (Community Money Advisers).  CMA meets people normally face to face and can usually deal with self employed, small businesses and guide them through doing DIY DMPs.  There's also CAP (Christians Against Poverty) but I'm not sure how fair they go with handling DMPs.

Frankly talking to any debt advice organisation can affect your credit record.  But it sounds like it's not that great now anyways so by getting things under control can only help.  

The essential thing is to ensure you pay your priority debts - the ones essential for living so like mortgage, council tax, utilities, water with enough left over for food.  Credit cards are non priority so have to wait their turn to get paid.  A good debt organisation will contact each of the cards (& other things like phones etc) and give them your financial details and ask/tell them what is affordable for you to pay.  Interest is very often stopped so any money paid is all going to the debt rather than being wasted.  

Good luck with it all!

peb

Apologies for muddying the water.  O looked at Companies House and didn't see charity 

fatbelly

No problem. It's a recent development for MAPS ( the old Money Advice Service) to be chucking money at a commercial enterprise so it is difficult to adjust.

Of course, Greg Pen used to charge so if anyone is still with them and still paying, they should demand a refund of charges

Payplan do free dmps too and are not a charity