Hoping for advice on which debt plan is right for me?

stu12345_2

the important part is no creditor can do much to pursue until they default, you can ignore calls and texts, you only respond after they default and even then it could be months and months after default before they become more demanding.
debt recovery takes a long time, the rules changed in that creditors can't hound you , they have to be patient and take only what you can afford,
never what they suggest, cos they don't care about other creditors, just their own debt with you

_Penny_Dreadful

oatsinthewater21 said:

_Penny_Dreadful said:

When you apply for a new rental property next year the landlord is very likely to search your public credit files. Your public credit files show insolvency and CCJ and as a DRO is a form of insolvency a potential landlord will be able to see it. I see from your SOA that you have a pet and a pet plus insolvency is going to make you a tough sell to most landlords especially if the rental market remains hot. 

Whilst the DRO looks appealing now you may come to regret it next year. Landlords would have no idea that your on a DMP though unless you tell them. 

Oh wow I had no idea a DMP doesn't show on your credit file!! 

Defaults, which you will have due to a DMP, do show on your credit file but they do not show on your public credit file which is the one landlords and letting agents can access. 

Floss

oatsinthewater21 said:

...The rest of the container is just filled with sentimental items or things I have no space for in a double room but would have space for when I move out. I have had a clear out of things I don't need/don't use in the past etc to try and pay off these debts before so what I have left is really the bare minimum. But I will 100% look into a council lock up to cut costs, as I don't use half the room in the storage container so it is beginning to be a waste of money.

If you need to keep things in storage you need a smaller unit. £120/m is way too much to be spending to store just a few things.

DisabledDan

oatsinthewater21 said:

Hi everyone,

I'm currently in £20,148.53 worth of debt comprising of 2x loans, 1x credit card, 1x balance transfer card, 1x store card and a vets bill, plus £633.06 owed to a friend, so all in all £20,781.59.

Over the last 5 months I've been in contact with CAB, National Debt Helpline and now StepChange to try and find a solution to all of this and start my journey towards being debt free again.
StepChange seem to be the advisors I have found most helpful and supportive throughout this process, so I have taken a lot on board from them. 

Under SC's advice, I asked my creditors for informal holds on my accounts consecutively for 3x months which were all accepted. I then applied and was approved for government Breathing Space (which is coming to an end on 5th August). I know I should have chosen a plan when I first started getting advice but the stress of having to document every expense in my life and it being picked apart and questioned why I was spending what I was spending is something that got too much for me in the beginning and I had to take a break in order to come back and try again. 

Up until the informal holds I was completely paid up to date each month with my debts, as I have watched my family go through the stress of bailiffs and court letters in the past due to money struggles so this is something I wanted to avoid at all costs. In doing so, I was keeping up with all my monthly debt payments but was leaving myself short for food and rent etc so ended up borrowing money from a friend to survive until it all go too much to deal with anymore.

Anyway, StepChange have suggested a few different options to me based on my spare income and situation but I am so stuck on which will be the best option for me. I have read threads upon threads here and tried to research as much as physically possible to find out what I will be up against with any small print that hasn't been discussed with me by my advisor etc.

They have suggested either a DRO, Token Payment Plan or possibly a DMP if I cut costs in places and have more to spare.

The DRO is what I was hoping for and is what I feel after researching would be best for me.
The problem I face is that there will definitely be financial changes in my life over the next 12 months that I'm worried will revoke the DRO.

I am due to have my official probationary review for my job on the 2nd August where my pay increase will be discussed (informally confirmed that I have passed probation but the review is still needed to discuss pay etc). I currently earn £22,750 per annum which I was told was my starting salary and will increase after my probation, to what degree I don't know just yet but would assume in the region of £24,000 based on conversations I've had regarding the pay cut I took to join the company (at that point in time I was happy to take the pay cut as the company values, treatment of staff and environment are so great). So this is a figure that will change in a matter of weeks.

I currently rent privately with an unrelated housemate, my tenancy finishes in April 2025 and I would be looking to move out of my current property and rent somewhere with my boyfriend or if money was still too tight I could move back in with my parents for a while, they have already said that if I needed to move back in with them that they wouldn't charge me any rent or expenses etc until I was back on my feet. So expenses there would also go either up or down but I don't know a figure just yet. If everything else pointed towards a DRO as the best option but the only issue would be moving out, I could possibly extend my tenancy after April 2025 for another 6x months which would take me past the 12 month period for the DRO to finish, so if worst came to worst this could be option.

In turn, because of this, I am wondering if the Token Payment Plan or DMP would therefore be best? I don't feel the TPP is a long term solution due to the informal agreement which can be denied at any point and I would then be back to square one again. The option I don't really know much about is a DMP, I know that you do pay your debts off bit by bit which can essentially last your whole lifetime if the repayment amount is fairly small which mine would be. Does this then mean I would always have issues trying to buy or rent a property or finance a new car etc? I don't want to be in my 70's and still tied down to debt I got myself into in my 20's.

My current budget is as follows: 

Monthly income - £1,680.61

House Rent - £512.50
Storage Container Rent - £150 - (I only have a double bedroom at my property and the rest is communally shared, so my container has my original household items like a sofa, fridge etc that I will need when my tenancy runs out and I can move again but I have no where else to store it)
Council Tax - £84.62
TV License £7.10

Electricity - £22.62
Gas - £22.62
Water Supply - £18.37
Water Waste - £10

Groceries - £300 (including pet food, laundry detergent and household cleaning items)
Vet bills and Insurance - £16.99

Home Phone, Internet, TV Package - £19.89
Mobile Phone - £12
Hobbies, Leisure or Sport - £25
Gifts - £300 - Per Annum

Car Insurance - £36.89
Car Tax - £17.50
Fuel, Parking, Road Tolls - £300
MOT & Ongoing Maintenance - £240 - Per Annum

Clothing & Footwear - £120 - Per Annum
Toiletries - £20

Other Essential Costs - £40 - to the friend I borrowed money from

Total spare each month: £9.51

I have a car worth £690 as an asset and no savings.

Please could I have some advice about the options I have been offered?

I know I should have made a decision sooner as my Breathing Space is running out fast, it's no excuse but I admit I got very overwhelmed trying to deal with all of this and still live a normal life, alongside working a full time job etc and it's finally dawned on me that I need to get my head out of the sand and stop hiding from this, as it won't go away! Thank you 

Thanks for taking the time to do such a detailed post, it seems that you are at DMP vs DRO, I would have another chat with National Debtline as my experience with them was so much better than Stepchange, they spent over an hour on the phone with me explaining differences.

I think the very first consideration should be your mental health, I can already sense that you feel the breathing space is giving you some protection and you don't want to address this until you have to.

With that in mind let's consider the two options in more detail.

First of all comes whether you care about your credit record in the next 6 years, i.e. you want to get a mortgage or buy a car because it seems to me that both options kill these BUT the DRO is over in a year and you can start rebuilding once that year is over.

DMP

I can't see how you keep a DMP off your credit record as it involves waiting for up to six months for debts to default then once they default that default is recorded on your credit file. Sure it won't say DMP but the credit file will show all the debts and sometimes they show up several times for the same debt when they are sold.

Then the debt will be sold to debt consolidators they appoint debt collectors to chase the debt, I am not sure you have the mental strengh to deal with that.  You will need to not engage with them and wait for them to give you an offer of between 60% and 90% for a debt they paid between 5% and 12% for, getting 90% could take several years. 

The first DC appointed will not be the one that makes the magic offer, the first ones just want a contribution no matter how small, that would extend the debt and change the profile to be "collectable" when the idea is to get them to think the debt is totally "delinquent".  The company that bought your debt will appoint a new debt collector after 3 to 6 months of them failing to get a penny from you.  The owner has to believe the situation is hopeless, they will open with offers at 20% off but do not engage for long enough and the 60% offers come in through the next DC.  It is important that you never offer anything, making them be the one that does all the offering is the only way to keep the stronger position. 

Even when responding to an offer, the approach I would take is that you can't afford the amount they are offering but if they offered 85% off you might be able to persuade your brother to help you although he is reluctant as you don't really get on.  The difficult part with a DMP is all of your creditors can see what you are paying your other creditors, so some will feel they should offer you similar while others will think you have more disposable and so they are less likely to offer anything.  It is tough to keep them in sync they will default in different timescales and even if two debts go to the same consolidator they may be more emotional about one than another because they paid more for it. 

In the the end they have 6 years before it becomes statute barred but that resets if you engage with them, so the longer you leave it without engaging the closer you get to the "I might as well wait it out" mindset. Sure there is a risk that once creditor will get a CCJ in year 5 but only one even considered that with mine.

You also need to understand the process in real world, go back 6 months and follow the experience of someone who too the DMP route, also review the DMP Support thread, again go back 3 to 6 months and skim

https://forums.moneysavingexpert.com/discussion/5897083/dmp-mutual-support-thread-part-13#latest

DRO

Most people can't get a DRO because their income leaves them with too much disposable income, it is a tight balance between people who have had a change in circumstances that means they will never be able to pay off a debt but who will manage if the debt is completely gone.  For this to work you need to be in the position where you can't afford to service any debt for a year.

Renting helps you because it keeps your overheads high, if you went  back home I would advise your parents find a way to charge you rent for that year, ideally not in their name.  I would not advise moving in with the boyfriend until the DRO year is over, it just makes things more stressful which is not the best start to cohabiting .

I have not done the math on your income and outgoings, if the debt charities say you are eligible I would take their advice on that, but make sure you understand what changes in circumstances would stop the debt being written off under DRO during and at the end of the year.

I would not worry too much about the impact of a DRO on a Landlord Referencing check, dealing direct on OpenRent or Spareroom means you are more likely to come across a Landlord that does not do tenant referencing.  To be honest most are more worries about pets, for poor credit they just ask for more upfront.

However, my advice would be to do the DRO until your Tenancy expires or even for the full year if it is more convenient and practical for your work.  Once the tenancy expires if you remain in the property it becomes a Statutory Periodic Tenancy (SPT) and goes from month to month if that is the frequency of your rent payments. 

On an SPT you only need to give a months notice if you want to quit, but the Landlord must always give you a minimum of two months notice under Section 21, alternatively if there are grounds such as rent arrears the notice is shorter depending on the ground being mandatory or not (some are but it take longer to get to Court but you may not wait for that).  With arrears there needs to be 2 months minimum arrears, but S21 is accelerated procedure so is heard sooner, again you might leave at the end of the two months notice, but if the Council owed you a housing duty (kids or a disability or MH condition) you would be asked to wait until they take it to Court.

Your bank statements should continue to show your outgoings remain unaffordable, so if you do move to parents you need that rent to go out, you could set up a payment to a bank account that says Landlord and I actually think your parents should take the rent, they can allocate some to food and save some for your emergency fund down the road. I find the National Debtline webpage pretty good at understanding what the DRO is all about

https://nationaldebtline.org/get-information/guides/debt-relief-orders-ew/

Staying in the lower paid job for the year will be less stressful and once the DRO is behind you then a clean start on everything is possible. You could also move home after the DRO year and save up for 6 month payment of rent plus a deposit.

The most important thing you remember is that none of this debt is your fault, the industry wants us to get to a position where we can afford to service debt but not pay it off, then they trap us with higher interest products like consolidation loans and other bad ideas.

For me your Mental Health is the key reason I think a DRO is better for you, as you say it is ruining your life and I think you will never want it again.

oatsinthewater21

Hi everyone, 

Just as a quick update, after my probationary meeting my wages went up and pushed me past the disposable income threshold for a DRO. So I decided to go along the route of a self managed DMP.

3 of my creditors have defaulted, one of which has passed my debt over to Arc Europe who I assume is a debt collection agency. They have only emailed to say that they need payment and if I don’t pay they’ll continue to contact me, but no further action it seems yet. 

I haven’t contacted any of my creditors and have ignored all calls/emails etc. 

For the 3 creditors who have now defaulted and one of which passed my details to a debt collection agency, what are the next steps from here?

Is this the correct time to propose small monthly repayments to them which I will review in 3 months time to see if my situation is better? If so, is this best to be done via email?

If they say they don’t accept the monthly repayments and want more do I ignore them and continue to pay what I have proposed?

Do I need to send anything like a monthly income/outgoings breakdown or tell them the names of my other creditors?

Thanks guys! 

Grumpelstiltskin

Don't propose payments, just pay them. You don't ask them if they are happy you just set a standing order up for the amount you can afford and are happy with.

oatsinthewater21

Grumpelstiltskin said:

Don't propose payments, just pay them. You don't ask them if they are happy you just set a standing order up for the amount you can afford and are happy with.

Thank you! Do I have to notify them to let them know how much I will be paying each month? 

stu12345_2

send them.an email says they will get such and such an amount every month on such and such a date, goodbye

sourcrates

Wait a moment here, don`t be so hasty.

Wait until they write to you before you start adding to their profits, emails/texts etc should all be ignored.

Only a letter requires action, and your response to their first letter should be to ask for evidence of your liability, you don`t just go giving someone money just because they ask for it.

Get them to prove the debt is owed by you, then start talking turkey.

Rob5342

I agree with the above. Thst can take a while so in the meantime put as much as you can into a savings account to cover anything you might need later.