Self managed DMP - do I start repaying now?

lea

Hello all

Following the extremely helpful advice on this board, my personal credit card debt was no longer manageable (repayments of over £1k a month which I couldn't afford) and I'd run out of balance transfer offers, and all my cards were at standard interest rates so I stopped all my direct debit payments for my credit cards in May.

I'm wanting to please check with you knowledgeable people on here what stage I seem to now be at in the process and whether it's time to start repaying at an amount I can afford?

My credit file via clearscore shows missed payments - but no 'D' or defaults as such, I'm not sure if I'm misunderstanding what I need to be looking for?

As for communication with lenders, it has been as follows

Fluid - a letter on 1st August saying 'A default notice has been issued to you, but despite our recent letter you have failed to repay the requested amount by the date shown in the notice. Your agreement with us is now terminated'

However I have not received a letter which stated it was a default notice - only a letter saying 'Notice of Sums in Arrears' dated 23 June.

I then got subsequent letter from Wescot asking me to contact them about repaying the debt.

MBNA - various letters stating I'm in arrears, with one dated 7 August telling me they are closing my account. Another dated 14 August saying 'Default Notice served under section 87 (1) of the consumer credit Act 1874' saying if I don't repay an amount by 1 September they will end the agreement and register a default with credit reference agencies. Is this now time to contact them to pay or do I wait until the actual default?

Virgin - various letters chasing payment, most recent on 28 July saying 'Notice of Default Sums' saying I've been charged a late payment charge of £12.

HSBC - various letters advising I've missed payments, most recent on 12 June asking me to catch up with payments. Only statements since.

Lloyds - emails chasing payments and an arrears notice on 29 July.

Next account - various letters saying I've missed payments, most recent on 13 August entitled 'Notice of Sums in Arrears served under section 86C of the CCA 1974'

Am I still to hold tight or is now the time to act? Really keen not to get this wrong as don't want to end up with arrangements to pay on my file and ruin my credit rating for any longer than it needs to be (I'm nearly 43 now so very aware this is going to impact me for the rest of my 40s at least!)

Thanks so much for your time
Lea

sourcrates

A "notice of default sums in arrears" just means you have missed payments.

A "Default Notice served under section 87 (1) of the consumer credit Act 1974" is what it says it is, a notice of default.

You wait until the 14 day period expires, then check your credit file weekly, it should show the account as been "in default" a big "D" for default should be shown, along with the date it defaulted.

That status will be repeated every month for the next 6 years.

Then just wait until someone writes to you, the debts will either go to a collector to manage, or they might be sold.
Some lenders prefer to keep defaulted debts "in house", not many do this, but Capital one is an example.

Some creditors may not default you, in that case you will need to decide what to do, wait until it does default, or resume payments, ask for advice if that happens.

That`s it, defaults can take a while sometimes, best advice is be patient, as nothing moves very fast in the world of debt collection.

Rob5342

And in the meantime put what you would be paying towards the debts into an emergency fund to cover any future expenses. 

Virgin were very difficult with me and took ages to default but did eventually. MBNA were very reasonable and defaulted me que quickly. It can take a while for credit reports to be updated. My virgin card disappeared and took aboit three months to reappesr as Intrum after it was sold. 

RAS

Hold tight on repayments.

Not sure on your precise circumstances, but....

You need to be saving everything you can into budgeting pots and an emergency fund because you need to have a buffer in case white goods fail, you are off sick etc.

If you rent, you ideally need enough in the emergency fund to cover a deposit and a month's rent in advance. If you have a mortgage, you need to cover say three month's mortgage, depending on what support your employer provides. And the cost of something like the boiler clapping out or roof repairs.

This is also the time to revisit your Statement of Affairs and work out whether it's working for you now you are not paying debt. Every time something crops up that isn't covered by your SOA, you need to adjust it. It may only occur once a year but you need to make provision for 1/12th of the cost each month.

If your income fluctuates, your SOA needs to cover your essential costs each month, although you might have a budgeting account which allows you a bit of flexibility. Once you've got that covered, when you earn more extra money goes into your pots for irregular spends, so if you see a bargain, you've got the "capital" to fund it. You don't want to be trying to fund shoes when the old ones are failing, if you could have bought some half price in the sale 6 weeks ago. 

lea

Thanks so much all.

I freelance so my income fluctuates depending if I'm working or not. I had managed to save just over £2k from not paying the credit cards however I'm between jobs at the moment so sadly needing to dip into that for bills. I'm looking into other income options for when I'm between my main work to try and keep an income as my freelancing is one of the reasons my debt is so high, living off credit cards when not working. The industry I work in is very volatile at the moment with a high percentage of us out of work so i think looking into alternative ways of making money is going to be essential.

I'll hold tight with the debt repayments for now until I definitely see the D markers on my credit file.

Thanks again all

lea

Hello

A small update and a question, please!

Only one of my (five) credit cards that I stopped paying back in April / May has officially defaulted on my credit file. This is my HSBC credit card which I owe £5975.08, which is one of the smaller balances I owe. They have rather surprisingly and quickly, passed the debt onto Wescot to deal with, who this week have sent me a letter entitled 'REDUCED SETTLEMENT OFFER' in which it asks me to make contact with them 'In an attempt to close this matter our client has agreed we can offer you a discount to settle your account' and that I should call them.

From not repaying the debt over the past few months I have a small emergency fund of £2000. Should I consider using my emergency fund and make them an offer, or is it now I should just set up a monthly repayment to them, now its defaulted? 

My other debts (which have not yet defaulted) are as follows:

Llloyds credit card - £9874.90 - interest stopped accruing in September, they've written this week to say they are taking steps to close the account and to get in touch in next 14 days (debt was £9520.77 when I stopped paying)
Virgin credit card - £13,704.76 - have written to say they've terminated my credit agreement and that a default notice has been issued - but is not showing as defaulted on my credit file yet. (Debt was £12082.54 when I stopped repaying so has grown a lot with interest and fees - is this normal?)
MBNA credit card - £11,167.20 - have written to say they've closed my account and have issued a default notice, again not showing on credit file yet.
Fluid credit card - £2342.85 - passed to Wescot to deal with, again says has issued a default notice but not showing on credit file yet (debt was £2182.50 originally but increased due to fees/interest)
Next account - £3621.04 - not defaulted yet, just chasing payments.

Most of the above have continued to charge interest / fees each month too, is this correct? It means all the debts have increased over the past few months from when I stopped repaying.

Thanks for your help,
L

Starfish75789

Im in a very similar position to yourself - I started with Stepchange but canceled and will now be running my own. Im waiting for the defaults to show on my credit records since May/June. My plan is to DMP and pay a significanlty reduced amount until I get offers of settlement. So even though my balance has increased since I stopped paying i'm hoping I will get offers and the reduced offer will remove the interest and charges from the equation.

As for using your emergency fund - I nearly used mine as I had a 50% settlement offer before the account had defaulted. However after sleeping on that decision I thought what would I do if I do have an emergency, as I can't use a credit card and have no extra funds. So as tempting as it was I couldn't afford it yet...maybe in 6 months.

As Sourcrates has told me and many people - patience and please don't rush into anything.

That's my view - Ill leave it up to the experts to guide the way

RAS

Your emergency fund isn't really enough to consider settlements yet. If you are renting, you need enough to pay the deposit and a month's rent if you have to move, although hopefully you'll get the deposit on the old property back to build up your fund again.

And you're not likely to get much off in a settlement at this stage so it's not likely to be sufficient either. 

I'd suggest trying to build it a bit higher whilst you wait for the other defaults to register. And make sure it's in an ISA or other savings account. Instant access obviously.

lea

Thank you both for your input.

Should I be ignoring the reduced settlement offer letter from Wescot entirely, or should I be contacting them to offer a monthly payment now that particular debt has defaulted?

I am inclined to agree about my emergency pot not being substantial enough to afford to settle with Wescot/HSBC especially as that is one of my lower debts.

Thank you

RAS

Have Wescot provided the account number and log-on details so that you can make a payment on-line? 

Rob5342

The emergency fund should be just that, don't use it for non emergencies and leave yourself unable to deal with unexpected coats. You should really have a separate settlement offer fund, and only use that when your emergency fund is at a good level.

There is no rush to start repayments, if you are happy with what's in your emergency fund then you might as well start, but if you want to build it up a bit more then wait a few more months.