Help with Debts & DMP

Smiggsss

Hi all, I am new here and just looking for a bit of advice. 

A bit of background I didn’t bother with credit until the loss of my parents in 2020/2021 - I lived and cared for them. 

I started getting small credit cards and a few catalogues throughout 2021/2022 this amounts to around 6000 in all 

Last June I took out a loan to clear this and had one monthly payment, my brother lived with me so I was comfortable as we split everything down the middle  and had no issues with repayments. 

unfortunately in the late stages of 2023, I had a breakdown due to being in a toxic workplace and grieving for my father which made me rack up a debt amount of 13k it was a coping mechanism my brother then moved out and that meant I had to start paying for all household bill including rent/bills these all come to just under 950 a month. 

I am currently spending £500 a month on debt which leaves me around £400 to try and live on which in this current climate is impossible especially when my bus fare to work is nearly £100 a month food shopping is approx £200 a month which leaves around £100 a month. Yes I know it’s my fault. I am unable to save anything for any emergencies and it’s starting to affect me. I can’t even have a social life.

My credit ratings have never been the best because the only credit have had in the past is a phone bill.

Anyway, I have currently yet to default on any of my debts. I have seen on the forum,  posts saying default before going with stepchange. 

Step change are trying to push me into an agreement ASAP. 

Am 40 at the moment and my plan is to hopefully go on a DMP for 6 years in the meantime try and save money for a mortgage who knows what will happen. 

I have two loans with RBS ( these may take the longest to default ) ? 

Could I offer my creditors payments myself ( eg £5 a month ) either way am going to default. 

I have already opened a new bank account and transferred all household bills and wages 

My 1st default will be around 15th September 

I was thinking of paying the little payments ie £10 catalogues and letting the big debts default 

I could do this till January then see how the defaults have worked then go with step change. 

Only issue then is they see I have savings and try and take more than recommended from me

Sorry if this all doesn’t make sense 

Any help would be grateful thank you 

Smiggsss

* 500 to live on not *400

Grumpelstiltskin

OK You have come to the right place to get help.

Start by reading this thread.
In Debt and Wannabe Debt Free? first Steps to take are here, please read, then ask questions. — MoneySavingExpert Forum

Complete a SOA as mentioned in that thread format for MSE and copy and paste on here then we can see your full situation.

Next don't panic, when you stop paying your unsecured debts as you will be advised to do nothing terrible will happen.

We advise you to let your debts default because they will disappear from your credit record 6 years from the default date whether they have been paid or not.

If you keep paying a small amount to them through a DMP before they have defaulted  they will stay until 6 years after your final payment.

Next thing to do is to open a basic account ( no overdraft ) with a banking group you have no debts with. Get your salary paid into it and manually transfer direct debits for your rent, council tax, utilities etc.

When your debts have defaulted you can set up your own DMP, no need to go though an agency..

Keep asking questions on here but remember you will be in a situation where you are in charge not your creditors.

Smiggsss

Hi mate, thank you for the above. I will fill the form in shortly. 

I have opened a basic account with TSB but I have arranged for them
to transfer the direct debits over for me. Will this be an issue ? 

I have just cancelled my two big loan direct debits 

will come back with form shortly 

thanks for all your help. 

I have been stupid and was lucky enough to live a life style but also forgot I wouldn’t have my parents forever and would have to live by myself but most of my 30’s were about caring for my parents and giving them the best life I could until they passed. 

I didn’t expect my father to pass away so suddenly after my mother the plan was to both save and me get a mortgage for a house for us both to live in  

Grumpelstiltskin

OK TSB you have no debts with Lloyds, Halifax? members of the same group?

The account is a basic one with no overdraft?

You need to transfer yourself just the vital direct debits to make sure you don't transfer any debt payments.

A lot of people on here use the online banks Monzo is one mentioned.

Make sure you don't pay any of the debts not just the big ones.

RAS

Hi, just to be clear.

When you cancel the payments to creditors, that is not a default. 

It will takes some months of non-payment before the creditor send you a scary letter demand repayment of the full amount, or they will register a default on your credit record. You pay nothing.

Once that default is registered you start a payment towards the debt.

That way your credit record clears 6 years after the default.

If you make token payments and delay the default, or the creditor marks your credit record as Arrangement to Pay, your credit record is damaged for a lot longer, 6 years after the debt is cleared.

Which is why we suggest you delay starting a DMP with Stepchange.

The other reason for delaying is that you use any spare cash to create an emergency fund. Which means you can get a new cooker if it fails, Road test your SOA and build up the funds to make cheaper annual payments for insurance etc. It means you are less likely to have to pause your DMP every life gets in the way and feel much more in control.

Smiggsss

I have an overdraft with Monzo and have heard bad stories. 

Had a bank account with Halifax in 2000’s but well closed 
 

Direct debits for the debts have been cancelled 

fatbelly

RAS makes the point I was going to so maybe I am just saying the same thing in different words

When we talk about a default we are talking about the recording of a default against the entry on your credit files.

That date stays with the debt if it gets sold on.

Six years after thatdate the whole entry disappears, leaving a clean report.

Then you are in the best place to look for a mortgage.

So you want the default marker as soon as possible and any messing about with token offers or Breathing Space just delays the process if it doesn't scupper it completely

Similarly if you are going for an insolvency option, the sooner you start the sooner the entry drops off

Brie

You say you want to save for a mortgage.  Does this mean you don't own the home you're living in?  If so a DRO may be another solution to think about.  

And if you don't think you can do a DIY DMP consider switching to another debt advice agency.  Not sure if Stepchange will allow you to DIY but Community Money Advice (CMA) does.  You might check with National Debtline or Christians Against Poverty (CAP) too.  Don't consider Money Wellness as I believe they will push you to something that will make them money as they are a profit making organisation.  

Smiggsss

fatbelly said:

RAS makes the point I was going to so maybe I am just saying the same thing in different words

When we talk about a default we are talking about the recording of a default against the entry on your credit files.

That date stays with the debt if it gets sold on.

Six years after thatdate the whole entry disappears, leaving a clean report.

Then you are in the best place to look for a mortgage.

So you want the default marker as soon as possible and any messing about with token offers or Breathing Space just delays the process if it doesn't scupper it completely

Similarly if you are going for an insolvency option, the sooner you start the sooner the entry drops off

I appreciate everyone’s thoughts and comments, I just need help. Should I just stop paying all my debts now. When a debt defaults on my credit score from a creditor and they send me a letter shall I call them and offer them a token payment of say £5 £10 a month ? 

sourcrates

Smiggsss said:

I appreciate everyone’s thoughts and comments, I just need help. Should I just stop paying all my debts now. When a debt defaults on my credit score from a creditor and they send me a letter shall I call them and offer them a token payment of say £5 £10 a month ? 

Well we are unaware of your circumstances, and debt solutions are circumstance dependant.

It was suggested you fill in an SOA, then we would have figures to work with.

However, based on what you have posted, I think its best to stop paying all non essential debts now, there will be a few letters and calls, but that`s all manageable, and just normal collection activity.

It can take a few months for your account to default, a formal default notice would be sent, giving a 14 day response time, let that elapse, save an emergency fund, that`s most important, when debts default creditors may retain ownership of the debt, but assign a debt collector to manage the debt, or they may keep it "in house". Sometimes the debt will be sold, whatever happens you will be written too.

You can choose to go with stepchange at that point, set up a DMP with them, or do it yourself, very simple, its not necessary to write letters etc, payments can be proposed/set up online, most debt collectors have spanking websites these days.

There is no need to panic, and certainly no rush, debt collection moves very slowly, there is a very small, outside chance of a lender taking action through the courts, they must follow civil procedure rules, so a letter before action will clearly state what it is, should you get one, you must act on it, its very unlikely to happen, but its something to be aware of.