Questions about dmp vs defaulting

dobbysock

Hi 

I’ve been reading the forums and trying to understand best before posting. 

My partner has unsecured debts of approx 40k across a loan and credit cards. 

He contacted stepchange and has started the process of a DMP but I have since realised this might not be the best way as ideally want this off his credit file sooner rather than later (I am aware a DMP is 6 years after the debt is paid). I have advised him to default on all his accounts (he is reluctant as it seems so wrong) and then wait and set up payments once defaulted but I wanted to ask a few things so I could give him the facts and pros/cons. 

- I’ve been reading and seen cases where people haven’t defaulted and instead been served with legal action (ccjs) or other issues  - can this happen? What’s the worse that can happen in this situation?

He is able to pay about £1k each month to pay off his debt. Will this be taken into account when contacting after defaulting - will they deem that he can “afford” to pay the loan/debt and therefore deny him any sort of payment plan?

- After defaulting on each can he then contact step change to set up a DMP or would this result in an AP marker? (As mentioned would ideally want to avoid this due to the lengthy time of it remaining on credit after last payment). 

- We currently own 40% of a shared ownership property. If he defaults or goes on a DMP what will this mean for us? Will we be putting the mortgage at risk? We remortgage this month so are just doing a product transfer with the current provider but anxious about what it will mean when we remortgage in 2 years. We are already on an awful interest rate and was hoping we’d get a better one in the future but looking unlikely now. 

Sorry if I’m not making much sense it’s all new to me. 

RAS

Has he already started the DMP and got AP markers? If not, it might be worth asking a mortgage advisor whether you can get a better rate now. They can look using only soft searches to check for options. However, his level of debt maybe an issue anyway. Check on the mortgage forum here in the first instance. 

You can start that process 6 months before the fix ends, so next time look earlier.

A DMP isn't 6 years after it ends.

AP markers, which is what he'll get if he just heads straight into a DMP, last 6 years after the debt is paid off. 

Defaults take a little time to be issued and clear his credit record 6 years after they are issued, even if he never pays a penny.

That's nothing to do with what type of debt management tool he uses.

If he's got £1k per month spare, is this even necessary, an SOA would really help.

Rob5342

Stepchange work in the creditors best interests at the expense of yours. Its better to manage it yourself as
Stepchange just complicate the whole process and give advice thst makes things a lot worse for you in the long run. 

It's completely counter intuitive but you get treated a lot worse if you contact the creditors and ask for help than if you just completely ignoret them and wait for defaults.

Legal action can't be taken unless you have defaulted, and its quite uncommon for it to be taken if you are making payments. Original creditors normally just sell debts on instead of taking legal action. The companies that buy them do so at a small fraction of their value, if you are making payments they can easily double their money by doing nothing for a few years so they dont have much motivation to take legal action which would only result in them getting the same payments anyway. 

dobbysock

RAS said:

Has he already started the DMP and got AP markers? If not, it might be worth asking a mortgage advisor whether you can get a better rate now. They can look using only soft searches to check for options. However, his level of debt maybe an issue anyway. Check on the mortgage forum here in the first instance. 

You can start that process 6 months before the fix ends, so next time look earlier.

A DMP isn't 6 years after it ends.

AP markers, which is what he'll get if he just heads straight into a DMP, last 6 years after the debt is paid off. 

Defaults take a little time to be issued and clear his credit record 6 years after they are issued, even if he never pays a penny.

That's nothing to do with what type of debt management tool he uses.

If he's got £1k per month spare, is this even necessary, an SOA would really help.

Unfortunately he has 2 missed payments this year and the broker has advised us to stick to current mortgage provider even though the interest rate is ridiculously high. 

I will get him to do a SOA this evening 

Rob5342

dobbysock said:

He is able to pay about £1k each month to pay off his debt. Will this be taken into account when contacting after defaulting - will they deem that he can “afford” to pay the loan/debt and therefore deny him any sort of payment plan? 

He needs to work out what he can afford towards his debts, his budget should cover all his expenses and a payment into an emergency fund as a backup. There is no negotiation with the creditors, once defaulted he just tells them what they will be getting and starts making payments. Once defaulted there won't be any AP markers added.

By managing it himself he can just set the payments in a way that work for him instead of having the added complication of trying to keep Stepchange happy. 

ManyWays

who is the mortgage lender?

13thlegion

dobbysock said:

Unfortunately he has 2 missed payments this year and the broker has advised us to stick to current mortgage provider even though the interest rate is ridiculously high. 

I will get him to do a SOA this evening 

He has missed 2 mortgage payments?

There are several points to understand, but thankfully they all work together to provide security and knowledge that things are solvable.

1. Debts are either priority because they involve a level of government (taxes including council tax), utility bills, and secured debts (where there is an asset attached like mortgages and car payments). Or they are non-priority (consumer debt like credit cards and loans)
2. Non-priority debts as the name implies come bottom of the pile of who your partner needs to be paying each month. Mortgages are very near the top. e.g. never make a payment to a credit card if it means not paying your mortgage or going hungry.
3. This thread contains a lot of vital information https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps-to-take-are-here-please-read-then-ask-questions
4. Defaults are not as scary as they seem. Court action is rare, and there are a lot of steps to go through before that comes.
5. Creditors use frightening terms because they a) work to keep you paying or b) are legally required to (e.g. with a default they must demand payment in full which is likely impossible to actually do before they default an account.

dobbysock

ManyWays said:

who is the mortgage lender?

Kent reliance. We haven’t missed any mortgage payments 

dobbysock

13thlegion said:

dobbysock said:

Unfortunately he has 2 missed payments this year and the broker has advised us to stick to current mortgage provider even though the interest rate is ridiculously high. 

I will get him to do a SOA this evening 

He has missed 2 mortgage payments?

There are several points to understand, but thankfully they all work together to provide security and knowledge that things are solvable.

1. Debts are either priority because they involve a level of government (taxes including council tax), utility bills, and secured debts (where there is an asset attached like mortgages and car payments). Or they are non-priority (consumer debt like credit cards and loans)
2. Non-priority debts as the name implies come bottom of the pile of who your partner needs to be paying each month. Mortgages are very near the top. e.g. never make a payment to a credit card if it means not paying your mortgage or going hungry.
3. This thread contains a lot of vital information https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps-to-take-are-here-please-read-then-ask-questions
4. Defaults are not as scary as they seem. Court action is rare, and there are a lot of steps to go through before that comes.
5. Creditors use frightening terms because they a) work to keep you paying or b) are legally required to (e.g. with a default they must demand payment in full which is likely impossible to actually do before they default an account.

Thank you. No we haven’t missed any mortgage payments 

dobbysock

This is what he completed with national debt line. Apologies I thought it was stepchange. We have a shared account (Santander) where we go half on all utilities. 

Yes there are things he can cut back on I’m aware of this. 

None of his credit cards or loans are interest free and although it seems like he has a disposable income but 1. Our mortgage is about to go up by approx £300 per month 
2. the cards and loan have high interest 

he has missed payments on 2 of the credit cards and now has to pay 995.01 and 347.49 upfront to bring payments up to date. 

dobbysock

Sorry forgot to upload