DMP advice with defaulted account?

dustiebustie78

I have a large amount of debt and not enough coming in to make the minimum payments. This will not improve over the next few months. I have done an incoming/outcoming expenditure with CAB, and they said I have £500.01 left to be able to pay any debts. This is less than what my usual minimum payments are. I called my bank & told them that I was struggling to meet their £452 minimum payment as I have another loan I must pay back too, and their minimum payment is £376.40. We again went through an incoming/outgoing thing on the phone, and he said the only option his system offered was to close the accounts and send it to default. I agreed to do this as there is just no way that I can afford anything else. I offered to pay a smaller amount, and he said when it gets transferred to another department, I’ll be able to make a payment plan with them. This will take 30 days and all interest and minimum payments will be frozen. He said the whole process can take 90 days and within that time, payments are frozen along with interest. 

I am hoping to do a debt management plan but organising it myself rather than doing it through a company. I am offering to pay £174 to the other loan (waiting to hear back from them), and £377 to this debt which is made up of 2 credits card and a loan. I was planning on setting up a monthly standing order to pay them.

I have been reading the forums though, and I’m a bit confused. Is a DMP recommended if an account defaults? I have set up a separate account and plan to start an emergency fund. Is there anything else I should be doing?

Any help or advice is greatly appreciated. 

fatbelly

That all sounds ok. You need to have your active current account somewhere that isn't connected to your debts. 

Let us know how you get on.

You know there are resources on

https://nedcab.cabmoney.org.uk/dmp.asp

Rob5342

dustiebustie78 said:

I have been reading the forums though, and I’m a bit confused. Is a DMP recommended if an account defaults?

What are you confused about? Normally a dmp would be suitable if you cant affect the minimum payments but would be able to repay the debts in a reasonable time period if the interest was stopped, say 5 years. If a debt defaults then all interest is stopped and the default drops off your credit report after 6 years. If you talk to the creditors about a payment plan then your credit report will be marked with an arrangement to pay marker whixh stays in your credit report foe 6 years after the debt is repaid. We usually recommend stopping paying to get defaults before starting a dmp as its muxh better for your credit report in the long term. The normal process we suggest is:

1, Work out a budget and decide what you'll ne paying esxh creditor.

2, Stop paying your debts, dont contact the creditors and ignore any contact from them.

3, Pay what you would be paying each creditor into a en emergency fund.

4, Wait for each account to default, then when they contact you start making the payment you decided on in #1. There is no discussion here, you just tell them whar they are getting.

5, Keep making the payments and if they dont like it they will sell the account to someone else.

6, Try and save money into a settlement offer account and when you hsve enough make settlement offers to your crediors. One approach would be to decide on payments less then you can afford in #1 and allocate some money to saving for settlement offers.

By following this approach you can clear your debts for less money and with your credit report being harmed for less time than it would have been had you engaged eith your creditors. I suggest that you stop all contact with your creditors and follow the above plan. Intuitively ignoring them seems wrong but it's far better for you in the long term. 

dustiebustie78

Rob5342 said:

dustiebustie78 said:

I have been reading the forums though, and I’m a bit confused. Is a DMP recommended if an account defaults?

What are you confused about? Normally a dmp would be suitable if you cant affect the minimum payments but would be able to repay the debts in a reasonable time period if the interest was stopped, say 5 years. If a debt defaults then all interest is stopped and the default drops off your credit report after 6 years. If you talk to the creditors about a payment plan then your credit report will be marked with an arrangement to pay marker whixh stays in your credit report foe 6 years after the debt is repaid. We usually recommend stopping paying to get defaults before starting a dmp as its muxh better for your credit report in the long term. The normal process we suggest is:

1, Work out a budget and decide what you'll ne paying esxh creditor.

2, Stop paying your debts, dont contact the creditors and ignore any contact from them.

3, Pay what you would be paying each creditor into a en emergency fund.

4, Wait for each account to default, then when they contact you start making the payment you decided on in #1. There is no discussion here, you just tell them whar they are getting.

5, Keep making the payments and if they dont like it they will sell the account to someone else.

6, Try and save money into a settlement offer account and when you hsve enough make settlement offers to your crediors. One approach would be to decide on payments less then you can afford in #1 and allocate some money to saving for settlement offers.

By following this approach you can clear your debts for less money and with your credit report being harmed for less time than it would have been had you engaged eith your creditors. I suggest that you stop all contact with your creditors and follow the above plan. Intuitively ignoring them seems wrong but it's far better for you in the long term. 

So when I got in touch with the banks yesterday, that was the wrong thing to do? I suppose it's done now though. 

dustiebustie78

Sorry, I cant edit previous post. 

Do I just ignore them from now, even though I have sent them an email? ignore all replies, etc?

Rob5342

dustiebustie78 said:

Rob5342 said:

dustiebustie78 said:

I have been reading the forums though, and I’m a bit confused. Is a DMP recommended if an account defaults?

What are you confused about? Normally a dmp would be suitable if you cant affect the minimum payments but would be able to repay the debts in a reasonable time period if the interest was stopped, say 5 years. If a debt defaults then all interest is stopped and the default drops off your credit report after 6 years. If you talk to the creditors about a payment plan then your credit report will be marked with an arrangement to pay marker whixh stays in your credit report foe 6 years after the debt is repaid. We usually recommend stopping paying to get defaults before starting a dmp as its muxh better for your credit report in the long term. The normal process we suggest is:

1, Work out a budget and decide what you'll ne paying esxh creditor.

2, Stop paying your debts, dont contact the creditors and ignore any contact from them.

3, Pay what you would be paying each creditor into a en emergency fund.

4, Wait for each account to default, then when they contact you start making the payment you decided on in #1. There is no discussion here, you just tell them whar they are getting.

5, Keep making the payments and if they dont like it they will sell the account to someone else.

6, Try and save money into a settlement offer account and when you hsve enough make settlement offers to your crediors. One approach would be to decide on payments less then you can afford in #1 and allocate some money to saving for settlement offers.

By following this approach you can clear your debts for less money and with your credit report being harmed for less time than it would have been had you engaged eith your creditors. I suggest that you stop all contact with your creditors and follow the above plan. Intuitively ignoring them seems wrong but it's far better for you in the long term. 

So when I got in touch with the banks yesterday, that was the wrong thing to do? I suppose it's done now though. 

Getting in touch at the beginning is not what we'd normally advise for the reasons i mentioned above. Talking to your crediors if you can't afford the repayments seems very logical, but due to this way the system works it rather perversly makes things a lot worse for you in the long run. 

dustiebustie78

Rob5342 said:

dustiebustie78 said:

Rob5342 said:

dustiebustie78 said:

I have been reading the forums though, and I’m a bit confused. Is a DMP recommended if an account defaults?

What are you confused about? Normally a dmp would be suitable if you cant affect the minimum payments but would be able to repay the debts in a reasonable time period if the interest was stopped, say 5 years. If a debt defaults then all interest is stopped and the default drops off your credit report after 6 years. If you talk to the creditors about a payment plan then your credit report will be marked with an arrangement to pay marker whixh stays in your credit report foe 6 years after the debt is repaid. We usually recommend stopping paying to get defaults before starting a dmp as its muxh better for your credit report in the long term. The normal process we suggest is:

1, Work out a budget and decide what you'll ne paying esxh creditor.

2, Stop paying your debts, dont contact the creditors and ignore any contact from them.

3, Pay what you would be paying each creditor into a en emergency fund.

4, Wait for each account to default, then when they contact you start making the payment you decided on in #1. There is no discussion here, you just tell them whar they are getting.

5, Keep making the payments and if they dont like it they will sell the account to someone else.

6, Try and save money into a settlement offer account and when you hsve enough make settlement offers to your crediors. One approach would be to decide on payments less then you can afford in #1 and allocate some money to saving for settlement offers.

By following this approach you can clear your debts for less money and with your credit report being harmed for less time than it would have been had you engaged eith your creditors. I suggest that you stop all contact with your creditors and follow the above plan. Intuitively ignoring them seems wrong but it's far better for you in the long term. 

So when I got in touch with the banks yesterday, that was the wrong thing to do? I suppose it's done now though. 

Getting in touch at the beginning is not what we'd normally advise for the reasons i mentioned above. Talking to your crediors if you can't afford the repayments seems very logical, but due to this way the system works it rather perversly makes things a lot worse for you in the long run. 

Thanks for your reply. So moving forward, do I stop replying until accounts have defaulted?

Grumpelstiltskin

Ignore all phone calls, E Mails, texts. they will threaten all sorts but just ignore.

Open any letters and just check they are not letters before action.

Get on with a new basic bank account and save as much as you can towards an emergency fund, keep coming back with any queries you have but don't panic and don't do anything until you are sure you are doing the right thing.

sourcrates

I very much doubt your bank will default the account that quickly, they will be sending it to recoveries, who will try to get you to agree a payment plan with them, your accounts status will be unknown at this point.

Much better to let the collection process unwind, and get into full flow so to speak, now this applies to all your unsecured debts, let them go through there collection activity, letters calls etc, and wait until its showing as in default on your credit file, along with the date it defaulted, you should receive a default notice in the post, for each account, demanding full repayment of the arrears within 14 days, you should ignore this, its for information purposes only in your case.

Once defaulted all interest stops permanently, you are no longer bound by the accounts terms or conditions, and you have a clear 6 year window till the default is removed from your credit file.

So once all that is confirmed, you can make payment arrangements with whoever writes to you, as its more than likely the debts will change hands whilst all this unfolds.

dustiebustie78

Thank you so much for all your replies. I'll definitely come back with anymore questions I have. You're all such a great help.

dustiebustie78

Hi all, thank you so much for help previously. After meticulously going through my bank statements over the last month or so, and seeing the money coming in, and the money going out in terms of rent, council tax, bills, etc I think I filled the form on CAB wrong or was being overly ambitious because when I did the expenditure form with StepChange it actually left me in a negative. I applied for a DRO via StepChange/Money Wellness and was accepted today. I just have a couple questions if okay..., 

One of my creditors is housing benefit overpayment. Currently, I am paying it back through the allowance they give me to pay my rent. So instead of paying a reduced amount because of housing benefit, I pay full rent and they keep the allowance to go towards the arrears. Now it's on the DRO, will they still keep taking payment? Or will I be entitled to that payment towards my rent again?

Klarna was also one of my listed creditors and that leaves my account automatically via card payment method. Will it not leave my account anymore now? or will it still keep taking it?

Thank you in advance