First time DMP Questions - scared and unsure

jones98746

My head is in a whirlwind and I am asking for advice.

I was going to go the bankruptcy route or IVA, but I don't want to take the nuclear option. I believe the best option may be a DMP. I have a few questions though, I have four main debts 3 credit cards and 1 loan. I also have a catalogue debt but hope to pay this off in full shortly before I enter into DMP, with the money I can save from not paying cc and loan.

Is it best to do the DMP myself or contact a debt company? I am a sole trader, and the business is not in debt, but Step Change cannot offer advice as I have a business. Is the Business debt line reputable? Are there other options? Do you advise doing it yourself or does a debt company have more muscle to talk to creditors?

Can I keep my car and keep making payments to the HP Finance?

Why is it best to default before doing a DMP? If I pay a small amount towards DMP every month doesn't that restart the 6-year clock on the statute of limitation? I am confused. Do I only pay into the DMP for 6 years as it will no longer be enforceable to pay, or do I keep paying the DMP for a possible 20,30 years?

I am an executor and have power of attorney for my parents - will being in a DMP affect this? If I inherit property will the DMP be affected, or will I be forced to sell?

If I just stop paying, I am worried about bailiffs and debt collectors, will this happen?

I think that's everything whirling through my mind at the moment. 

I have applied for a basic bank account as one of my debts is with my bank, is the next step moving over my direct debits and income? Do I then stop paying for everything cc and loan-related? Can anyone tell me the next steps, do I just default on payments and then ask to set up a DMP when they write to me?

Or do I just keep searching my credit record each month and see who has defaulted? Then send letters requesting a DMP? 

I apologise for all the questions I just want to do this correctly and I feel so alone. 

Nomunnofun1

Posting at that time in the morning may be a fair indicator of the stress that you are under? 

Please take a deep breath - this is certainly the place to be for advice as there are some wonderful contributors on here, many of which have been in a far worse financial position than you. 

This is not my area of expertise but I am confident that you will be in a much better frame of mind once they arrive.

Deep breath!

Grumpelstiltskin

OK the first thing is to calm down and don't panic.

You should stop paying your unsecured debts, not your car keep paying that, if the catalogue is a small amount and you will not use it again then clear it.

Once you have defaults, a letter sent by snail mail then you can work out the total amount you can afford to pay and start paying the correct percentage to each creditor.

Ignore E Mail and text threats and don't speak to any creditor.

Bailiffs no, not for consumer debt, door knockers a slight possibility but they have no authority just ignore them.

That will do for starters there is more to coe.

RAS

OK, you're in somewhat of a panic? And that's really not going to help you sleep, so you are going to be less effective at work and in managing your debt. Deep breaths.

I can't answer all your questions right now and we need more detail to help you but here are some basics. 

You need to ensure that your business and your personal finances are kept separate. You should not be routinely subsidising your business by paying bills on personal cards. If the business isn't solvent, get salaried employment. Alongside this make sure you prioritise any debts to HMRC.

Do not use a debt company. Talk to business debtline about your business debts and be realistic if the business "owes" you because you've paid bills and injected capital.

It's unusual for consumer debts to be enforced in courts and very very rare for bailiffs to be used, because you just keep the doors and windows locked. Business debts are more likely to be subject to action, if you have assets.

Doing a DMP does not affect your ability to act as an attorney or executor. Nor can you be forced to sell to pay consumer debt from an inheritance. The absolute worst could be a charge against the property, but that's unlikely. Again, you need to keep up to date with HMRC debt, as they are  the only ones who may use bankruptcy. But since you haven't given details, it's hard to advise further and business debtline would be your best point of call.

If you are paying a DMP, the debts are not going to become statute barred, simple. We still see a few people who've struggled to pay £1 a month for 20 years when they might have just stopped paying 15 years ago and now be in a better situation.

If you pay a reduce sum, your account will be marked Arrangement to Pay. These markers stay on your credit file for 6 years after the debt is paid off.
If you stop paying altogether, the account will be marked as defaulted (3-18 months). It will be heralded by a scary, legally required, letter telling you to pay the whole sum or it will default, so you know when to look out for the default. This halts interest and fees and drops off your credit record after 6 years, even if you never pay another penny.

More likely you start small affordable payments (DMP), the debts gets sold several times. Some day, you get a settlement offer at 50% or more and can clear the account.

Re the car, is it on a business account, or personal one?

Grumpelstiltskin

OK RAS has given you more information.
Start by reading this thread and complete a personal SOA, as RAS says you must keep personal and business totally seperate.
In Debt and Wannabe Debt Free? first Steps to take are here, please read, then ask questions. — MoneySavingExpert Forum

fatbelly

Good advice above, and I can see from your post that within your thinking you are doing the right things.

If the car is a priority to you then keep paying it. If the catalogue debt is small enough to clear in one hit, then do it.

Get your banking sorted out so that you are not banking where you have debts and stop paying the nonpriority creditors, including the bank account you are walking away from.

As for what your strategy should be, we would need to see your soa. Mention of a 20-30 year dmp would not be sensible unless there really is no other strategy

A dmp is an informal strategy so no-one forces you to to anything and power of attorney is not affected. Inheriting a lump sum can be a good thing. You stay in control.

jones98746

I just wanted to say I work part time in paid employment and have also just started a business which has no debts. Here is my income and outgoings. I am also on universal credit, single and have a 15 year old son. I live with family,no property although I may inherit one day and don't want to jeopardise the property. I am executor and power of attorney. 

Thank you for all your help and advice, I don't feel so alone. I want to keep paying off the car. Student debt won't be paid back yet. I would like to pay off very if I have spare money with not paying the cc and loans. So DMP would be for 3 credit cards and the Tesco loan.

Current Debt – no current defaults

Student finance – £5770.54 not earning enough yet to pay back

Tesco Loan –       £4867.93 monthly payment £118.73 ends April 2028

M&S CC             £ 6440.30 min payment £161.00

Virgin CC –          £7918.88 min payment £157.94

Barclays CC –     £7391.58 min payment £70.23 0% rate changes soon

Very Account –    £1180.55 – pay later at the moment

Stellantis HP car – £7141.00 outstanding £166.07 per month ends May 2028

Total Debt £40710.00

Currently paying per month £673.97 will increase to approx £763.97 when Barclays rate changes

MONTHLY SPEND

MOBILE PHONE SIM ONLY          £6.00

MOBILE PHONE SON                  £18.34

MOBILE PHONE PAYMENT         £35.96

PET INSURANCE                         £22.93

CAR TAX                                       £16.62

PETOL                                           £45.00

CAR INSURANCE                         £40.00

BUSINESS COST                         £90.98 (MEMBERSHIPS, PHONE, ADVERTISING, NECESSARY COSTS)

LIFE INSURANCE                        £25.81

FOOD                                           £400

CLOTHES                                    £0.00

SUBSCRIPTIONS NETFLIX       £10.99

CCTV SUBSCRIPTION              £10.00

GOOGLE SUBSCRIPTION        £19.99

MICROSFT OFFICE SUBSCRIPTION £7.99

TOTAL £ 750.61

Thankfully I do not have costs for home insurance, gas/electric, phone/internet, water, tv licence, or council tax as I live with my parents, they do not ask for rent but give them small amounts when I can afford it. I will have these costs if I inherit the house.

INCOME

£1091.64 EMPLOYMENT

BUSINESS DOES NOT MAKE ANYTHING YET – NO PROFIT

£459.00 UNIVERSAL CREDIT (THIS MAY END SOON SO WILL LOSE THIS)

CHILD BENEFIT £110.00

TOTAL INCOME £1660

INCOME £1660 MINUS £750.61 MONTHLY SPEND = £909.39

£909.39 MINUS DEBTS MINIMUM PAYMENTS £ 235.42

RAS

Thanks. It is important that you understand how you've got into this much debt? As plainly if historically you had over £200 per month spare, you wouldn't have been using credit cards and loans. And if you've got a son who has a phone, your clothing cost isn't nil. That pretty much normal for a first attempt.

What did you get the loan for?

You need to get out the last 6 months statements, work through each of them and allocate every item to a line in the SOA budget that is you were referred to. That may take a bit of time. Then format for MSE.  Post if you feel OK doing that.

fatbelly

It looks like about 25k would go into the DMP and about £175 available, though it may be prudent to pay less and save on the side.

Yes that's a long plan but there would be the chance of settling with full& finals somewhere down the line from either your savings pot or an inheritance. And there's no real downside.

jones98746

What is the best way to monitor when my accounts have defaulted, or will creditors write to inform me? 

Are there apps which show your credit file, which are the best?  Thanks

fatbelly

They'll write to you

Credit Karma and Clearscore are free:also MSE Credit club.