Help! £54K debt, DMP process and defaults.

Ripcurl

So I have the following debts:

Virgin credit card: £9646 (interest free period expires next month)

Lloyds credit card: £6464 (paying standard interest rate)

Santander: £5098 (paying standard interest rate)

HSBC: £6198 (interest free period expires next month)

M&S credit card: £ 3143  (period expires 6 months)

Halifax credit card: £2243 (paying std interest rate)

Halifax credit card £2709 (paying std interest rate)

Barclays credit card £1609 (paying std interest rate) 

Shawbrook debt con’ loan £15246 (4 years 5 months outstanding)

All payments up to date apart from one missed one payment 6 months ago to M and S which I completely forgot about. That’s now on my credit file. 

I earn £72K per year, that's only the past 4 months. Taking home £3976 per month. Prior to that £45-53K past 6 years. Live with my second wife who owns where we live. I have no interest in the property. We are financially independent from each other. I pay half off all bills. 

Pay £1076 in child maintenance for 4 children from previous marriage (7,11,11 and 13). Never missed a payment. 

I went through a divorce between 2018 and 2022. Already had £19K debt before divorce.

Took 4 long years, during which time I had to continue paying half the mortgage on the martial home, my own rental, maintenance and legal costs. This crippled me and I’ve never recovered. Marital home eventually sold but I didn’t get half the equity, only 30%, which worked out at £11K. Paid off debt with this. 

Tried use balance transfers to reduce ongoing debt but it hasn’t work. 

With interest free period now coming to an end monthly payments are increasing. Currently the above debts I pay £1590 monthly but this will increase to around £1900 next month. Starting to feel it now and getting very worried, especially the impact this may have with my wife. She is aware but I don’t think she fully understands the gravity of my situation. 

I’ve been on Step change with all my debts who have advised me to start a DMP. 

However, from reading other threads it is better to stop payments first, go into default and then start the DMP process? 

If so, do I need to wait until the defaults officially appear on my credit file first?

Any advice, feedback gratefully received as I am worried and don’t know the process at all. Many thanks 🙏 

fatbelly

A dmp sounds appropriate if you have surplus ~ £1000 available. Pls read

https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps-to-take -are-here-please-read-then-ask-questions

Which explains the default thing and invites you to post a soa

The defaults will have no impact on your wife as long as you have no joint financial products.

Grumpelstiltskin

OK So you have no joint accounts with your wife?
What do you do, pay an amount into her account and she pays all the bills?

It is only fair to tell her your debt details, marriage is a partnership, you should realize this after a divorce.

Our advice is to stop paying, save as much as you can for an emergency fund and wait for defaults.

Ripcurl

Yes £1000 seems about right to put forward to towards a DMP. 

Thanks for the link! Will have a good read now. 

RAS

Hi, the first question is just to double-check that you have no joint accounts with your 2nd wife, other than Council Tax?.

Second thing is that this isn't a huge amount of debt compared with some folk on here and you have a decent income, albeit reduced by the amount of maintenance you will be paying for the next few years.

I'd recommend that you do the Statement of Affairs for your side of the family finances and encourage your wife to do the same, as a way of ensuring your new wife understands the reality of things. No point her thinking about exotic holidays in this situation. 

Stepchange will advise that you start making DMP payments immediately. Most experienced DFWs advise that you delay payments until the debts default and set up an emergency fund whilst you wait for that to happen.

It's important that you and the missus understand that: 

A default is removed from your credit record after 6 years even if you still owe money.
An AP marker stays on your credit record for 6 years after the debt is cleared so damages it for much longer.

If you then want to let Stepchange take over for a few years, do. They will however only allow you to add £25 per month to the emergency fund.

But at some stage you may start getting offers from creditors for discounted settlement. Stepchange will distribute any lump sum you offer equally between creditors and will not take advantage of the best discounts on individual accounts. At that stage, you may want to take back control? But that's way down the line.

fatbelly

Yes, I was thinking 54 months seems a reasonable period if you can do it. An IVA would take 60 months and bankruptcy, while shorter at 36 months is probably a sledgehammer approach that you don't need, and advisers might worry about you having acquired an interest in the present property.

Ripcurl

Grumpelstiltskin said:

OK So you have no joint accounts with your wife?
What do you do, pay an amount into her account and she pays all the bills?

It is only fair to tell her your debt details, marriage is a partnership, you should realize this after a divorce.

Our advice is to stop paying, save as much as you can for an emergency fund and wait for defaults.

Thanks for your reply? No joint accounts whatsoever. So I pay her a set amount towards dual fuel, council tax and services charges, which she pays for.  I pay for the broadband. We've just had a frank discussion this morning and going through options, including DMP, which seems the best option. 

Does seem the general consensus to stop paying and wait for the defaults to come through. What is the typical time period? Should I only start payments through the DMP once the last default comes for all the credit cards / loans? 

RAS

Good that your both on board and have no shared accounts. 

When the debt defaults, generally wait for a letter telling you if they are keeping the debt in house, assigning it to a DCA or have sold it. Then pay the appropriate piper, you decide how much, on-line using the provided bank detail's  and your account number.

You not not need to wait, but do not raise expectations of the early defaulters by paying them than you will be able to afford when they are all in.

Do your debts include Amex or a credit union?

Ripcurl

RAS said:

Hi, the first question is just to double-check that you have no joint accounts with your 2nd wife, other than Council Tax?.

Second thing is that this isn't a huge amount of debt compared with some folk on here and you have a decent income, albeit reduced by the amount of maintenance you will be paying for the next few years.

I'd recommend that you do the Statement of Affairs for your side of the family finances and encourage your wife to do the same, as a way of ensuring your new wife understands the reality of things. No point her thinking about exotic holidays in this situation. 

Stepchange will advise that you start making DMP payments immediately. Most experienced DFWs advise that you delay payments until the debts default and set up an emergency fund whilst you wait for that to happen.

It's important that you and the missus understand that: 

A default is removed from your credit record after 6 years even if you still owe money.
An AP marker stays on your credit record for 6 years after the debt is cleared so damages it for much longer.

If you then want to let Stepchange take over for a few years, do. They will however only allow you to add £25 per month to the emergency fund.

But at some stage you may start getting offers from creditors for discounted settlement. Stepchange will distribute any lump sum you offer equally between creditors and will not take advantage of the best discounts on individual accounts. At that stage, you may want to take back control? But that's way down the line.

Appreciate the reply, thank you. No joint accounts whatsoever. Council tax is in her name but I give her half each month toward it as well as other bills. 

Yes, I've had a good read on here and yes some folk are in a worse position and granted my income position better than most. 

I've asked this already but regarding DMP, I should wait until ALL credit cards and loans have defaulted before starting repayments via DMP?

I'm thinking if I put forward around £1000 per month towards the clearing the debt it will be cleared in around 4.5 years. 

Ripcurl

RAS said:

Good that your both on board and have no shared accounts. 

When the debt defaults, generally wait for a letter telling you if they are keeping the debt in house, assigning it to a DCA or have sold it. Then pay the appropriate piper, you decide how much, on-line using the provided bank detail's  and your account number.

You not not need to wait, but do not raise expectations of the early defaulters by paying them than you will be able to afford when they are all in.

Do your debts include Amex or a credit union?

No Amex or credit union. 

So what you are saying is stop paying all credit cards and the one loan going forward. Use those funds and save up for an emergency fund. Wait for the defaults to arrive and then begin the process of paying the relevant company holding the debt by an agreed amount whether directly or through Step Change. 

RAS

If you go to Stepchange immediately, they will set up payments immediately to their standard formula which will damage your credit record for 10/11 years based on your estimates. Because you will get Arrangement to Pay markers.

Stop paying, wait for the defaults, start paying each creditor once they default (and let you know who to pay). That way you know your credit record will recover in 6/7 years. Once they are all in, decide whether to continue to self manage or go to Stepchange.