Would DMP be the best option?

device1355
device1355 Posts: 5 Newbie
First Post
in Debt-free wannabe
I have been struggling with Debt for the past couple of years as and it has spiralled out of control and I am looking for advice on the best course of action to address this.

My income after tax is £1974 and my household expenses (not including debt payments) with my share of the rent (living with partner) is £1771.

I have £29000 worth of unsecured debt with monthly repayment totalling £1229 across loans/cc/overdraft which somehow I have managed to avoid any missed payments so far.

So my question is would a DMP paying £139/month be a good solution?
This is what was recommended after filling in my budget on Step Change, although it explains that it would take up to 19 years to pay off!

Following some of the advice I have read online, I've created a new bank account with a bank I haven't got any credit with which I will be paying in my monthly salary.

I have a list of things I believe I should do but would like affirmation whether this is the correct thing or advice if it isn't:
  • Transfer priority bills direct debits to new bank account (utilities, council tax etc.)
  • Contact creditors that the next month is unaffordable and explain I am contact with Step Change looking for a debt solution
  • Start saving an emergency fund - if yes, how much should I be looking to save and for how long?
  • After how long should I start the DMP with Step Change?
I also understand at this point there is no point caring about my credit.

Any advice or guidance would be appreciated.

Comments

  • RAS
    RAS Posts: 34,958 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Looks pretty good.

    Did you check the banking groups when you opened the new account? Do you have any shared accounts with your partner?

    Contacting your creditors may well delay the issuing of defaults, although that may be a good thing. Any debts to credit unions?

    The emergency fund would cover one month's essential spends, or a deposit and first month's rent if you had to move, as a basic. 

    If you don't mind sharing your SOA, people might spot things for which you are not accounting, or possible affordability issues.

    You set up payments as each debt defaults, pro rata. Once the last defaults, you can engage Stepchange if you with. In the first instance only allocate say 80% of what you think is surplus when you calculate the debt payments. You need to live with the new budget for a while.
    If you've have not made a mistake, you've made nothing
  • device1355
    device1355 Posts: 5 Newbie
    First Post
    I'm with Nationwide as my main current account with overdraft. I opened a new account with HSBC which to my knowledge doesn't have any affiliation with Nationwide. And no, no shared accounts with partner.

    SOA below:
    [font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

    Household Information[/b]
    Number of adults in household........... 2
    Number of children in household......... 0
    Number of cars owned.................... 1[b]

    Monthly Income Details[/b]
    Monthly income after tax................ 1974
    Partners monthly income after tax....... 1100
    Benefits................................ 0
    Other income............................ 0[b]
    Total monthly income.................... 3074[/b][b]

    Monthly Expense Details[/b]
    Mortgage................................ 0
    Secured/HP loan repayments.............. 0
    Rent.................................... 1675
    Management charge (leasehold property).. 0
    Council tax............................. 250
    Electricity............................. 180
    Gas..................................... 0
    Oil..................................... 0
    Water rates............................. 8
    Telephone (land line)................... 0
    Mobile phone............................ 16
    TV Licence.............................. 0
    Satellite/Cable TV...................... 20
    Internet Services....................... 43
    Groceries etc. ......................... 300
    Clothing................................ 0
    Petrol/diesel........................... 0
    Road tax................................ 0
    Car Insurance........................... 0
    Car maintenance (including MOT)......... 0
    Car parking............................. 0
    Other travel............................ 0
    Childcare/nursery....................... 0
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 10
    Pet insurance/vet bills................. 15
    Buildings insurance..................... 0
    Contents insurance...................... 20
    Life assurance ......................... 10
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 0
    Haircuts................................ 25
    Entertainment........................... 50
    Holiday................................. 0
    Emergency fund.......................... 0[b]
    Total monthly expenses.................. 2622[/b]
    [b]

    Assets[/b]
    Cash.................................... 0
    House value (Gross)..................... 0
    Shares and bonds........................ 0
    Car(s).................................. 0
    Other assets............................ 0[b]
    Total Assets............................ 0[/b]
    [b]
    No Secured nor Hire Purchase Debts[/b]

    [b]Unsecured Debts[/b]
    Description....................Debt......Monthly...APR
    Lendables Loan.................9443......559.......0
    Nationwide Overdraft...........2000......50........0
    Nationwide CC..................7900......300.......0
    Creation Finance...............1150......66........0
    Paypal Credit..................3000......109.......0
    Barclays CC....................250.......20........0
    Lloyds CC......................4500......120.......0[b]
    Total unsecured debts..........28243.....1224......-  [/b]

    [b]
    Monthly Budget Summary[/b]
    Total monthly income.................... 3,074
    Expenses (including HP & secured debts). 2,622
    Available for debt repayments........... 452
    Monthly UNsecured debt repayments....... 1,224[b]
    Amount short for making debt repayments. -772[/b]

    [b]Personal Balance Sheet Summary[/b]
    Total assets (things you own)........... 0
    Total HP & Secured debt................. -0
    Total Unsecured debt.................... -28,243[b]
    Net Assets.............................. -28,243[/b]

    [i]Created using the SOA calculator at www.LemonFool.co.uk.
    Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]
  • Grumpelstiltskin
    Grumpelstiltskin Posts: 5,272 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    You need to add the interest rates to all the debts, that is important.
    If you go down to the woods today you better not go alone.
  • device1355
    device1355 Posts: 5 Newbie
    First Post
    [font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

    Household Information[/b]
    Number of adults in household........... 2
    Number of children in household......... 0
    Number of cars owned.................... 1[b]

    Monthly Income Details[/b]
    Monthly income after tax................ 1974
    Partners monthly income after tax....... 1100
    Benefits................................ 0
    Other income............................ 0[b]
    Total monthly income.................... 3074[/b][b]

    Monthly Expense Details[/b]
    Mortgage................................ 0
    Secured/HP loan repayments.............. 0
    Rent.................................... 1675
    Management charge (leasehold property).. 0
    Council tax............................. 250
    Electricity............................. 180
    Gas..................................... 0
    Oil..................................... 0
    Water rates............................. 8
    Telephone (land line)................... 0
    Mobile phone............................ 16
    TV Licence.............................. 0
    Satellite/Cable TV...................... 20
    Internet Services....................... 43
    Groceries etc. ......................... 300
    Clothing................................ 0
    Petrol/diesel........................... 0
    Road tax................................ 0
    Car Insurance........................... 0
    Car maintenance (including MOT)......... 0
    Car parking............................. 0
    Other travel............................ 0
    Childcare/nursery....................... 0
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 10
    Pet insurance/vet bills................. 15
    Buildings insurance..................... 0
    Contents insurance...................... 20
    Life assurance ......................... 10
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 0
    Haircuts................................ 25
    Entertainment........................... 50
    Holiday................................. 0
    Emergency fund.......................... 0[b]
    Total monthly expenses.................. 2622[/b]
    [b]

    Assets[/b]
    Cash.................................... 0
    House value (Gross)..................... 0
    Shares and bonds........................ 0
    Car(s).................................. 0
    Other assets............................ 0[b]
    Total Assets............................ 0[/b]
    [b]
    No Secured nor Hire Purchase Debts[/b]

    [b]Unsecured Debts[/b]
    Description....................Debt......Monthly...APR
    Lendables Loan.................9443......559.......19.18
    Nationwide Overdraft...........2000......50........39.9
    Nationwide CC..................7900......300.......24.9
    Creation Finance...............1150......66........0
    Paypal Credit..................3000......109.......25.9
    Barclays CC....................250.......20........24.9
    Lloyds CC......................4500......120.......16.45[b]
    Total unsecured debts..........28243.....1224......-  [/b]

    [b]
    Monthly Budget Summary[/b]
    Total monthly income.................... 3,074
    Expenses (including HP & secured debts). 2,622
    Available for debt repayments........... 452
    Monthly UNsecured debt repayments....... 1,224[b]
    Amount short for making debt repayments. -772[/b]

    [b]Personal Balance Sheet Summary[/b]
    Total assets (things you own)........... 0
    Total HP & Secured debt................. -0
    Total Unsecured debt.................... -28,243[b]
    Net Assets.............................. -28,243[/b]

    [i]Created using the SOA calculator at www.LemonFool.co.uk.
    Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]
  • ManyWays
    ManyWays Posts: 1,053 Forumite
    1,000 Posts Fifth Anniversary Name Dropper
    Neither of you has any travel costs? 
    Is the Water bill correct? The pet insurance/vet bill looks very low. £16 a month for two mobiles? 
    Groceries is too low, zero for clothes is impractical for years, no presents? no emergency fund?
  • Grumpelstiltskin
    Grumpelstiltskin Posts: 5,272 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    ManyWays said:
    Neither of you has any travel costs? 
    Is the Water bill correct? The pet insurance/vet bill looks very low. £16 a month for two mobiles? 
    Groceries is too low, zero for clothes is impractical for years, no presents? no emergency fund?
    I will agree with ManyWays. You need a budget that is live able with for a long time not something you can manage for a couple of months.

    The most important thing is an emergency fund, you won't have access to credit and something will break down
    and need replacing. I  would aim for £2000 for starters, OK you haven't got a car but what would you do if the washer and freezer both broke down the same week?
    If you go down to the woods today you better not go alone.
  • device1355
    device1355 Posts: 5 Newbie
    First Post
    £0 travel cost as I have a company EV and charging is done at home (included in electricity bill) although I do pay for insurance at £67/month.

    Phones are £16/month for sim only as mobiles are fully paid off but are getting old (3+ years).

    Water bill is correct, we have a meter and I am building up a credit even at £8/month.

    Broken washing machine and freezer is not a concern as I live in a rental.

    Would £400/month for Groceries be reasonable and setting aside £50/month for clothes?

    Should I put £200/month towards Emergency Fund? 

    Will have to update SOA to see how much I have left over towards paying off the debt afterwards. Thank you for the input.
  • enthusiasticsaver
    enthusiasticsaver Posts: 16,008 Ambassador
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    No doubt you have managed not to miss payments by still using credit to live off? That is unsustainable.  Did Stepchange suggest bankruptcy? You have no assets to protect and as you said your amount available to pay off debts is not enough to repay over the 6 years your credit record will be affected for.  Does your job rely on you not being made bankrupt or is private renting difficult? 

    I would say your rent is probably the biggest problem as it is so high comparitive to your income. Your partner also seems to be on a low wage or is that £1100 just what they contribute towards bills/groceries etc? 

    You need an emergency fund and initially I would put the whole £450 monthly surplus after essential bills towards that until the debts default. 
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.

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  • sourcrates
    sourcrates Posts: 31,093 Ambassador
    Part of the Furniture 10,000 Posts I've been Money Tipped! Name Dropper
    I have to ask how do you mange to keep your water bill at £8 per month for two people?

    I live alone and mine is £37 on a meter.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • device1355
    device1355 Posts: 5 Newbie
    First Post
    My partner is self employed so her income varies, but it is usually at least a min of £1100/month. Stepchange didn't suggest bankruptcy but I guess they might do if I tweak the budget to account for emergency funds etc.

    As for the water bill being cheap that's just how much it costs, perhaps you have a leak?

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