Add 65k debt to mortgage, dmp, or something else?

kimwp

Grumpelstiltskin said:

When you transfer the direct debits over they should work immediately.

Your old bank will not be interested in where you have gone. They have more important things to do than look at every customer who goes elsewhere.

Sorry I wasn't clear when I said it might take time to move the direct debits over - this is because some companies won't allow you to change the direct debit details if you are within a certain number of days before the payment being taken. So you might have to wait to change those and make sure the old account is funded for those payments.

Kittymumof4

Thank you all. I'm looking at Monzo for banking but is it a regular free current account I need to open? If my husband and me both open a free current account with them can we then open a joint account to use for our every day banking, then a savings account to build an emergency fund while we wait for cc accounts to default? 

Also, has anyone had crippling anxiety when going through all of this? I can't stop thinking about it all, can't sleep or eat. We've never missed any payments before so to cancel payments fills me with fear. And with the amount of debt we have, I feel like it will never be paid off, a DMP will take us 15 years to finish. I know that there's a possibility of making offers to settle at a reduced amount further down the line, but how likely is this? Why would debt collectors do this? If they're getting regular payments what's in it for them to allow you to settle with a lower amount than what's owed? How do you deal with the uncertainty of it all? I'm only just beginning to sort this and I'm not sure I can deal with it, and the feelings it brings for the foreseeable future. 
We've always had credit to fall back on. I know that's what got us into this mess and I desperately want to live the rest of our lives without credit, but it feels terrifying. We don't have any family to help us if something happens and we can't pay something. My son isn't going to understand why we can't do the things we used to do. It just feels like such a huge mess. 

RAS

Sorry this got long

It amazing how many people come here totally freaked out by their situation, not only heading into the unknown but also it's been drilled into them that what they have to do is "wrong" and "shameful". It takes time to adjust but a year in most are stunned by how much less stressed they feel and how easy it has been to manage.

You've mentioned that your husband is finding the situation very hard. As the sole income earner he may feel very responsible for the whole family's financial well-being? I think you also mentioned that he drives a lot? 

So it's going to be very important to manage the early creditor response. Creditors now have to check affordability when dealing with debt. Some are fair, but sometimes with debt collectors it's also a fact check to see what they can extract. You hubbie needs to concentrate on driving not phone calls and texts.

If you've got an old phone anywhere and can get a very cheap PAYG Sim, use that. Just change the number on all accounts and put the phone in a drawer on silent. And create a similar throwaway email account. In debt collection, anything important has to be sent by snail mail, by law.

Or write (pen and paper) telling the creditors only to communicate in writing (GDPR applies). Don't ask for reduced payments, do mention your son's and your own health issues and the increased mortgage payments.

The first few weeks will result in a lot of queries from the creditors. No-one is really looking at you, it's all auto generated by computer. If you are already panicking it is easy to assume that "may lead to further action" will have dreadful consequences. It means that the computer is programmed to send you another letter, or a text a day. 

Do collect the mail and once a week or so, open and file by creditor. Meantime keep saving that emergency fund and refining your budget. Creditors can't do anything until the account is defaulted. 

What you are looking for is a scary letter, demanding that you repay the whole debt with a time limit, or the creditor will terminate the relationship. The text is legally prescribed and is good news because it means they will issue a default if you don't contact them.

Soon after they will assign or sell the debt and tell you who will deal with the account. If you decide to do an DMP, when that company gets in touch, you log in, provide your customer number and make a payment. By that stage you should have an idea how much you can afford. Then set up a Standing Order.  

It now looks like a long journey. One thing you may want to do is look at threads here on affordability claims. It's worth reading round those once you've stabilised the situation. It does take some effort, so get settled first. And in a few years you will get reduced offers.

fat belly has also mentioned that you could look at an IVA later in the year when the new rules come in. The budgeting on those is tighter than with DMPs but you'd pay a fixed sum and receive a discount to settle your debts. It is an form of insolvency so has to be declared when ever you are asked if you have ever been insolvent unlike a DMP.

Ignore any adverts on TV and social media. Those companies are lead generators for insolvency practitioners who charge high fees, so you are paying for both company's profits. If you want to talk about an IVA speak to Stepchange whose fees are much lower. 

Also be aware that if you get any sort of windfall, in an IVA you can end up paying the whole debt back plus the IP fees, so not wise if you might get an inheritance or redundancy payout in the next 5-6 years. With a DMP you could negotiate reduced settlements.

You will be OK, and you have options. But right now, one step at a time. You need a little more light and less stress to make a decision.

kimwp

I believe Monzo is a "normal" current account, what's your concern about them?

I think everyone who has been in your situation finds this bit very stressful and worrying - you've spent so long trying to avoid it that a change to that approach is very scary. But the fact is you already can't rely on credit - you are maxed out, so while it feels like making the situation worse, this is you addressing the situation to make things better. In terms of coping, you need a plan (which you have), and you need to follow that plan and otherwise spend your time focussing on other things - planning and doing fun (but cheap/free) things to do for example.

Have you had a look through the diaries?

RAS

Sorry, the Monzo issue. 

The reason we always suggest new basic bank accounts is that setting one up does not require a credit check. 

If you can set up a Monzo account, fine but there've had a number of instances on the banking forum where Monzo have closed accounts at short notice. So have another set up as a back up.

And an instant access ISA for your emergency fund. Short-term put the window money in there as well.

sourcrates

Kittymumof4 said:

Also, has anyone had crippling anxiety when going through all of this? I can't stop thinking about it all, can't sleep or eat. We've never missed any payments before so to cancel payments fills me with fear. And with the amount of debt we have, I feel like it will never be paid off, a DMP will take us 15 years to finish. 

We've always had credit to fall back on. I know that's what got us into this mess and I desperately want to live the rest of our lives without credit, but it feels terrifying. 

Your reaction is typical of someone whose been trapped in the credit chain for a long time, its akin to being in a kind of cult, where you must make regular payments or something terrible will happen.

They tempt you into the borrowing circle at a young age, they offer you cheap rate credit cards, then loans, car finance, more cards, more loans, they want a customer for life you see, that`s how they, the banks prosper, and you always stay under that thumb, paying the debts dutifully.

Debt management is a well proven way to deal with your debts, its simply a process to follow, a way to do things to the best advantage, for you, not your lenders.

There is surprisingly little banks can do if you stop paying them, oh of course they don`t tell you that, they want you to be scared of the unknown, well there is no need to be scared, anxious, or anything like that, you are a grown adult, taking positive steps to deal with your debt problem, under guidance from this website.

Follow the advice on here, all will be well, we can help you deal with any scenario you are likely to encounter, once debts are defaulted, and you are making regular payments, life will go on as normal, you pay monthly, all is good, no hassle, no pressure, no contact from creditors.

The hardest part for most folk is the beginning, waiting for defaults, now you don`t have to wait for defaults, but its to your advantage if you do, but if its easier for you, you can go straight to debt management and it will all go quiet within a week or so, once everyone knows what`s happening, and payment arrangements are set up.

It`s your choice how you run things.

kimwp

Worth noting, if you go straight to debt management, you'll get arrangement to pay markers on your credit history - these will stay for six years after the debt is paid off (as opposed to defaults only staying six years total) - so will affect available mortgage rates for longer.

Kittymumof4

RAS said:

Sorry this got long

It amazing how many people come here totally freaked out by their situation, not only heading into the unknown but also it's been drilled into them that what they have to do is "wrong" and "shameful". It takes time to adjust but a year in most are stunned by how much less stressed they feel and how easy it has been to manage.

You've mentioned that your husband is finding the situation very hard. As the sole income earner he may feel very responsible for the whole family's financial well-being? I think you also mentioned that he drives a lot? 

So it's going to be very important to manage the early creditor response. Creditors now have to check affordability when dealing with debt. Some are fair, but sometimes with debt collectors it's also a fact check to see what they can extract. You hubbie needs to concentrate on driving not phone calls and texts.

If you've got an old phone anywhere and can get a very cheap PAYG Sim, use that. Just change the number on all accounts and put the phone in a drawer on silent. And create a similar throwaway email account. In debt collection, anything important has to be sent by snail mail, by law.

Or write (pen and paper) telling the creditors only to communicate in writing (GDPR applies). Don't ask for reduced payments, do mention your son's and your own health issues and the increased mortgage payments.

The first few weeks will result in a lot of queries from the creditors. No-one is really looking at you, it's all auto generated by computer. If you are already panicking it is easy to assume that "may lead to further action" will have dreadful consequences. It means that the computer is programmed to send you another letter, or a text a day. 

Do collect the mail and once a week or so, open and file by creditor. Meantime keep saving that emergency fund and refining your budget. Creditors can't do anything until the account is defaulted. 

What you are looking for is a scary letter, demanding that you repay the whole debt with a time limit, or the creditor will terminate the relationship. The text is legally prescribed and is good news because it means they will issue a default if you don't contact them.

Soon after they will assign or sell the debt and tell you who will deal with the account. If you decide to do an DMP, when that company gets in touch, you log in, provide your customer number and make a payment. By that stage you should have an idea how much you can afford. Then set up a Standing Order.  

It now looks like a long journey. One thing you may want to do is look at threads here on affordability claims. It's worth reading round those once you've stabilised the situation. It does take some effort, so get settled first. And in a few years you will get reduced offers.

fat belly has also mentioned that you could look at an IVA later in the year when the new rules come in. The budgeting on those is tighter than with DMPs but you'd pay a fixed sum and receive a discount to settle your debts. It is an form of insolvency so has to be declared when ever you are asked if you have ever been insolvent unlike a DMP.

Ignore any adverts on TV and social media. Those companies are lead generators for insolvency practitioners who charge high fees, so you are paying for both company's profits. If you want to talk about an IVA speak to Stepchange whose fees are much lower. 

Also be aware that if you get any sort of windfall, in an IVA you can end up paying the whole debt back plus the IP fees, so not wise if you might get an inheritance or redundancy payout in the next 5-6 years. With a DMP you could negotiate reduced settlements.

You will be OK, and you have options. But right now, one step at a time. You need a little more light and less stress to make a decision.

Thank you so much. I really appreciate your time. This is so helpful in knowing how to manage this with less stress. I have an old phone and will look for a cheap PAYG SIM today. I love that idea, I think if we're constantly seeing text messages and phonecalls pop up we will constantly feel panic. 

Yes my husband is very stressed, our plan was for me to build up my business so he could get a job with less stress and responsibility, but with my health issues and my son's needs, this hasn't happened, so on top of everything else I think he's now feeling trapped in his job. I'm hoping that me giving up for now on my business will help to reduce the stress in the household, hopefully helping to reduce his stress levels as he will be more able to focus on work and relax more when he gets home. I will also be able to take a leading role in budgeting and managing finances as I'll have more time and energy which will reduce pressure on him too. 

As I write this I'm kind of thinking that this financial crisis may save us in a way. We've both been living in a state of anxiety and overwhelm, trying to manage juggling credit cards to stay afloat, him working full time then coming home to care for my son, supporting me physically with tasks I struggle with, and me frantically trying to get some work done to build my business, both of us are exhausted. He's still hoping that I will be able to work and build my business but I think this will need to wait a few years so we can get our lives back in control. 

I feel like I know what to expect a bit more now that you've told me what's likely to happen which reduces the uncertainty and helps me to feel a bit more in control. 

I'm going to try to focus on the next steps then maybe look into options such as an IVA a bit later in the year. 

Kittymumof4

kimwp said:

I believe Monzo is a "normal" current account, what's your concern about them?

I think everyone who has been in your situation finds this bit very stressful and worrying - you've spent so long trying to avoid it that a change to that approach is very scary. But the fact is you already can't rely on credit - you are maxed out, so while it feels like making the situation worse, this is you addressing the situation to make things better. In terms of coping, you need a plan (which you have), and you need to follow that plan and otherwise spend your time focussing on other things - planning and doing fun (but cheap/free) things to do for example.

Have you had a look through the diaries?

Hi, thank you so much. You're right, I need to focus on the next steps rather than looking at the mountain. 

With Monzo, I'd read here that I should be looking for a basic account and wasn't sure if their personal current account and joint account are classed as basic. So does basic just mean a free account with no fees and no overdraft? 

No I haven't looked at the diaries, I'll have a look. Thank you. 

kimwp

Kittymumof4 said:

kimwp said:

I believe Monzo is a "normal" current account, what's your concern about them?

I think everyone who has been in your situation finds this bit very stressful and worrying - you've spent so long trying to avoid it that a change to that approach is very scary. But the fact is you already can't rely on credit - you are maxed out, so while it feels like making the situation worse, this is you addressing the situation to make things better. In terms of coping, you need a plan (which you have), and you need to follow that plan and otherwise spend your time focussing on other things - planning and doing fun (but cheap/free) things to do for example.

Have you had a look through the diaries?

Hi, thank you so much. You're right, I need to focus on the next steps rather than looking at the mountain. 

With Monzo, I'd read here that I should be looking for a basic account and wasn't sure if their personal current account and joint account are classed as basic. So does basic just mean a free account with no fees and no overdraft? 

No I haven't looked at the diaries, I'll have a look. Thank you. 

That's a good way of looking at it - if we looked at all the mountains in our lives (degrees, children, even continuously keeping a house clean!) we'd never get anything started!

Ah sorry, I hadn't picked up on that subtlety. No fees definitely because there's no need to pay fees. No overdraft is a good idea because theres no temptation and as RAS said, a basic bank account won't require a credit check, which you might not pass.

There's also the debt free thread, pinned at the top of the forum. It's a bit quiet, but still a nice read of people's experiences and advice from their journey out of debt.