DMP or Default, that is the question!

_Annoyingmonkey

Hi everyone I’m new here and have got to the point where I NEED to sort my debt out.

I am at the stage where I can no longer afford what I owe and am having to do money transfers from credit cards to pay other debts coming out of my bank on direct debit.

I have read about a DMP and also defaulting and doing it myself, both seem very scary.

I have gone through Stepchange to see what my options are (DMP), what the payments would look like and how long it would take to pay off (8 years).

I’m just not sure what the best step is now.

I don’t want to try and manage it myself because me trying to manage my finances got me here, and I don’t trust myself.

I would like the offer of my debt actually being reduced by a company, is that something that could still happen when on a DMP?

Amongst my debt I have one loan shared with my partner that would be due to end in 2 years if I continued paying it. I wonder how a DMP would affect that?

Would love any help or advice you could provide, thanks 😊

Grumpelstiltskin

OK Do not start a DMP before the debts default, if you do you get Arrangement to Pay markers, they stay on your credit file for 6 years from date debt is cleared so 8 years plus 6 years 14 years. If the debt has defaulted it disappears 6 years from date of default even if it hasn't been cleared.

You  do realise that your partner's credit will be affected as you have a joint debt.

Rob5342

DMPs are very simple really, you work out what you can afford to pay and pay it, that's it fundamentally

Stepchange have tools on their website to create a budget and will handle payments for you. That can save you a bit of administration but makes no difference otherwise. 

Make sure you default first as that's much better for your credit record long term.

A good budget is key. You need to assign money for things like car services and put that money aside each month until it's needed. You also need to put some money into an emergency fund to cover the unexpected things that will crop up. 

ManyWays

I would like the offer of my debt actually being reduced by a company, is that something that could still happen when on a DMP?
This can happen in several ways, I dont know what you are thinking of:
- in an IVA, which is a sort of insolvency. That would be an alternative to a DMP and not normally a good idea but post a Statement of Affairs and we can suggest if you may be one of the exceptions
- you may get "settlement offers" in a DMP, usually after quite a while when your debt has defaulted and been sold to a debt collector
- you can make an affordability complaint and if you win interest will be removed from the balance, thats possible in a DMP

_Annoyingmonkey

Thank you everyone, I haven't defaulted on any payments yet I am assuming that means where you don't make a payment for that month? If that is the case is that why people are moving their salaries to be paid in to different accounts so the direct debit can't be taken?

RAS

You need to move your income into the new basic bank account (no credit check) if you owe anything to a bank in the same group as your current account. You also need to move essential DDs like rent, CT, utilities. Do not use the switching mechanism.

I'd suggest either having a second account for annual/infrequent spends like birthdays, car maintenance, or an account like Monzo which has pots. Use an instant access ISA for emergency funds.