DMP advice for newbie. Please help

moogle87

Hi all,

My husband & I are £41k in debt & have £4.5k in savings as we've just sold an asset.
We are looking at entering into a joint DMP. The debt in my name is low (£9k) but I'm the problem spending wise (It's me who overspends) so we are looking at making it joint.

StepChange suggested an IVA or DMP.
The DMP seems to be the better option as we have £100k of equity in our house, it's less serious & we will get flexibility.

We recently both changed jobs & our disposable income is low.
I reckon we could afford to pay £250 a month at a push or £100 to make life comfortable.
But will our lenders accept such a low amount?

I have a disability & intend on claiming PIP but we all know how difficult that can be & it won't be quick even if I do get it.

We're also unsure of what to do with the £4.5k & how we should use this.
I've seen people advising an emergency fund but can't they force us to use this towards our debts?

We can't borrow on our mortgage as I'm self employed & only have proof of earnings for 1 year.

moogle87

I've done some reading & moved the savings into an account with a bank that we don't owe any money to.

People are saying to wait until defaults & to stop paying all credit card payments.
Can somebody explain this in more detail please?

fatbelly

It's explained here

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

Your creditors will accept whatever your financial statement shows they will be getting

Ps get going on the PIP claim as that will make a big difference. If you phone for the forms on Monday, then you have I think 1 month to complete the form and you get a lump sum backdated to today if successful. That can be a large sum as the process can drag on for several months

https://www.gov.uk/pip/how-to-claim

https://www.citizensadvice.org.uk/benefits/sick-or-disabled-people-and-carers/pip/help-with-your-claim/fill-in-form-pip/

RAS

Your general aim is correct. Do get that PIP claim going as part of the equation is to increase the income side as well as manage spending.

If you've read the forum you'll realise that there are two main reasons to wait for defaults.

Defaults clear from your credit profile 6 years after they are issued, even if you've not paid a penny.

Arrangement to Pay markers stay on your credit record for 6 years after the debt is paid off. With a long DMP, they damage your credit record longer. You can choose a new fix with your current mortgage provider without a credit check, as long as the mortgage payments are up to date.

A clean credit record allows you to consider new mortgage providers.

And whilst you wait for the defaults, you save because you won't have access to consumer credit going forward. It may only be another £1k but it helps.

The traditional DMP with an immediate start meant every time a white good or the car broke, people had to suspend their DMP payments, save for the repairs etc and it was stressful. 

I saw a recent Dave Ramsay Q&A where he was asked about emergency funds. "In 2003, he recommended £1k. Did that need updating, was 1k sufficient now?"
"Hell no! £1k wasn't adequate even in 2003 but they'd tried nil savings before that and people just couldn't hack it so they suggested a small cushion." 

It help massively if every small issue isn't a crisis. Gives a sense of control.

You don't have to declare savings to creditors and being self employed you need a cushion.

ManyWays

We can't borrow on our mortgage as I'm self employed & only have proof of earnings for 1 year.
Good! When you have a low disposable income at the moment, the last thing you need is more secured borrowing. If you rank the options, then secured borrowing is totally inflexible, IVAs often fail as they aren't flexible enough, and a DMP is the most flexible.

You need flexibility, first because you are self emplyed and second because winning a PIP complaint may make a big difference to your situation. I agree that getting going on the PIP is vital and also appeal any rejection, as large numbers are won at that stage.

I am suprised Stepchange said anything to you, they normally say they dont deal with the self employed. 

People are saying to wait until defaults & to stop paying all credit card payments.
Stop all payments to loans, catalogues and overdrafts as well! You only carry on paying the mortgage, household bills and any car finance. 

Posting a Statement of Affairs here will get you more detailed advice. Include your creditor names, not "CC!" as that helps to see if you may have possible affordability complaints or if there are any creditors that may be more difficult than others. 

moogle87

I am suprised Stepchange said anything to you, they normally say they dont deal with the self employed. 

Stepchange spoke to my husband. Also, the business advice line said to go back to them as there's no business debt, so I put it down as not being self employed as I was going around in circles otherwise.

Luckily (there's not a lot of positive in this situation) I put our car borrowing (we borrowed £7.5k) on cards. Everything is on credit cards apart from the mortgage & £200 to Next.

I'll pop a SOA on later.

moogle87

I've cancelled the credit card direct debits.

I just wish that I'd seen this earlier & hadn't paid off about a £1500 worth of debt before I did so (minimum payments.) But at least we still have a good chunk left. I also have lots of stuff to sell, which I will be doing for cash only, so we can build a further safety net up that way as well.

Would you all advise that we apply for breathing space as I've only done this with 1 of the cards so far?
Most are up to date payment wise (but we won't be able to afford the minimum payments going forward) except for 2. We owe to Tesco (2 cards), Virgin (breathing space applied for), MBNA, Santander, Barclays & M&S. 1 of the Tesco & Barclays are behind on 2 payments so far.

All bills are up to date. In fact, about 5 years ago, we overpaid £20k on our mortgage. 

I think the next thing that I need to do is move our joint account (where all of the bills go out of) from Barclays?

I think that I need to do this without using the switching service, is that correct?

moogle87

I owe £1800 to PayPal credit.
Does anybody know how this will work?

Grumpelstiltskin

OK Quick answer No joint accounts, separate bank accounts, Breathing space a waste of time, just stop all unsecured debt payments and do not contact creditors.

Paypal no different to other credit cards, do not use it going forward.

Do not use the switching service, it causes problems, transfer vital payments manually.

13thlegion

Yes. Do not use the switching service.

There is no point in applying for breathing space as you want the accounts to default.

You have plenty of good in this story. The chunk of savings is a great start to your emergency fund and this will grow as you wait for defaults.

ManyWays

I am not as anti breathing space as many people here are. They get new interest and charges stopped for a couple of months and if you stop paying them you then get 2 months arrears being recorded on your credit record. This is helpful as it means defaults may be sooner and you have avoided having 2 months interest added to the balance.

I get the "oh you will only be paying back a small amount of that in the end anyway so the interest doesnt matter" argument, but it is based on things carrying on as they have done in the past. I think we are already seeing fewer debts being sold to debt collectors and between debt collectors, and there is pressure to remove the "ask for the CCA" option that may succeed in the next few years. And some debt collectors rarely take low offers. So to me removing a couple of months interest from balance still seems useful. 

Plus its an easy way in at the start, less contact from lenders, time to sort out a new bank account etc