Urgent advice. DMP now or default first. Please help on a plan

Holyt

Hi everyone,

 

I’m new here. I’ve been reading through posts over the past week and can relate to so many of your stories. I thought it was time to share my own situation. Thank you in advance to anyone who takes the time to offer advice — I really appreciate it.

 

I’ve read that it’s often best to let your creditors default before entering a self-managed DMP or one with StepChange. I understand the consequences — mainly that my credit will be affected for the next six years and a mortgage will be unlikely during that time.

 

I’m 31, and my debts have become unmanageable. I’m stuck in a cycle of only paying interest, with no real progress. I’ve never missed a payment, and my credit score is currently fair, but all my cards and loans are maxed out. No lenders will extend further credit.

 

My financial issues stem from a gambling problem that took hold over the past few years. I’ve been gamble-free for six months now and am determined to tackle this properly. I currently have no defaults or missed payments on my credit file.

 

I’m in a Breathing Space period until the end of December, with no savings or emergency fund. My total debt is around £37,100 spread across various credit cards, loans, and arrears:

 

Should I not enter a DMP and carry on paying the minimums. What if I lose job or change job in 2 years and am out of work and don’t have the salary, this will just prolong the 6 year date should I default.

I want to add I am 3200 behind in Rent, so if I do not pay any unsecured debts, I will have no rent arears and I will have x2 months of missed payments on every account.

The reason I have 450 in mobile phones is I have 10 device plan contracts, which I have sold all the devices on. I no longer have them so am paying the device plan off.

 

 

I have zero savings or any cash.

 

The minimum payments have become impossible to keep up with. I’m paying just enough to avoid defaulting but have barely anything left each month.

 

My main concern is managing all the creditors — the calls, emails, and letters can be overwhelming.

 

So, I’m trying to decide:

 

1. Should I stop paying unsecured debts so they default quickly, and then start a DMP with StepChange? Stepchange advise i make token payments and get into a DMP ASAP. 

 

1. Or should I enter the DMP now, even if that means having payment arrangements show up on my credit file? I read that I should not do this and default as quick as I can.

 

1. Or should I manage this myself once they all default one by one? I am aware longer term, the debt will be sold and will save myself paying less. Arent defaults that aren’t satisfied worse?

 

1. Once the debt is sold, do I need to prove I cant afford to pay and pay what I want? What if they ask for payslips or income/expenditure report. Do I need to do this?

 

1. Are there any types of letters I should definitely not ignore during this process?

 

1. I am very very concerned about CCJs. Would the credit union be more likely to go for this?

 

Handling around 14 creditors myself could be quite daunting but I guess I would be in control

 

Based on my income, StepChange estimates my DMP could be cleared in about two years, but I’m unsure which route would be best in the long run.

 

I’ve seen advice from RAS, Grumpelstiltskin, Rob5342, and others that’s been really helpful — hoping to get some of your insight too.

 

Thanks so much for reading.

 

Holyt

trying to post my SOA

Grumpelstiltskin

OK Quick reply, just stop all unsecured debts but you must try and get your rent up to date, do not even think about a DMP until they have defaulted.

Holyt

Summary

Monthly Budget Summary	Amount(£)
Total monthly income	4,400
Monthly expenses (incl. HP & secured loans)	2,832
Available for debt repayments	1,568
UNsecured debt repayments	1,572.7
Amount short for making debt repayments	-4.7

 

Personal Balance Sheet Summary	Amount(£)
Total Assets (things you own)	0
Total Secured & HP Debt	-0
Total Unsecured Debt	-37,100
Net Assets	-37,100

Household Information

Number of adults in household	1
Number of children in household	0
Number of cars owned	0

Income, Expense, Debt & Asset Details

Income	Amount(£)
Monthly income after tax	4400
Partners monthly income	0
Benefits	0
Other income	0
Total monthly income	4400

 

Expenses	Amount(£)
Mortgage	0
Secured/HP loan payments	0
Rent	1627
Management charge (leasehold property)	0
Council tax	130
Electricity	0
Gas	0
Oil	0
Water Rates	0
Telephone (land line)	0
Mobile phone	450
TV Licence	0
Satellite/Cable TV	0
Internet services	0
Groceries etc.	400
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, dentists, opticians etc.)	0
Pet Insurance/Vet bills	0
Buildings Insurance	0
Contents Insurance	0
Life Assurance	0
Other Insurance	0
Presents (birthday, christmas etc.)	0
Haircuts	25
Entertainment	200
Holiday	0
Emergency Fund	0
Total monthly expenses	2832

 

Secured & HP Debt Description	Debt(£)	Monthly(£)	APR(%)
Mortgage	0	(0)	0
Secured & HP Debt totals	0	-	-

 

Unsecured Debt Description	Debt(£)	Monthly(£)	APR(%)
Santander	10000	455.7	7
Oakbrook (Fino)	1400	75	0
Capital one	950	50	34.08
Bank Loan	10000	250	7
Very Catalogue	1800	150	64
CDER COUNCIL TAX	2700	70	0
Credit Union Loan	4900	220	12
Zable	950	77	38
Vanquis Bank	1300	50	32.8
Zopa	1300	75	34.7
Marbles	1300	50	37.19
Capital one	500	50	34.08
Unsecured Debt totals	37100	1572.7	-

 

Asset Description	Value (£)
Cash	0
House Value (Gross)	0
Shares and bonds	0
Car(s)	0
Other assets (e.g. endowments, jewellery etc)	0
Total Assets	0

Holyt

Grumpelstiltskin said:

OK Quick reply, just stop all unsecured debts but you must try and get your rent up to date, do not even think about a DMP until they have defaulted.

Thanks - this is my plan. i will be up to date with rent in December. i will have missed all payments to unsecured debts. should i then default on everything? i have included above my SOA

Holyt

What does everyone else think? I will be out of rent arears in December. Then what would your advice be? Any help would be appreciated 

ManyWays

No clothes, no transport, no emergency fund, this is either hopelessly optimistic or you are hoping to cover them from the fairly generous food and entertainment lines, so it's difficult to say if this is realistic or not.

When will the device plans end? As soon as some start rolling off, your situation will be transformed. 

If a DMP with StepChange only lasted 2 years, that may be a good option. It is dubious whether its worth going for defaults first then a self managed DMP, especially as that route will have more interest added before the defaults are added. However, there is a chance that some creditors may not freeze interest in such a very short DMP, in which case it would last longer.

You are concerned that you may lose your job, do you think it is at risk at the moment?  Using the current breathing space to clear the rent arrears sounds good.

Holyt

ManyWays said:

No clothes, no transport, no emergency fund, this is either hopelessly optimistic or you are hoping to cover them from the fairly generous food and entertainment lines, so it's difficult to say if this is realistic or not.

When will the device plans end? As soon as some start rolling off, your situation will be transformed. 

If a DMP with StepChange only lasted 2 years, that may be a good option. It is dubious whether its worth going for defaults first then a self managed DMP, especially as that route will have more interest added before the defaults are added. However, there is a chance that some creditors may not freeze interest in such a very short DMP, in which case it would last longer.

You are concerned that you may lose your job, do you think it is at risk at the moment?  Using the current breathing space to clear the rent arrears sounds good.

indeed yes, that is included in the food/entertainment lines. living in london is expensive. device plans end in 30 months or so. Possibility i will end up earning less each month due to commission based role. So thinking to reset the clock now rather than potentially in a year or so time if that happens. If pay stayed the same for the next 2 years i would be i a better position as closer to paying many of the debts off. Just not sure what to do. i will already miss November & December payments so thats 2 months missed. i would then need to catch up on each of the creditors to be back in the green which would take a few months and still likely default on some or make AP to them until im back on track. really no idea what to do. 

Holyt

Im so lost on what to do. Default now and start emergency fund, plan would be to get a mortgage in 4-5 years. I cant save this way anyway for a few years so would take a few years after i pay off most of these debts and then save after. please point me on what to do. really lost and scared 

RAS

Just to explain that AP markers stay on your credit record for 6 years after the debt is paid.

So perversely any existing AP markers will damage your credit record longer than a DMP with defaults in the next year or so.

Holyt

RAS said:

Just to explain that AP markers stay on your credit record for 6 years after the debt is paid.

So perversely any existing AP markers will damage your credit record longer than a DMP with defaults in the next year or so.

Hi thanks for replying. So what should I do in this situation confirming all what I have said above? Any help appreciated