Debt Management Plan

Aro2025

Good afternoon all,

I hope this finds you well - sorry if i have not posted this in the correct place. 

I have broken up with my partner for the right reasons, however we had credit card debt which was solely in my name so now i am lumbered with it all. It's around £40,000.

These are made up from several credit cards.

After all my outgoings i have around £500 .

My questions are as follows

- Is £500 a reasonable amount to pay on the basis of owing £40,000

- My Mortgage is with Halifax and i have credit cards with Halifax. If i enter a DMP will this cause my Mortgage an issue if i am still paying my Mortgage without any issues?

- I've heard it's better to default first before applying for a DMP. Is this true? I thought this would mean that i have more letters coming through the door and then a CCJ would be coming my way. 

- Is it worth setting up a Payment break on gov website?

- My partner and I have broken up but we still pay half mortgage each - if the DMP is in my name only, would they be able to offer a CCJ on the house? I've heard this is not often but i'm worried this could happen?

- I've opened up a new current account with Monzo as my wages used to be put in Halifax and i know they could potentially use this to surplus. 

If i'm doing anything wrong, please let me know ASAP 

I really appreciate any responses to this. Thank you for your time. 

sourcrates

Hi,
As debt management is an informal solution, payments are based on an individuals available budget for debt re-payments, however small that amount that may be, that`s what they will get, creditors have no say in the matter, all payments are decided on the basis of affordability, based on your disposable income.

Mortgages are secured on property, as you know, as long as the mortgage payments are maintained, all will be fine, the status of your unsecured credit, even with the same lender, is a totally separate matter altogether.

Its good practice to default first as it gives you the best outcome longer term, a point to note is that legal action cannot be taken prior to a debt defaulting, as the terms of the agreement must first be broken, only once a debt is defaulted can a lender even consider such action.

To be honest "breathing space" which I think you are referring too, is a waste of time in its current form, the collection process can last 3/4 times as long as breathing space currently allows you, so its of little value to you, collection calls can be blocked, and collection letters recycled.

No one "offers a CCJ on the house" there is a legal process to go though which must adhere to the civil procedure rules, before a lender can obtain a CCJ and charging order for unsecured debt.

There are of course ways to avoid such actions from happening, that can be discussed if or when it happens, so as to avoid flooding you with information all at once.

Exodi

That is unfortunate to hear about the credit card, it sounds like you've been stitched up. It sounds like you weren't married so very little you can do if it was in your name. I guess if you bought any physical items on it, you could argue ownership (e.g. a car) however this can be a bit of a grey area if the items could be considered gifts.

Firstly, we always ask new posters to post a statement of affairs (https://www.lemonfool.co.uk/financecalculators/soa.php ). This is for several reasons, firstly it helps the poster fully understand their true situation (whether it's better or worse than they thought) but it also allows people to give recommendations on where costs could be cut. I've lost count on how many times people have managed to save another couple of hundred pound by changing their TV subscriptions, phone contracts, takeaway habits, energy tariffs, etc. The more money you can throw at your debt, the quicker you can be out of the situation.

With regards to your questions -

- Is £500 a reasonable amount to pay on the basis of owing £40,000
It's actually irrelevant whether I or Halifax or someone else considers £500 p/m reasonable on a balance of £40,000. The idea should be that you are offering all the money you can spare. If that is £500 or even £100 then it is what it is, you can't give them what you don't have. The creditor will have the choice of accepting the offer (in the understanding you physically don't have any more money to give them) or rejecting it and suing you for the balance (with the court taking a dim view of the fact that they rejected an offer put to them and the more obvious issue that if you had the money sitting around to pay them, you probably would have - you can't get blood out of a stone).

- My Mortgage is with Halifax and i have credit cards with Halifax. If i enter a DMP will this cause my Mortgage an issue if i am still paying my Mortgage without any issues?
I can't say for certain for Halifax, but in general, apart from first applying for the mortgage, banks do not conduct any more financial checks. You can default on a debt without it having an effect on your mortgage (assuming you carry on paying your mortgage, unless you do something that requires a new credit assessment, e.g. additional borrowing). I'd imagine it would have no impact on your mortgage. Maybe someone with specific experience could comment.

- I've heard it's better to default first before applying for a DMP. Is this true? I thought this would mean that i have more letters coming through the door and then a CCJ would be coming my way. 
I would but rather than re-invent the wheel, there's a good article on debtcamel (a very good resource on DMPs btw) about this (https://debtcamel.co.uk/stop-debt-payments-before-dmp/ ). 

- My partner and I have broken up but we still pay half mortgage each - if the DMP is in my name only, would they be able to offer a CCJ on the house? I've heard this is not often but i'm worried this could happen?
What's the long term plan for this? Do you still live together? Will the house be going on the market or will one of you be being the other out? Firstly pursuing a charging order on a house is very rare, especially where there is a payment plan on the table. Secondly, if there are joint owners they can not get a charging order, it would be a restriction. This makes it signfiicantly harder to enforce. There is a very long thread about that here: https://forums.moneysavingexpert.com/discussion/1839539/charging-order-the-myth/p1

- I've opened up a new current account with Monzo as my wages used to be put in Halifax and i know they could potentially use this to surplus. 
Fair enough.

Post up the statement of affairs and let's go from there.

There's some very knowledgeable people on this board luckily.

Brie

As @Exodi has mentioned there needs to be some understanding of what is happening with the house and the mortgage.  Are you joint tenants, i.e. you both own the whole house, or are you tenants in common, i.e. you each own a percentage of the house?  If both your names on the mortgage (most likely) therefore you are both responsible for the full mortgage.  So if you stop paying or you ex stops paying the bank will look to the other for the payments.  Same can hold true of council tax arrears if you are named on that.  

As I understand it when the mortgage comes up for renewal you may not get the best rate if you have defaulted on your debts but you won't necessarily need to move it anywhere else.  But that's something to consider later in the process. 

If your statement of accounts shows you have £500 spare to pay your debts the creditors will be expecting this to be paid to them - they might not be happy about how much they get but the standard thing in a DMP is to divide that up pro rata and pay a portion to each account on that basis.  Assuming if nothing else changes (no pay rises, no write offs) it will take 80 months of £500 per month to pay off £40k.  Many creditors will be thrilled with that.  I've known people with more debt paying each creditor £1 a month - basically means the debt will never get paid but that's fine.  Creditors will like to see some version of the SOA to prove your income and expenditure.  They do not get to see your payslips, bank statements or bills.  

Have you confirmed that your name is off any other bills?  Utilities, water, phone, TV licence etc?