Debt Management Plan and Creditor Payments

KittyKat645

Hi all. I’m about to enter a DMP with Step Change who are amazing by the way. Long story short is that I had to take early retirement due to a health condition and this has led to some financial difficulties. My question is about payment offers to my creditors. There is one creditor who is being offered significantly more than the others and more than my usual monthly payment to them. This has been explained as an inputting error but I’m concerned that because my other payment offers are quite low, this might cause issues. It does mean that the higher payment will be paid off quickly, in around 10 months. My plan starts this month when my first payment will be made. Any advice is welcome. Thank you

sourcrates

I believe the discrepancy may be due to how Stepchange allocate payments to creditors.

I don`t know how they have arrived at this figure, as they are supposed to treat all creditors the same.

Have you thought about self management?

Going it alone means you can allocate payments as you see fit, if you go with the debt charity, you have to play by their rules.

Grumpelstiltskin

OK Have all your debts defaulted? You shouldn't be starting a DMP if they haven't.

Why aren't you self managing? If you do that you decide which creditors get what amount and you are completely in control.

ManyWays

It would help a lot if we can see the budget you gave Stepchange, if you could take the numbers you gave them and enter them into our Statement of Affairs form (https://www.stoozing.com/soa.php) and post it here please. Do include the lender names.

Can you say more about this "inputting error" - have Stepchange said this was because you entered a detail wrong, or is it some error at their end? Is it being corrected?

The big problem if Stepchange are paying a creditor more than the normal monthly payment is that interest will not be frozen.

fatbelly

StepChange I thought, base your payment on the contractual payment amount so you should not be paying one more than that, and others less.

Are they saying that they will sort out the error?

Brie

My understanding with DMPs is that all the payments were based pro rata from the total available to pay. So if you have 10 creditors to whom you owe the same amount they should get the same payments. If that one creditor you owe twice as much as each of the others then the payment to that creditor should be twice as much as the others. If StepChange got it wrong (for whatever reason) tell them to correct it.

Have they discussed all the other options with you? Debt Relief Order for instance? If the DMP gets messy and you can't continue to pay and decide to go for a DRO then there will be issues as to why you were favouring one creditor above the others.

KittyKat645

Thanks all for the replies. In answer to ‘have all of my debts defaulted.’ Some have but not all yet although they will fairly soon. I don’t want to go down the self management route. Yes, other options have been explained and the DMP is the best one for me at this point.
The inputting error is on Step Change’s side I think. The total amount I owe one creditor has been input as a monthly payment instead which has resulted in a much higher monthly payment to them. I did message them about that when I saw the breakdown of payment proposals . I will contact them again as I am concerned that it might cause some issues or lead other creditors to rejecting the smaller amounts. Really appreciate the advice.

Grumpelstiltskin

Honstly you should wait until all the debts have defaulted before you start your DMP. Have you stopped paying you debts and have you been using the money you have saved to make sure you have an emergency fund?

You can jump into a DMP in panic much too soon.

sourcrates

Creditors will not ever reject a DMP, especially when proposed by an organisation they fund to make such arrangements.

You pay what you can according to your available budget, there is no acceptance or non acceptance, you pay, they receive, that`s it.

If they are unhappy with what you are paying, they will just sell the debt on, or assign it to a collection company, and payments continue to whoever then picks it up, its all pretty much a given debt management.

ManyWays

@Brie My understanding with DMPs is that all the payments were based pro rata from the total available to pay. So if you have 10 creditors to whom you owe the same amount they should get the same payments.

That is the way most DMPs work but my understanding is that with StepChange the payments are pro rated based on the monthly payment to the debt, not the balance owed. As a result some creditors are paid in full early than others.

@KittyKat645 The total amount I owe one creditor has been input as a monthly payment instead which has resulted in a much higher monthly payment to them

That explains why a very high payment to them is being generated. StepChange needs to correct this, but I would not worry too much about other lenders reactions. For you it is important to sort this mess out. For the creditors this is just one of thousands of new DMPs this month and no one is sitting there looking at them all individually.

Rob5342

I would suggest managing it yourself too, that way you can simply pay what you want to instead of having Stepchamge create extra complication like this.