DMP set up but wondering if I should have defaulted first, and is too late to change?

QuantumBadger7

I'm 29, based in London, earning £2,290 a month. I've just had a DMP set up through StepChange yesterday and they've confirmed they've received my paperwork. But before I fully commit I wanted to get some views on whether I've done the right thing, specifically around the defaulting first debate.

My debts

Total non-priority debt: £6,727.95

• Santander overdraft: £593.93
• Nationwide overdraft: £1,024.00
• Nationwide overdraft: £100.88
• Nationwide personal loan: £733.11
• Zilch: £73.84
• Steadypay: £620.00
• Zable credit card: £500.00
• Capital One credit card: £1,000.00
• Klarna: £442.19
• Creditspring: £720.00

I also owe money to three friends/family (listed as priority debts by StepChange) totalling £920.

I have to pay off £100 a month to one of them, until £600 is paid off, this is not negotiable. I'm also not in a position to borrow any more money off friends and family.

The DMP

Monthly payment: £333.67

Timeline: 18 months

My budget as approved by StepChange

Income: £2,290.24

• Rent: £860
• Transport: £110
• Electricity: £40
• Prescriptions/dentist: £26.57
• Groceries: £200
• Meals at work: £25
• Alcohol: £100
• Laundry: £20
• Other bills: £140
• Clothing: £21.67
• Toiletries: £20
• Hairdressing: £40
• Internet/TV: £60
• Mobile: £45
• Hobbies/leisure: £60
• Gifts: £41.67
• Savings: £30
• DMP payment: £333.67

Credit score

Currently 404 - already in very poor territory before the DMP started.

My question

I've been reading about the strategy of letting all accounts default first before entering a DMP, so that all 6-year clocks start simultaneously and drop off your credit file at the same time, rather than getting AP markers that last 6 years from settlement.

Given my DMP is only 18 months, is the credit file difference meaningful enough to have been worth defaulting first? And given my creditor mix what's the realistic CCJ risk if I had gone down that route? Obviously concerned about being chased by so many creditors for up to 6 months as well, is there a way to limit it to only letters etc?

Is it too late to pause the DMP and reconsider, or should I just crack on?

My slowly deteriorating financial situation is something I've avoided looking in the eye for too long, but desperate to get it sorted now.

RAS

It's certainly not too late to stop the DMP. It might make more sense to ask Stepchange to hold action for a couple of weeks while you think it through more. They'll not mind.

What you haven't shared is how much you were paying to each creditor each month, including family.

Grumpelstiltskin

Yes contact Stepchange ASAP and ask them to hold off for a few days.

Honestly with a couple of months of only spending what is needed not wanted you could bring those debts way down and self manage your own DMP

QuantumBadger7

That's good news, thanks for getting back to me.

On the monthly payments, here's what I was paying (or supposed to be paying) to each creditor:

Non-priority creditors:

• Santander overdraft: £29.70
• Nationwide overdraft: £51.20
• Nationwide overdraft: £5.04
• Nationwide personal loan: £54.10
• Zilch: £73.84
• Steadypay: £125.00
• Zable credit card: £15.00
• Capital One credit card: £30.00
• Klarna: £442.19
• Creditspring: £120.00

Total contractual payments: £946.07

Priority (friends/family):

• Friend 1: £100.00
• Friend 2: £16.67
• Friend 3: £10.00

Total including family/friends: £1,072.74 per month

To be honest I wasn't keeping up with most of these, that's what led me to StepChange. The gap between what I should have been paying and what I could actually afford is what made the DMP feel necessary.

QuantumBadger7

@Grumpelstiltskin my issue has been ive been living through the buy now pay laters, which has been killing me month to month, so next month im due have paid out around £950 right at the start.

This doesn't really take down any of the debts at all, apart from the BNPLs, and after spending essentially all of money on the debts and these I have no real choice but to use them again and rack up progressively worse bills for the next month.

sourcrates

Fellas, its only an 18 month arrangement, default or not it won`t really make diddly squat difference to the outcome here.

Let the OP clear his debt, and any AP markers may well make him think twice about further credit.

QuantumBadger7

Conflicting advice here. Appreciate you all taking the time but feeling a little more at a loss..

RAS

How does the Stepchange DMP deal with the debts to friends? Does it allow you to make those £100pm payments and then distribute the rest to your creditors?

Do you have your salary paid into a bank account owned by a provider to whom you owe nothing (check bank groups)? If not, I'd suggest you get a new basic bank account as no credit check is required. Do not use the switch mechanism although that means setting up your new DDs manually.

I agree with sourcrates, it'll take 6-18 months for your creditors to issue defaults. You can probably clear things like the smaller ODs and pay your friends before defaults start to be threatened.

You'll be written to before any default is issued. The letter demands repayment of the whole debt, but most will agree a regular payment clear the debt.

If you put spare money aside for 6-12 months you may be able to live without getting more credit and slowly pay down the other debts.

The APRs on the ODs will be horrid, as will some of the other debts. Prioritise them.

bazdvd

your OP says you owe

• Klarna: £442.19

yet your monthly out goings also include

• Klarna: £442.19

Which one is correct?

QuantumBadger7

@bazdvd I owe Klarna 442.19, but that's all due next month. It's a buy now pay later set up.

QuantumBadger7

@RAS the stepchange monthly payment amount doesn't include my debts to friends in the money they take, but it does allow me the space to pay off those debts alongside the DPM, and still be ok month to month.

Thanks for your advice, but to summarise, you think I should go for the DPM? I'm currently renting, and well aware ive got no chance of being accepted for a mortgage at anytime in at least the next 6 years, so that's ok, but if i move, will I have trouble being able to rent with a new letting agent/landlord?