Debt getting me down

llcooljayne1

thank you! So I will set up the dmp, the creditors will default my accounts and after 6 years these defaults will drop off my file regardless wether I have completed paying them or not?

RAS

Yes.

Meantime, you and yours can renew the mortgage by selecting the best offer from your existing provider without a credit check.

As fatbelly has explained the other option is an IVA. These have changed a lot in recently.

The new "protocol" IVA last 6 years, rather than 5 with an expectation of remortgaging in year 5.

The upside is that you might complete the IVA having paid back a small percentage of your debt.

The downside us that if your income increases or you inherit you could end up repaying the whole debt plus the IVA fees. Stepchange reputedly charge less than the private providers.

And of course, you might need to advise insurance providers (some ask you to declare bankruptcy, some insolvency) or employers

13thlegion

https://forums.moneysavingexpert.com/discussion/comment/82040205#Comment_82040205

A useful order of steps is.

1. Stop paying the unsecured debt completely (this will feel really very weird to begin with)
2. Use the money not spent on building up an emergency fund. Because you wont be relying on credit for a while.
3. When the debts default then set up the DMP.

Because if you set up a DMP first you will get Arrangement to Pay markers which stay on you record longer but with the same effect as a default.

And you will need a cushion financially so more to the emergency fund is good.

Final tip. Even when on your DMP make sure to set some money aside each month to the emergency fund.

RAS

As above. You and yours need the financial buffer of an emergency fund. If you go straight into an IVA or DMP with a debt charity or IVA provider you'll not have that in place. And, for example, going forward Stepchange allow £30 per month for emergencies. As a houseowner, even with only a percentage to pay, that may not be adequate.

With a DMP you can negotiate a temporary halt. Doing that in an IVA can extend the time to clear the debt, as you've agreed 72 payments not just 6 years.

In both cases, you are going to have to explain why you haven't got easy access to major funds for upgrades etc to parents. Getting an emergency fund in place can help.

llcooljayne1

wow, the advice on here is amazing! I came on yesterday full of anxiety and this morning feel like maybe I can actually get this sorted once and for all.

So my plan now is to stop paying my creditors, wait until they default and then set up a dmp.

Just to clarify, if for some reason I gain a lump sum (inheritance or other) can I pay the balance off early?

Also, if my accounts default and get passed to debt collectors, what do I do then?

Time2Go_25

Just a question for those more knowledgeable than myself, but is this likely to impact the credit history of the parents?

llcooljayne1

oh yes great question! Thank you!!

RAS

Before the OP stops paying their creditors there are a few things to check.

Do they have any debts with the bank group into which their income is paid? If so, they need a new basic (no credit check required) account, get income paid in and to manually transfer any essential DDs. Or try Monzo etc. Do not use switch as creditors can reinstate DDs even if cancelled before the switch.

Do they have any joint accounts with partner or parents? If so, clear and close to protect the others' credit records.

Otherwise sharing a mortgage with their partner isn't a major issue. Nor is consumer debt owed by the OP to their mortgage provider.

But all three other adults need to understand the limitations on the OP's ability to fund non-essential purchases or schemes.

If the OP's income improves they can pay off the debts when convenient. In practice most debt is sold off for a fraction of the book value and the OP may well be offered settlements at a reduced price. Generally, this is open to negotiation, so make a counter offer for a little over 50% of the reduced price and haggle.

The debt purchasers can generally make a profit if they get 30% of the book value and the older and more frequently sold debt would have cost even less.

Grumpelstiltskin

Anyone who has joint accounts with you could be affected. We advise you to close all joint accounts.

Also if you owe money to the banking group you have your current account with close that and move to a group you don't owe anything to.

You need an account that doesn't have an overdraft.

Don't worry about setting up payments, that is some way down the line, there are further steps to take before that.

fatbelly

https://forums.moneysavingexpert.com/discussion/comment/82040455#Comment_82040455

Once the dmp starts and the debts default then the creditors will consider selling your debt to a debt buyer, at a hefty discount. So either the creditor or the buyer, whoever owns it, will be open to offers in full and final settlement. These can often be similar to the levels of discount in an IVA but depends on negotiation with the individual creditor.