End of the road Considering self-managed DMP – CAB advice vs waiting for defaults?

ImpatientWannabe

Hi everyone,

I’ve spent quite a bit of time reading through the DMP threads on here and they’ve been incredibly helpful and reassuring, particularly hearing from people who have actually been through the process. I’m hoping for some views on my situation and, particularly, the period between stopping payments and actually starting a DMP.

I currently have around £34,700 of unsecured debt across 13 accounts, made up mainly of credit cards, catalogue/BNPL accounts and unsecured personal loans. Interest rates on most are very high, generally around 26-49%. At the moment everything is completely up to date. I haven't missed any payments and have no arrears on any of the unsecured debts.

I'm also a homeowner and have a second-charge loan following home renovations. The mortgage, second charge, council tax, utilities and all other priority bills are completely up to date and protecting our home is my absolute priority. The unsecured debts are currently costing me approximately £1,264 per month in minimum/contractual repayments. Despite paying such a large amount every month, the interest rates mean these are minimum payments and don't make a dent in the capital, resulting in further credit spending to get us through the month, a huge amount of household income is disappearing without making any progress on the underlying debt, which has lead me to the DMP situation.

More importantly, though, the situation is having a significant impact on my mental health and quality of life. The constant worry about money has become exhausting. I'm continually thinking about what payments are coming out, whether there will be enough money left, what happens if something unexpected needs paying for and how I'm ever going to get out of the situation. Even though everything is technically being paid on time, its just not sustainable sustainable anymore and is hugely impacting my mental health. I think that's probably been one of the hardest things to accept. On paper I'm not in arrears and haven't "failed" to make a payment, but maintaining that position has come at the expense of constant stress and worry. Debt has become something that's in the back of my mind virtually every day and it's affecting how I feel about life generally.

I've reached the point where protecting my credit rating no longer feels worth the effect that doing so is having on my mental health and family life. I want some certainty again. I want to know that the mortgage and bills are paid, that there's money available if the car breaks or something happens with the house, and that every month I'm moving towards being debt-free rather than constantly juggling credit.

I've realised that I need to stop relying on credit completely and find a sustainable way of clearing what I owe. I'm seriously considering a DMP, potentially self-managed, and accepting that my credit file will be damaged as part of getting my finances properly under control.

I've worked through a detailed household budget and believe approximately £480 per month would be a comfortable and sustainable starting DMP payment. If interest were eventually frozen, that would repay the current balance in roughly six years. Importantly, it would leave enough room in our household budget to deal with unexpected expenditure without immediately reaching for credit again.

This morning I've spoken to Citizens Advice's debt advice service about the situation. Their recommendation was that I should contact all of my creditors now, while the accounts are still up to date, explain that I'm experiencing financial difficulty and tell them I'm looking at entering a DMP.

This is where I'm slightly confused.

Having read many of the long-running DMP discussions on here, the lived experience seems somewhat different. A common approach appears to be stopping payments, allowing the accounts to go through the arrears/default process, building an emergency fund from the money that would otherwise have gone towards the contractual payments, and then beginning DMP payments once the accounts have defaulted.

I understand the rning to be that a default drops off the credit file six years from the default date, whereas entering reduced-payment arrangements before default can potentially result in arrangement-to-pay markers and delay the point at which the credit file eventually recovers.

Financially, once I stop the £1,264 monthly contractual payments, my budget suggests I could put money aside to build a proper emergency fund quite quickly before starting the DMP.

For me, that emergency fund isn't about having thousands sitting there while refusing to pay creditors. It's about breaking the reliance on borrowing. If the boiler breaks, the car needs repairing or something unexpected happens with the children, I want to be able to pay for it rather than immediately reaching for another credit card. Psychologically, having that buffer would also be enormous. For a long time I've felt as though we're only ever one unexpected expense away from another financial problem.

However, deliberately cancelling payments when I've never missed one before feels completely counterintuitive and, if I'm honest, quite frightening. The thought of letters arriving, constant calls, debts being passed to collection agencies and not knowing exactly what happens next worries me.

So I'd particularly appreciate hearing from people with experience of this about when and how they decided to start the DMP process. Did you contact your creditors immediately as Citizens Advice have suggested, or did you cancel the payments and wait for defaults?

If you contacted them to say you were in financial difficulty, did that result in arrangement-to-pay markers rather than defaults?

Did you respond to letters/calls/emails during the process, or simply wait until the accounts had formally defaulted?

And once the defaults arrived, did you then start a StepChange DMP or manage the creditors yourself?

One additional complication I have is a Very account with around £7,000 outstanding, of which approximately £5,900 is currently BNPL. There is potentially around £2,000 of deferred interest that could be added as the various BNPL periods expire between September 2026 and June 2027. I'd be particularly interested in hearing from anyone who had Very BNPL when starting a DMP and what happened to the deferred interest/default process.

I'm not looking to avoid paying what I owe. I fully intend to repay my debts. What I'm trying to change is the way I'm doing it. At the moment I'm paying more than £1,250 every month while living with constant financial anxiety and still feeling trapped by the balances. I'd rather accept that my credit file is going to be poor for a number of years, live within our actual income, build some financial resilience and have a clear route towards eventually becoming debt-free.

I'm hoping that making this decision might finally allow money to become something I manage rather than something I worry about every day. Any experiences from people who started from a similar position would be really appreciated.

Sorry for the long post, I've had a lot on my mind! Ha!

gwynlas

Unfortunately I had not joined this forum before starting DMP so wasn't able to follow advice available re emergency funds etc.

Current thinking is to allow accounts to default before entering plan whereas I offerred token payments but essentially outcome was the same with interest being frozen. However I assume that my debts are possibly still listed as eventually in a position to make full and final settlements so file might show partly settled as this was less than 6 years ago.

Grumpelstiltskin

OK You should stop all unsecured debts now and get as much as you can in a instant cash ISA .

You only have to read more threads to work out you will be doing the correct thing and the sky doesn't fall in because you will not be paying your debts.

Boabyfromcraiglang

First things first. You are more important than your debts. You only have one life. Time to stop spending it worrying like this. I've been there. It's horrible.

The settled view is stop paying your unsecured debts now. Always keep paying your secured debts and priority payments. Nothing bad will happen. Start using the money you have saved to build your emergency fund. You'll soon have no access to credit for many years so you'll need it. Forget about your credit rating. Do you really want credit in future anyway?

Also, use a little of that money to be kind to yourself. You deserve it.

Put together a budget. Make sure you can easily live with it and allow money for fun / enjoyment as well. That's important I think.

Then you wait for your debts to default. Once they do you start paying back what you decide you can afford.

And I believe that's it

Oh also look in to affordability complaints. There is no harm in speculative complaints.

Also you'll have to stick with your current mortgage provider.

And you must move away any bank accounts in your name that are with an organisation you owe money to somewhere else due to the right of set off.

Number one priority is you and yours.

Good luck

Brie

No doubt you've read that we suggest filling in your statement of accounts (see the link in my signature) using 2 - 3 months worth of statements so you get an accurate view. You can then post that here and people will advise where things might be tightened up. Or don't post it and keep it for your own reference. Chances are the creditors will want to see this at some point to know that you aren't "cheating" them and dealing with everyone the same way.

They will understand you continuing to make your priority payments while defaulting on the non-priority. You can ring them if you like but they'll get the picture soon enough when the money stops going their way. Don't be startled by their stern letters - they are bullies and will do their best to scare you into making impossible payments.

Stay strong - you are doing the right thing.

fatbelly

Yes I think you have this pretty well sussed. You should probably give it 6 months for the defaults to come in, and so save 3k. File letters, block calls, texts and emails.

Don't expect good advice from CA. There has been a hiatus in debt advice over the past few years and experienced advisers left. It's now a complete mess.

ArtyJ931

I’m nearly 6 months in if you want to read my diary I do a weekly update of what has happened which might be useful. I haven’t contacted any if the companies I owe money to and haven’t responded to anything. I’m saving money into an emergency/ full and final settlement offers fund.

As of now none of my debts have defaulted and I’m still saving.

ImpatientWannabe

Thanks everyone for the replies and insight, ArtyJ931 that diary is great thanks.

blue2mills

That diary is very cool :-) I have just jumped off the cliff and have cancelled all my unsecured creditors direct debits from my bank, NatWest. I have opened another independent bank account with Starling. I've changed my bank details for work wages to go to Starling moving forward. What are my next steps please? Do I now sit and wait for the creditors to start chasing me before I contact Stepchange to set up a DMP or can I manage a DMP by myself and if so, how do I start? Thank you very much for any advice/support offered.

RAS

The next thing you need is a good Statement of Affairs. You'll be using the next few months to stress test that. Can you actually live on what you have budgeted? Remember £100 pw is £433.33 pm, for example.

Stuff for which you hadn't budgeted keeps turning up? That means you've not made monthly provision of annual or occasional predicable expenses. So you need savings pots, or even an instant access saver where money goes, and you know you can raid it as needed.

Then you have what's left over. It'll take 6-18 months for creditors to default debts. Those left overs go into an instant access ISA you don't touch. If you are renting, it's were you can find the deposit and month in advance if you have to move. If you have a mortgage, it covers a couple of months if you are ill, or a house repair. A proper emergency fund because you can't access credit.

When the creditors register defaults on your credit record, they may keep the debt in-house but will probably assign or sell it. They'll write to you and then you can set up payments. That'll need doing gradually but once they are all in, it's up to you if you DIY or use Stepchange.

ArtyJ931

manually move all your direct debits to new accounts. Change contact details with debts to new “DMP only” email address and block unknown numbers on your phone. Collect letters as they arrive into a folder and watch for when you have officially defaulted on your credit file. I still haven’t on any.

Research affordability complaints and start that process if appropriate too.

23 weeks in I’m still changing my SOA and amending budgets regularly.