AP, then defaulting

Altior

I'm exploring a tactic:

1. Breathing space
2. Setting up DMP via Stepchange
3. If interest and charges are not frozen by the creditors, self managing and then defaulting

What I would like to know is if anyone has experience of deploying this sequence (or similar), either accidentally or on purpose. As per my original thread, my primary objective is to freeze interest and charges asap once I have ran out of road on 0% rates. I must make it clear that I am not at all bothered about getting a clean credit report as quickly as possible. An AP is as good as a default for me. However, although I am aware write offs are possible in my scenario (ill health), I'm still not inclined to take that approach unless there is no other option.

There are two unknowns within this potential strategy to me:

• If I use a debt charity such as Stepchange to progress the breathing space and then arrange the DMP, how likely are the lenders to freeze interest and charges for APs? I won't have much to pay the DMP with, circa £50 PCM on perhaps £12K total debt (pre charges/interest).
• If I get APs set up via the arranged DMP, and then stop paying, is that similar to the usual method of obtaining a default? For example, if the DMP is running for two months and interest and charges are still being applied, I opt to self manage instead and then await the defaults.

The strategy will of course fail if I get APs but full charges and interest continue. I've read a few articles online about APs, but they don't really say in practice how likely creditors are to freeze interest in an AP.

Thanks!

USERerrorUSER

I think generally the advice is stop paying, start saving emergency fund, get defaults, start DMP.

AP are just a pain and to be avoided, much better to get default asap.

Altior

https://forums.moneysavingexpert.com/discussion/comment/82122225#Comment_82122225

I agree in many circumstances. But having a clear credit report faster to me, in my specific scenario is totally irrelevant. I'd happily take the APs over defaults IF it expedites the freezing of interest.

Altior

I have no fear of self managing or dealing with the bombardment of comms, or setting up payments either. Just that my instinct if if it comes from SC, I'm more likely to get interest frozen. I'm aware that technically self managed is meant to carry the same weight, in practice however, it seems much less likely.

I often read on here these tales of folk waiting up to 9 months for defaults and the interest and charges piling up, That's the one thing I want to avoid.

Rob5342

You are much better off defaulting now, it gets everything sorted instead of having APs hanging over you. Having a clean credit record sooner might not be important to you now, but it could well do in years to come. In 6 years time you could have cleared the debts and be facing another 6 years of having a damaged credit record and wish you had defaulted which could have seen you clear in a few months instead.

Altior

https://forums.moneysavingexpert.com/discussion/comment/82122296#Comment_82122296

It's not 6 years really though, if the defaults take up to 9 months (sometimes longer I believe), then it's practically 7 years from beginning to stop payments. I forecast that I will be in a position to fully settle the liabilities around 2 years from now, even better if settlement deals are possible. So roughly, that is 1 year either way.

Nothing is set in stone, but all things being equal, that's the direction of travel in my circumstances.

The other variable that's not the typical case with me is that I already have a pot of money/EF, and it can't go over £6K, and today it's £5999. I can use capital to settle debt, but I don't need any new capital. And I can easily make minimum payments for the next 6 months from income, in fact I have pulled all discretionary spending and implemented the mortgage charter to hit the debt as hard as I can until April. There is also a possibility of getting refreshed 0% BT offers, but currently they've all dried up.

ManyWays

Interest is normally stopped if you have very little spare to make monthly payments with.

Altior

https://forums.moneysavingexpert.com/discussion/comment/82122426#Comment_82122426

Thanks. I'm reasonably attracted to this approach. I realise most regs on this board would probably cringe at the prospect of trying to obtain APs on purpose, and I totally get why, but I feel it's logical in my specific circumstances.

If my UC application goes through smoothly (first statement is generated this week), my 'spare' income will be contingent on a successful application for SMI. It's three months' waiting after a successful UC application, so I won't know for sure if it will be approved until next year, but there's nothing I'm aware of that would stop it. Even a completely genuine I/E report wouldn't show much to spare, but I want to hit the spot where SC still think a DMP is appropriate.

sourcrates

To be honest, a lot of debt advisors think breathing space is a waste of time and effort, its only 60 days, which in the world of debt collection is nothing, its about the average turn around for a letter sent to a debt collector.

Stepchange promote it because it was their baby, their idea, it was originally intended to be six months, but got watered down to 60 days, all it does is stop phone calls and letters for that period, after which they re-start, you can achieve the same result yourself by blocking calls and binning the letters, its more of a gimmick than an actual help to people.

When I was in debt I tried most strategies, and I still think non payment, wait for defaults, then self managed DMP is the best way for a homeowner to tackle their non priority credit debts, as long as the debt isn`t so high that an IVA might be needed, if your debt is around 12k that`s DMP territory.

Altior

I was actually just now doing some BS research, and on the embedded SC video, the indication is that you need to have actual missed payments to be eligible for breathing space (not just have unaffordable unsecured debts).

My scenario that is when this started over a year ago, I think I had circa £40K+ plus cash assets but only £380pcm income (+ savings yield), so as expected through terminating 0% deals, regular essential living costs and contractual payments, I am now down to £6K. Because I had that amount of money originally, I have only just become eligible for UC. I will only find out next Saturday for sure, but UC should give me an extra £200 or so PCM, meaning it's the first time since July 2025 that my income will be higher than my scaled down outgoings (not including unsecured debt repayments). I also overpaid the mortgage when I could, as that was allowable under UC rules, with the aim of reducing my priority debt repayments going forward. I knew that meant unsecured would then be a bigger problem in the future, but my judgement was to prioritise my property.

I also have a reasonable/semi desirable car, I pretty much currently only use it to ensure that the battery doesn't go flat! Other than that it's journeys to the GP or job centre for UC. It's a sort of nuclear option to sell it, that I was keeping back for a real emergency eg not being able to make mortgage or CT obligations. UC doesn't count your only everyday car as capital, but I could easily survive without it I had to.

I'm a nightmare planner/worrier really and I overthink and plot out every scenario, typically. I'm 6 months away from being in actual trouble re unsecured, and even then, some of my current 0% rates last another year+. Two big balances however have 0% rates finishing by the end of April, and they will be circa £11K combined, which I make around £200 PCM in interest added alone, and at that point my commitments would again be more than my income. Only this time immediately unsustainable

The upside of the alternative manual defaulting approach is that I could keep going with the longer lasting 0% deals. In fact I could potentially only need to default those two accounts (Virgin and NatWest combined £11K).

ManyWays

StepChange no longer routinely offers breathing spaces.