AP, then defaulting

Altior

The information that I found out today (I still need to dig into it further) that individuals may require missed contractual payments before being eligible for BS, might lead to a slight change of plans.

I may just play it naïve and present SC (or another reasonable charity) with my scenario around February (before missing any payments) and see what option they recommend.

I have another potential offering as per cashback, I could qualify for a £1K cashback pay out by the end of June next year. The relevant element here if I go for it is I have a small cc liability with that bank on a 0% deal that ends by April. To qualify you have to have a current account with one of the banks in the group, which I don't. I would probably need to clear the card in line with the cc terms rather than include it in a DMP, and disclose my current income to be able to open a current account. That would kill off any chance of refreshed 0% transfers with them, but perhaps I'm at the point where I can forget about any refreshed 0% BT deals again anyway, and I'd be better off taking the grand cashback.

There is another thing that the experts might be able to assist me with? What's the ballpark surplus income sweet spot for a DMP of around £12K. Looking at SC today for example, they are quite keen on a DMP being affordable. I want it low enough that it's manageable, but high enough to make my creditors think it's worth while. So if I went for £50 per month for example, that is 20 years. Seems very long, so maybe £100 is better. I realise that the creditors have to accept what I offer, but if I use a debt charity I want them to feel that a DMP is viable.

ManyWays

Stepchange is likely to be unhappy with a DMP of much less than £100 a month.

Altior

https://forums.moneysavingexpert.com/discussion/comment/82123531#Comment_82123531

Thanks!

If I go down that route, I'll self manage anyway after it has been running for a few months, I just need them to be comfortable enough with my declared surplus to support setting up the DMP.

So if I went for £125 per month, that is 8 years. Having had no prior experience of this, that seems reasonable? 20 years is perhaps stretching.

I realise that if I do enter a DMP it is pretty small beer compared to many that have been posted, but I don't see a way around navigating a path without one, considering my regular household income is likely to be around £850 pcm.

sourcrates

It might run 8 years, it might not, debts are bought and sold all the time, for fractions of their face value.

Offers to settle for a discount, and the ability to pay over time, is not unheard of with lots of debt purchasing companies, so that 8 years could be wittled down to 6 possibly.

Self management leaves the door open to be as flexible as possible, wear as using stepchange requires you to conform to their rules and reg`s, up to your own personal choice I guess.

Altior

https://forums.moneysavingexpert.com/discussion/comment/82123623#Comment_82123623

I was choosing this route as, rightly or wrongly, I suspect that I'm more likely to get interest and charges frozen if I set it up formally via a debt charity. Then self manage once I've secured balances being frozen from interest being added.

I will be able to let the charity know of my LCWRA status and that I will be unable to work again, along with my true benefits income. It's just my expenses that I can flex on to a certain extent due to clothing, entertainment, emergency fund etc. I already had an EF and have not spent anything on the other discretion type items since I had to give up working, but that's probably not sustainable for several years.

sourcrates

."I suspect that I'm more likely to get interest and charges frozen if I set it up formally via a debt charity. Then self manage once I've secured balances being frozen from interest being added".

That is only guaranteed once all accounts default.

The default is the line in the sand if you like, the point of no return, the official end of the agreement between you, until then, a creditor can re-instate interest at their discretion, this is even more the case if your payment is around the account contractual minimum.

I`m not saying this happens often, usually accounts with stepchange will default within 6 months, but choosing to let a 3rd party represent you, keeps them in control, that may or may not be an important factor for you, but for me it would be.

If you are going to take charge of this, then take charge from the start and put your stamp on it, don`t rely on your plans being in the hands of any 3rd party.

Altior

I'll have a think on it all, as is my want!

It will probably be a little easier to make my final decision once my situation has more certainty. I will most likely target that cashback, meaning I will need to clear that card before anything kicks off. It's less than £1K so achievable.

UC screwed up my first claim so that needs sorting, as does securing SMI.

Altior

Just to keep the thread updated, I have reached a decision.

It seems a little perverse, but there is logic to it, I am going to take the traditional approach of defaulting and will also manage it myself. However, instead of leaving it as long as possible, I'm am going to default on the cards that have their promo rates ending first (once the deals have ended).

I have battered those balances nearing their promo rate end recently, so they are now tolerable. By coincidence, they are the same banking group. Perhaps they might even end up with the same debt purchaser.

This approach should mean that I am able to fully clear the longest lasting 0% rates, and actually have a smaller total amount included in my informal 'DMP'. Stopping the payments on the earlier ones will give me a little more resources to hit the longer ones with. I should be okay as long as the older ones don't demand immediate full repayment.

The only other predictable variable that might change things is if, by some chance, I get renewed 0% BT offers. But my instinct is that is now very unlikely. My credit reports all still look clean, but it seems quite evident that something has changed (that is not visible to me).

ManyWays

It's up to you what you want to do, but i want to be clear that what you are doing makes little sense from the debt handling / future credit point of view.

There is no merit in only getting 4 defaults in 1-3 years time rather than 8 defaults in the next 6 months. It will not improve your credit score, indeed your credit score will take longer to recover.

It is better to get more defaults now than fewer spread over the next few years.
You do not want more 0% offers unless they may mean that you do not need to default at all to anything.

And if you default on a card to bank X, then you may well find other cards from that bank (and possibly others from the same banking group) are closed.

Altior

I make it that, taking this approach, I will have 2 defaults in total. Just to simplify the scenario:

Card A £5K 0% ends Dec 26

Card B £5K 0% ends March 27

Card C £5K 0% ends June 27

Card D £5K 0% ends Nov 27

Logic would dictate clearing A & B and defaulting C & D. What I am now potentially doing is defaulting A & B, and paying off C & D fully within the contractual terms. Obviously a debt charity wouldn't support that approach, so I'll need to organise it myself.

I'm not trying to minimise the number of defaults, rather, minimising the total amount that will be included in my informal DMP.

I have a couple of other cards with circa £1K balances. But overall it won't be that much difference if I include them in the DMP or not. It's probably not worth including them, not to minimise defaults but they aren't material amounts and will be other accounts to manage within a DMP.

The coincidence is that A & B are the same banking group (they weren't when I opened them).