DMP guidance please

sunflower_meadow

Hello everyone,

I have been loitering for a few months - gathering knowledge/reassurances regarding dealing with our personal debt and the different ways to manage it.

Firstly, thank you - the guidance I have read so far has really calmed my worries after years of just about managing to pay minimum payments but then using credit again as the payments had taken up any spare income - a continual cycle that I had no idea how to resolve until finding this forum.

I think that a DMP would work for us, I have spoken with Step Change but haven't taken that further yet after reading the advice about defaulting first. I realise also that we need some time to build up an emergency fund and also to establish a realistic monthly budget and to make sure it works for us.

We have now missed at least one payment on each of our credit cards. We have 7 in total (totalling just over £60k) with an overdraft too on a current account of £3,500.

We have moved accounts after reading that suggestion so all our monthly bills go out of that and all income goes into that too.

I'd really appreciate further guidance for a few things I am worried about please.

1. Default timeframe: I understand that the timeframe for cc defaulting is a bit hit & miss and that we're quite early on in the process but I'm concerned about there being a particularly long gap between the first & last default - in terms of a managed dmp. If we self-manage we can start small monthly repayments as & when they default I think?
2. Overdraft: it sounds like it's a lengthy process to get a default on an overdraft. Can anyone recommend how best to navigate this please? Our o/d balance is very close to the limit and no further funds will go into that account so any monthly fees will take it over the limit which will prompt alerts from them (HSBC).

It feels really wrong to not respond to texts/calls regarding missed payments but I understand this is best. I had initially planned to write to each lender to explain we plan to start a dmp but I now know this will impact on the time it takes to reset the 6 year period of We have begun blocking numbers to help our stress levels.

Thank you

RAS

Excellent understanding of the process.

With defaults, work out your available total, apportion to creditors (maybe 80% initially). As each defaults, they'll keep, assign or sell the debt.

Someone will write and tell you who and how to pay (hopefully the original creditor and the assignee or buyer but sometimes timings don't match). Set up an SO to pay the defaulted account. Most creditors are just glad to get money for little effort. Occasionally one tries to wring out a little more and you have to be firm.

Once they've all defaulted, choose to self manage or to ask Stepchange to manage.

Build up some fighting funds and wait for reduced settlements.

Brie

For clarity….is the new account with a bank completely unrelated to any of the debts and the account with the OD in particular? Did you set it up with the new bank in the standard old fashioned way or did you use Switch? Answers to both should be yes.

The statement of accounts (see the link on my signature below) will help you set out your budget so you can see precisely the incomings and outgoings. You can post it back here if you want help on where to tighten your belts or otherwise point out where things may be improved. Do use at least 2 months worth of statements so you know your numbers are correct. Too many of us (I include myself) underestimate which is why we get into a bother with our finances.

And well done for facing up to the elephant in the room. My situation was of a similar magnitude to yours so don't feel alone in your struggle.

fatbelly

Yes, overdrafts can be tricky. Tell them you have taken advice from Stepchange and require the account to be closed with no further charges/fees. They will probably tell you that they have to run through their standard process. Let us know.

sunflower_meadow

https://forums.moneysavingexpert.com/discussion/comment/82147634#Comment_82147634

Thank you, we're probably months off defaulting yet (it's not a quick process I've come to realise!) so I'll do some calculations for each card balance and a % of our available budget. That's really helpful thank you as I was worried what would happen if there is a long period between first and last defaults.

sunflower_meadow

https://forums.moneysavingexpert.com/discussion/comment/82147688#Comment_82147688

Thank you, I'll do that and see what they say when the time comes.

sunflower_meadow

https://forums.moneysavingexpert.com/discussion/comment/82147664#Comment_82147664

Thank you so much, the answers are yes and yes thankfully - down to the advice I read on here though, I wouldn't have had a clue otherwise.

Our new account is with Starling and I am finding their 'spaces' really helpful when budgeting for regular expenses. Hindsight is a wonderful thing but this would have helped us enormously had we done it before now.