My StepChange DMP setup - need advice on how to continue

Tuxedo_Roxy

Hello all,

I've embarked on my becoming debt free journey a few months ago after struggling with it for years. In short - a bit over of 30k debt over multiple CC'd, a couple of cash loans, and then Klarna and to top it of a few payday loans, 11 lines of credit. I've then started to fail behind on payments as the 0% interest faded away, my overtime which I used to make ends meet got cut, and so needed to find a way out.

Decided that I was better than living like this, and needed to change, I've opened up to my friend who advised me to contact StepChange. I did a bit of research of how great it was, and gave them a try following their process on the website and "successfully" setup a DMP payment of £930 monthly.

What a relief at first - the annoying phone calls and letterst stopped and life felt great again, until the first problem - I required a wisdom tooth extraction last week and didn't have an emergency found. I did put the max £30 pounds suggested by StepChange into budget, but it was not nearly enough saved up to cover this expense. I ended up asking the same friend who knew about my situation to cover the bill for me, he was happy to do it but with the condition I would repay him on my next payday (past Friday, and I sent him the money back) and to sort out an emergency budget . This then brought me to this forum, where I've read through multiple topics where I learned that I probably should have waited for the credits to default, and build up an emergency found in that time, and probably should have been more generous with my submitted budget.

I'm now a bit devasted because I don't know in which direction to go. I was super carefully with my money using Monzo Salary sorter and put everything into pockets so I just used one pot for my food shopping/groceries/daily life, and everything else I wasn't worried about as it was taken care of in the background. This also helped me to live within my means, and now I suddenly can't make the next months DMP payment.

Should I speak to StepChange and ask to Pause/Cancel the DMP for a few months and get all the accounts defaulted first? I haven't found an official answer on this, only that they can deal with 1 missed payment, but what if something else happens and I need emergency cash again? I e-mailed them what happend, asked to reduce the next payment to £300, what I can afford for the next month, but haven't received a response for more than 10 days now.

Also, using StepChange I don't know the status of all the 11 accounts, I've only received letter from NatWest saying that they have sent me default notice, stopped interest charges, and agreed to the proposed payment plan (I assume what StepChange sent them), that's for 3 credit cards. One more creditor has sold the debt onto a collection company which gave me a login to a website to set up repayments there. I've used the StepChange dashboard to report this and move the debt to the new agency. So that's so far 4 out of 11 credit lines I know the status for.

I'm afraid if I take a payment brake NatWest or other creditors would use the time to take the CCJ route, as It says in their letter if I don't make regular repayments on as agreed.

My idea would be to pause (or cancel if pausing is not possible) the StepChange DMP for a few months, and then setup a new DMP with another provider, or even self-manage? Any other advice/steps to take now please? Thank you all in advice for responding and helping out.

sourcrates

Hi,

DMP`s are informal arrangements, you can start/stop or cancel altogether as you see fit.

Stepchange are simply the administrator of your arrangement, they work at the behest of your creditors, who incidentally also fund them, you are under no obligation to continue, especially if the payments are not affordable.

You can tell them this and they will understand, but you would be best off stopping payments altogether, and allowing everything to default first, your lenders will normally just sell the debts or assign them to collection companies, you would be very unlucky if any took legal action at this very early stage.

Once you are on a firmer footing, you can self manage very easily, all self management involves is making one payment to each creditor on a monthly basis, its very easy to do.

RAS

Just contact Stepchange and tell them to halt your DMP. Explain that in the absence of any savings you can't continue at the moment.

A DMP is an informal arrangement. It's pretty common for people to have to defer or halt payments if they've not got decent savings organised before they start. And some may need to do so even after several years.

The downside is that you will get more calls, texts and emails. So set up a free email just for debt collectors. Set your phone to reject unknown numbers and selectively monitor known ones.

All important documents have to be sent by snail mail any way, warnings about defaults, defaults, sale or assignment of debts etc.

The upside is your defaults should arrive sooner. And it may be a good time to read up on unaffordable debt at the debtcamel website. And to live with and road test your statement of affairs.

Meantime, open an instant access ISA or other savings account for the emergency fund. Depending whether you rent or have a mortgage, your absolute minimum is enough to pay a deposit, month's rent and moving costs, plus one domestic emergency, or several month's mortgage, a house repair and emergency.

You can always re-join Stepchange later.

Grumpelstiltskin

OK Yes on Monday contact Stepchange and tell them you have realized your DMP is not viable and you will be cancelling your payment and you will maybe contact them again when things have been sorted.

Don't panic about CCJs, debt collection is very slow and creditors can't magic them out of thin air,.

Then sort a livable budget and use what spare money you have to start your emergency fund.

Keep posting on here and ask us anything you don't understand.

The main thing is don't panic, nothing terrible will happen if you don't pay.

Brie

I agree with the others that you tell SC that you are stopping. Don't ask.

Then take the budget that was set up with them that said you could pay £930 a month. Check what is on there for you building an emergency fund. If there's nothing there set it at a reasonable amount - maybe £100 a month. So that means the £930 (or whatever amount you actually know is possible) should be the amount you can afford to repay the debts AND the £100 emergency fund builder payment.

Divide the debt payment portion into an amount for each debt on a pro rata basis. Make payments yourself to any creditor you know for a fact has defaulted your debt. Like NatWest. Leave the rest and put the money you aren't paying to the creditors into your emergency fund account. In time the debts will default and when they do you can start paying them one by one.

I'm assuming your Monzo account has no related debts so no one can try and raid your savings.

Commiserations about the wisdom tooth - I needed all 4 out and still remember decades later what a literal pain it all was.

Rob5342

I self manage mine and it's far simpler as I can just adjust it however I like, having Stepchange involved is just an unnecessary complication in what is a very simple process.

gwynlas

As above I am surprised that SC set your repayments so high that you could not afford dental treatment.

It is up to you if you wish to renegotiate with SC allowing you to build up emergency fund or to self manage going forward.

I know once acknowledged that you woud like these debts gone asap but it is unrealistic to stretch yourself making large payments knowing that you have not got any recourse to credit for the unexpected bills that come in

Tuxedo_Roxy

Firstly, I want to thank you all for your very valuable feedback. I'm now more comfortable and can "breathe" again, not worrying to much about any court action, even if it comes to that I would be ready as I made reasonable efforts to repay the debt anyway.

I've now spend some good amount of time in this forum reading up on DMPs, and as some of you mention here, I found out that their goal is to maximise the debt payment.

I will let SC know about pausing/cancelling my payment until I have a comfortable emergency found. In the meantime I will think about to re-joining later or to self-manage.

And yes I checked, my Monzo account is new and not affiliated with any creditors.

I also found advice and used the free trial on the CheckMyFile website, which gave me more info on the status on my debts, as chasing them down through the 3 different credit agencies is a nightmare, as some are reported in some but not others. This gives me a clear picture.

Some accounts show "Arrangement to pay" instead of default. Can I ask for the account to be defaulted instead? Is this a smart move now, to get it off my credit file sooner as other suggest, but can you actually ask for it to defaulted instead or the creditor has to decide?

Should I sent the £1 token payments to the defaulted ones until my situation improves?

@Brie Thank you for your feedback, I'm just thinking about my wisdom tooth situation, as this was only the first one, I'm a bit reluctant of just reducing the current DMP for £100, as another one might come up tomorrow,next month, next year… It's just causing me too much anxiety not having a penny left after all my payments.

@Rob5342 Thank you for your reply, I've read some of your comments and you seem to be advocating a lot for self management. I'm also considering this, as building up a spreadsheet with all the information is something I do daily at work anyway, and then I would be setting up a reoccurring payment to each.

However, I'm intrigued in the way you say in your posts "you can do whatever you want to". Can you please elaborate more on that - don't you have to send them a budget, review it with them and then they have to agree to that? What if they question the value of some items being too high? Or you just skipped this step and started sending them money and they shut up? I would love to know more about the self managed process and the setup.

Thanks everyone!

Brie

Looking at things in a different way…. are the debts reasonable? Should you have been granted the credit? Ok maybe the initial ones were affordable but what about the rest? Companies are obliged to take affordability into account when setting up a line of credit of any sort. So maybe you had a couple of credit cards, which was fine. But then you set up your Klarna account - was it really affordable? And what about the payday loans? They rarely are.

So if you write to the companies and ask what affordability checks they did they might find they will cancel interest already paid or even cancel the balance of the debt. There's a template letter on one of the stickies.

Meanwhile I would suggest you continue to pay a small amount to those debts you know for a fact have defaulted and that you know for a fact appeared to be affordable when that credit was granted. All the rest goes into your emergency fund.

Grumpelstiltskin

OK Don't send token payments at the moment, honestly it is better to stop all payments until things are more sorted.

A DMP is not a legal agreement. You have to realize you are in charge not your creditors.

What do you tell your creditors? You tell them what you want, if you do give them a budget you can make it fit the amount you will be paying them it does not have to be accurate.

What if they are not happy with what you will be paying them? Then that is their problem.

You have to realize the less you contact your creditors and the less you tell them the better it is. Remember you are in charge not your creditors.

You will receive texts, phone calls and E Mails, block what you can and ignore the rest but you must open anything you get by snail mail. Just remember not to panic and keep posting if you are not sure about anything.

sourcrates

If you continue with stepchange, then you will have to abide by their terms and conditions, in order for them to continue acting for you, which means you provide an income/expenditure form when asked, and you play by their rules basically.

Non of that applies if you go self managed, in this scenario you are the provider of the DMP, you decide how you run it, and what creditors get by way of payments and when.

They dance to your tune, not the other way around, and as we are still currently in a cost of living crisis, with household costs rising weekly, and wages remaining stagnant, they will be more than glad to accept whatever you propose to pay towards their non essential, non priority debts.

Trust me, they know the first thing that gets missed when money is tight is a non priority credit card or loan payment, affordability is the key to everything these days, if you want to retain control over your own finances, I would heartily recommend you self manage when you are ready to re-start payments.