£61k in debt and struggling - StepChange DMP advice

Plebby85

Good morning,

I've been struggling with debt since 2020 and have been able to just about make things meet but I'm now in a situation where I'm no longer able to. My husband has been contributing towards my debt (as some loans etc were taken out to support our joint living costs while he was out of work) however he's now been hit with a huge tax bill (he's self employed now but this is prior year PAYE owed that has just come to light), which is a priority debt for him. He is already working 6 days a week and needs that money to cover his existing bills and our living expenses, so he can no longer contribute.

I've started an application with StepChange and it initially recommended an IVA but DMP was also an option for me (they reckon repayable within 10yrs and 6months). Obviously I would prefer the DMP to the IVA. I have gone through the budgeting process which leaves £494.50 to go towards all my debts - I'm currently paying over £2k towards the debts each month. It feels horrible admitting the mess I've gotten into!

I just don't know how to proceed. I'm worried that creditors will refuse the DMP because the amount I can pay now is so low. I'm worried that they'll take me to court.

5 of my debts are with Lloyds Bank and that is where my current account is held - I've heard they can claim back money owed from my current account and that a new bank account is recommended but I have no idea when to do that, before or after setting DMP up? I also have a small amount of savings with the Lloyds account, only around £700 but it's the emergency fund, which is currently being used to pay the monthly credit repayments.

I've also read on here that it's better to default and then enter into a DMP? That absolutely terrifies me! It could take months for a loan to default and I'm worried they could send bailiffs round or something.

Any advice you experts could give me would be much appreciated!

Thanks

ArtyJ931

They won’t send bailiffs round. Nothing whatsoever will happen other than letters, emails and phone calls. Change your email address on all your accounts and set your phone to screen out unknown numbers and you won’t even notice them.

Get a new account now and move your savings in preparation for whatever you do next. I would recommend Monzo or one of the accounts with pots and budgeting help.

I am 31 weeks in and 4 of my debts have now defaulted (literally in the last few weeks) the rest are still rumbling on. In that time I have built up various pots to cover irregular and regular payments (details somewhere on my diary) and also have a decent emergency fund. I’ve also tested my SOA and more importantly stopped panicking.

it’s ok, you’ll be fine. Nobody is coming to your house. Everything is automated. Nobody is even looking at your accounts.

ManyWays

£494 and a DMP that clears in 10 years is not low!

There is no reason to think many creditors will reject this and go to court. Some send letters saying it is not enough, you will get arrears and defaults, but you want that and those creditors will freeze new interest and take the DMP payment offered.

You DO need a new bank account and need it NOW. Do you have another account with a bank you do not owe any money too, if you do not then Nationwide will give you a basic bank account no matter how bad your credit, or go for Monzo which has a very nice app for helping you budget with named savings pots.

I suggest this as a rough order to do things in:

- open new bank account if needed
- switch wages into there and move the savings there too. If its too late to get your wages paid in there for this month, move the money from lloyds into the new account when you are paid.
- cancel all the DDs to debts
- cancel DDs to household bills and other things you want to keep (eg car finance?) and reset up with new bank account. (Do not you the bank switching service, do this manually and move them over one by one.)
- set up a DMP with Stepchange. This would be to start early December now, this gives you a month in November to save that £494 as the start of an emergency fund

If you would prefer more of a buffer, cancel all the debt payments now and delay saying yes to Stepchange until late November, to start in January.

Nothing bad happens in the few months after you cancel the debt payments. You can tell lenders who contact you that you are talking to Stepchange and hope to have a DMP up and running in January. Do not offer to pay them anything.

This order means your bank account is sorted before the DMP and you have a small emergency fund. Its also good to go into a DMP a few months in arrears as the debts will default sooner. Defaults drop off your credit record sooner so you want this.

Grumpelstiltskin

OK You must get all your money out of Lloyds now. When you set up a new account don't use the banking switch service, it can cause problems. You should manually transfer all vital direct debits yourself.

Also have you any joint accounts with your husband? If so get your name off them now.

We will need to see a SOA, there is no good advice we can give you without knowing your exact circumstances.

The main thing is not to panic when you stop paying your unsecured debts nothing terrible is going to happen and you will find out debt collection moves slowly Arty has given you their experience.

RAS

Your creditors can't take any legal action until the debt is defaulted and bailiffs rarely happen, after a long legal process you can halt quite easily. It's much cheaper just to accept what you can afford to pay.

As Arty explained it'll be 6 months or more before the debt defaults.

You need that new bank account plus somewhere new for savings, to move those savings and your salary and then advise the essential services you need to pay of the new bank account number for the DDs. Do not switch.

An SOA would be helpful. If any of the debts are joint, please tell us.

Your husband needs to sort out the HMRC, and then make provision (save) for the SE tax bill that'll come in next.

You may want a session with an advisor who can make sure your plans jointly address future tax issues.

And a meeting at least once a month where you sit down together, check accounts and try to identify the next possible priority, car, boiler, HMRC etc.