Scared of debt management options but struggling. Has anyone been through this?

[pteradactyl]

Essentially just that, but to expand a bit. I've been making terrible financial decisions for a while now and it's got to the point that whilst I can make all payments every month, I have very little left over and end up using credit to buy essentials like clothes/food/petrol most months. I'm stressed out by it all and it makes me feel a bit sick. I owe approx 11k across several lenders. I've tried budgeting but there just seems to be endless demands and as soon as I feel like I have something in place the car breaks or the kids both need new shoes and clothes at the same time. I wanted to build an emergency 1k fund but with my current situation that will take over 5 years to build.

I'm at a point where I'd like to explore debt management problems as I can't afford to make more than minimum payments so feel like I'll be in debt forever really. However, I'm scared. Everyone tells me it will ruin my credit (not an issue right now as quite frankly I never want credit ever again) but we do hope to be in a position to buy in approx 5-10 years due to inheritance (of course you can't put a figure on when that will happen but as an estimate). Right now I wouldn't get a mortgage anyway but I feel like it will ruin any chances forever.

I'm wondering if anyone has been on a debt management options of some type and if you regretted it, really. It feels like a very scary decision to make but I'm not sure if some of that is just me making it worse than it is (I mean it is bad I know but if I'm projecting my feelings of failure onto it too and making it worse)

Please be kind, I feel awful about this

Speak to Stepchange... so easy to sort out honestly.

Did take a while to get my credit rating back to where it was but have now and have a mortgage.

Do it. It will be the biggest relief

If you have a 5-10 year goal then nothing to worry about. Get everything paid off, and start again

Yes stepchange it's so easy and such a huge weight of shoulders

Depending on the amount of debt you have there are various options. You could do an IVA which will total all your debt and you pay a monthly payment you can afford which will be determined by your income expenditure. The downside is you’ll have it on your record for 6 years but clear after that. You’ll have to inform them if you have a change in income. If income rises they will raise your payment. And be prepared for them to tell you that you have to give up non essentials like Netflix (stepchange are like this).

there is also a dro bankruptcy etc. all have an impact for around 6 years.

what you could do is work out how long you will be in debt for if you only pay the minimum payments if it’s going to be more than 6 years then it’s worth doing something like an Iva. Plus anything outstanding is written off

Thank you all for taking the time to comment. I'm going to pluck up the courage to speak to stepchange tomorrow.

Will they be going through bank statements etc or do I just complete forms with the details in? I'm wondering if ai can be proactive if they'll need things like statements and start getting it sorted

I do have sky with netflix included but it's in a contract so I'm not sure if I'll have to cancel that now as it would incur exit fees? It's something we do plan to ditch when the contract ends in a few months though.

Thanks again, you've made me feel less scared about taking the plunge and getting things sorted

Stepchange has changed my life! Like you, I was able to make minimum payments, but nothing further and it was starting to feel uncontrollable. I am now 3 years into a 5 year plan with stepchange and life is immeasurably better financially and stress wise.
My credit rating is poor, but is very slowly creeping up a little each month. I have savings. And I'm still paying everything back, which is important to me.
Honestly, go for it

Sounds like it could be a case of the sooner you get started, the better. Debt management is likely to hit your credit file, but it all falls off after 6 years from the date of default, so if you're going to default, which is likely to be recorded once you start to pay less than the minimum/enter into a formal arrangement, then it should have passed once you're ready to apply for a mortgage.

You say 'I've tried budgeting but there just seems to be endless demands and as soon as I feel like I have something in place the car breaks or the kids both need new shoes and clothes at the same time'.

All these things should be included in your budget as planned expenditure, you know you'll need to buy clothes and shoes for DC, cars will need repairs sooner or later, etc so if you're in a position where you need credit to buy these things, or credit repayments mean that you can't afford to put money for them, that's the indicator that you can't afford to pay your credit commitments, so time to enter a formal solution, if you otherwise don't have room to cut back on other spending (I assume that you've already looked at what you spend on things like food, broadband, subscriptions, cars, insurance, and aren't spending more than you need in these areas)?

@BarbaraofSeville I understand what you mean about the budgeting. I think I worded it poorly. I mean I've started trying to budget but I would put money aside for clothing, car maintenance, emergencies etc starting in January for example but in March the car breaks down before I've had a chance to save much so it wipes out everything I have saved so far and more. And it happens over and over. I hope that makes sense.

We've already cut back everything we are not tied into contracts for yes and many unnecessary costs

But yes, sorry your point is a good one that although I'm making all my minimum payments and paying the bills, I'm not able to pay for the unbilled necessities

Echoing other posters and singing the praises of steochange. They have literally changed my life and the relief you will feel when you contact them is immense. I'm on a debt management plan with them for a similar amount of debt to you OP. Like you I was making minium payments and not in arrears but was robbing Peter to pay Paul and having to use credit cards to do food shop etc. Honestly I wish I'd contacted them sooner. Starting the process is always daunting but you will feel better when you have a plan in place. Good luck.

I could’ve written your post pretty much word for word, even the amount and the exact same reasons. It’s all come to a head this week as helpfully tax credits have decided to half our weekly payments to £48. I don’t know why but I’m guessing probably because the other half has been taking overtime and it’s obviously put us over as we now owe them about £300. This has put me right up shit creek as I get paid a month in arrears and during April I didn’t work as I had a chest infection end feb-through till end April and felt pretty unwell, this consequently means no money at the end of this month (what I’ve worked this month I get paid end June). Just had to pay for numerous school trips and prom, still haven’t made a rent payment or g+e payment and about £550 left in account.

to absolutely top it off the car has broke again so paying out bus fares and scrounging lifts to get kids to school in next town over. Had a bit of a cry today tbh as feeling very overwhelmed by it. Dp doesn’t know the extent of it either, he knows we have cc’s but not the balances or the fact I’ve been putting petrol/essentials on them, they are not maxed out but not far from and monthly repayments combined are £380, he has a loan so with that as well we pay out £830 on servicing debt 😣😭

In 2014 I was in a similar position to you OP, owing just under £7k across a couple of credit cards, overdrafts and other debts. I called PayPlan (similar to StepChange) and they set me up with a debt management plan.

I finally became debt free in December 2019. My credit rating was trashed until my last defaulted account dropped off my file in October last year, but tbh, more credit was not something I was looking for anyway. I do now have a credit card again, but pay it in full every month.

Make that first call OP. Honestly you will so much more in control once you do.

CCJs and Defaults only stay on your credit file for 6 years, after this you can get a small credit card to start building your credit profile again (Tiny limit and clear it every month!)

Oh my, I'm sorry to read this. It seems like you're definitely going through a tough time at the moment. Can you open up to your husband about it? It might take the weight off a bit, but only if he's supportive. My partner also has debts but he doesn't want to seek out anything like this, but as a family we spend approx 600 per month on debt too. It's such a strain on the family finances. I hope you get sorted.

If you feel up to it I'd also recommend at least looking at stepchange! They have an option to tick if nobody else in the family knows about the debt too. You can see what they suggest o line and then have a think about it

Thanks again to everyone for sharing your experiences and advice. I completed the online tool today and also called them (it ended up being a few times as I kept thinking of more questions and they were really helpful each time.). It looks like I'll go down the debt management plan route but I haven't finished the application yet. If it all goes through OK it will be a massive weight off my shoulders.

Thank you all again! I was expecting to be told how rubbish I am, basically, so I really appreciate the responses

Normally I don't post much on these threads but

Sorry hit post instead of return....

I think there will be people who will end up where we were... Debt run up to make ends meet because we didn't see the storm coming early enough.

We owed 37k on unsecured debt. Interest payments were overwhelming and took all of our disposable income.

First up you are not alone.
Stepchange (charity) and Payplan (paid for by the CC companies free to debtor) - were amazing. We used PP in the end because Stepchange did not have the capacity to help. I cannot fault them.
Paying it back was not easy - we had 6 years of beans on toast / pasta with tinned tomatoes. Kids with lost property uniform. Walking anywhere under 3 miles.

It is doable. Making the last payment was the best day.

Top tips start now. The quicker you catch it the better. And... Get everyone on board. It is a joint effort. Unbudgeted treats were not an option so don't think about it - even the kids knew this.

Could you take out a loan for debt consolidation or is your credit rating not good enough? Just thinking that would be a better option as it won’t affect your credit rating like a DMP will.

Been there and worn the t-shirt. DO NOT BORROW MORE, its a down ward slope. We used Payplan, but Stepchange are the same and manage it all for you and make it easy. Like others have said you will be on a budget but the light at the end of the tunnel comes quickly because you are not paying interest charges and is such a huge relief. Took us 4 years.

@making miracles, your tent should be the first thing you pay, I can't believe you put school trips and a prom before rent. You need help prioritising. OP take the plunge tomorrow. You will feel relief once you get help with planning and budgeting. I think schools should teach budgeting and finance planning in PHSE. Not all parents have these skills to pass on to their children.

Good luck OP, the first step is the hardest. Make sure the budget you agree is realistic and sustainable. You absolutely shouldn't be facing years of 'eating beans on toast and lost property school uniforms' in fact, the amount you're allowed to spend on these items will probably be more than you're used to when you're in problem debt, because that's how debt management works.

Debt is only repaid with what is left after normal household costs are covered. Don't skimp and be realistic about how your utilities might rise again later in the year - if you're on a standard tariff you could face another big rise in a little over 4 months time.

But I'm concerned that your DP has debts that he doesn't want to deal with. Because that could make setting a budget difficult (debt management is often about being 'all or nothing' with creditors, once you start to reduce payments, you have to reduce all of them, and your creditors won't be happy accepting reduced payments on your debts while the household is paying his debts in full).

Him not dealing with his debts will also delay your plan to pay off debt, clean up your credit file, save and buy a house, because the repayments and treading water of interest charges could be hanging over him indefinitely until he does something about it.

I did go through stepchange and have applied and had an application for a DMP accepted. The relief is enormous. Thanks for the hand hold everyone, it really did help!

Hi all, interesting reading this thread.

What is Stepchange and how does it work? Is there a catch?

There's no catch as such, no. It does involve sticking to a budget and killing your credit score for a few years. You still pay back all of your debts, but the monthly payments are lower so it may take longer than it would have otherwise. However, some creditors will freeze your interest and charges, so it may actually mean it is paid back quicker.

Stepchange are a debt charity. You don't pay them any fees or similar for a dmp. If debt is bothering you I'd definitely recommend looking into it. I put it off for months and I wish I'd done it sooner

Considering the way things are going in this country I think it’s shit so many people are struggling just to keep credit ratings especially those in private rental sector etc . I know people can be judgemental about debt but if you’re on a low income and don’t have benefit entitlement then it’s all too easy to use credit for unexpected essentials .