DMP - yes or no?

[bakingmad123]

i feel so ridiculous asking this… I’m a grown woman, with a good job, but a lot of personal issues. I have Bipolar and CPTSD which flared up badly last year after both my foster parents died in awful circumstances. This led to me making a lot of really poor financial decisions and making grand gesture purchases using credit cards. I’m now in a huge amount of debt (c.60k) on a mix of credit cards and loans. I have a mortgage and have never missed a single payment on anything, but have increasingly been using money transfers from credit cards to pay basic expenses. After the flare up I was hospitalised in a psychiatric unit for a few months at the beginning of the year. After discharge, my husband left me and then I broke my leg and ankle needing serious surgery. I’ve only just returned to work full time last week. Step Change have advised a DMP which seems great, but I’m scared about how this will affect my credit score moving forward (e.g when my fixed term ends on my mortgage in 2 years time). Can anyone share their experience?

I really really would advise against a DMP if you need to re-mortgage in 2 years

If you've effectively been robbing Peter to pay Paul for some time, you could be getting to the point where you're going to not be able to borrow any more anyway due to affordability or persistent debt rules.

Without seeing details of your income and non debt outgoings no-one can advise on the best solution. It could be a DMP, which will wean you off using credit to pay your basic expenses, force you to live within your means and get you out of debt in a few years. Stepchange should have given you an idea how long the DMP will take, what is this?

Otherwise if you're at the stage where you're paying so much interest each month you might be forced into a solution because persistent debt rules now time limit credit card debt otherwise people could be trapped into paying interest for decades but never really getting anywhere.

Or it could be achieved by cutting back on non essential spending, reducing your bills and taking out 0% deals. But presumably you're past that stage if Stepchange have recommended a DMP?

On the mortgage, usually lenders will allow their customers to take out a new deal without a credit check, so a ruined credit rating might not be a barrier to a decent mortgage deal. Plus DMP or not, if you don't significantlt reduce your debt in the next 2 years, no other lender will take you on anyway.

Have a look at moneysavingexpert.com

https://www.moneysavingexpert.com/loans/debt-help-plan/

Can you actually service £60 of credit anyway (using one card to pay another doesn’t count). If not then you have to do something regardless of the impact on your credit. Anything you do that doesn’t involve meeting your contractual payments on time will impact your credit.

stepchange are great, I’d take their recommendation. I did a DMP and it was fine - your credit eventually recovers.

Step Change are a charity with an excellent reputation in the sector. Plenty of 'for profit' advisers would probably have tried to persuade you an IVA, on which they'd take a massive commission, is the way to go.

Miss-selling of IVAs is a scandal yet to fully emerge.

You may have seen it already but CA's website has an overview of debt solutions:

https://www.citizensadvice.org.uk/debt-and-money/debt-solutions/

To be honest if you've got £60k of debt and are robbing Peter to pay Paul then you're probably beyond the point where your credit rating needs to feature in your thinking.