Should I stop debt payments before my DMP starts?

A reader asked in mid August 2022:

My StepChange DMP will start in October. Do I have to make the payments to my creditors in September? Because it’s going to be a real struggle. Could I offer them less?

I asked what her StepChange monthly payment will be, and whether that has taken into account rising energy prices in October 2022?

It’s going to be about £250. She said:

I need to admit that this feels life-changing. Why did I not do this last year? I can’t believe I won’t have to pay the usual £890 every month towards my debts anymore. 

Maybe I can afford to go to the dentist. New glasses. Maybe I can save up for a little family trip. Maybe I am able to make some choices from now on, rather than dreading the 1st of every month that would wipe my bank account out.

And it does take rising energy prices into account. Her StepChange budget is based on the amount she puts into prepayment meters tripling this winter.

Stop the next month’s payments?

If Stepchange thinks she can afford £250 a month, it’s not surprising she has been finding it very hard to pay £890. There is no reason to try to make these impossibly high payments for another month before her DMP starts.

She could offer her creditors less in theory. But for only one month this is simply not worth it. It would be a considerable hassle to talk to them all and explain what is happening and the amount she could afford.

Instead, I suggest she should cancel all the payments if they are being paid automatically, and just not pay them if she pays them manually.

She can tell her creditors what she is doing if she wants but she is not asking if she can stop the payments – she is telling them. She doesn’t need her creditors’ permission to do this and she shouldn’t worry about it. Her creditors are not going to turn up on her doorstep, take her to court or send round bailiffs.

She will just get some emails, texts and letters about missing a payment. She can reply saying a DMP is being set up and giving her StepChange reference number.

So what should she do with the spare £890?

She doesn’t have a spare £890 next month! That’s why she needs the DMP. She only has a spare £250…

Priority debts aren’t usually included in a DMP – rent or council tax arrears for example. If she has any, this money in September could be used to reduce those.

Or go to the dentist and optician. Or put the money away for Xmas. Or start a small emergency fund.

Having some money saved up will make a DMP a bit smoother.

Before a DMP starts

There some other bits of admin it’s good to do before a DMP starts.

• if you have any priority debts, try to get an arrangement set up to repay them;
• double-check that all your non-priority debts are included in your DMP. Don’t leave one out because it’s small. And don’t leave out an overdraft or a catalogue because it seems convenient. These are expensive debts and it’s best to get them all included and have a clean start;
• open a new bank account if you need one, without an overdraft.

You may find Worried about starting a DMP? useful. But your DMP firm will be happy to answer any queries you have.

You can also speed up your DMP if you can win any affordability complaints. But these don’t have to be started before the DMP. So if everything feels uncertain at the moment, wait a couple of months until the DMP has settled in.

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