Help! DRO or Bankruptcy - SOA

MM1975
MM1975 Posts: 30 Forumite
in Debt-free wannabe
Hi there,

I've been posting on the other boards but I'm really confused. StepChange suggested Bankruptcy but others have suggested DRO (which would obviously be a better solution). I don't have any assets or interest in properties. My pension is paid into monthly but is worth less than £2000.

Here's my SOA mostly based on calculations I did over the last few days speaking to StepChange. They calculated originally that I had £170 left over - they wouldn't include the entertainment and gifts category and I'd forgotten about the medical expenses.

Any thoughts/suggestions/insight? I'm so confused.

Thanks!

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household......... 1
Number of cars owned.................... 0

Monthly Income Details
Monthly income after tax................ 1937
Partners monthly income after tax....... 0
Benefits................................ 607
Other income............................ 389
Total monthly income.................... 2933

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 1566
Management charge (leasehold property).. 0
Council tax............................. 85
Electricity............................. 49
Gas..................................... 57
Oil..................................... 0
Water rates............................. 40
Telephone (land line)................... 0
Mobile phone............................ 65
TV Licence.............................. 13
Satellite/Cable TV...................... 7
Internet Services....................... 22
Groceries etc. ......................... 375
Clothing................................ 46
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 60
Childcare/nursery....................... 215
Other child related expenses............ 89
Medical (prescriptions, dentist etc).... 27
Pet insurance/vet bills................. 7
Buildings insurance..................... 0
Contents insurance...................... 17
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 34
Entertainment........................... 50
Holiday................................. 0
Emergency fund.......................... 0
Gym..................................... 86
Pocket Money............................ 4
Total monthly expenses.................. 2934


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 0

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly.. .APR
Barclaycard....................865.......0........ .0
Council Tax w/Confero..........1999......0.........0
Drafty.........................1165......0........ .0
EDF............................895......0........ .0
Behind on Council Tax..........842.......0.........0
Lawyers/CCJ....................6800......0.........0
Wonga..........................645.......0........ .0
Thames Water...................227.......0.........0
HSBC...........................250.......0........ .0
HB Overpayment.................2400......0.........0
Tax Credit Overpaymen..........2437......0.........0
First Direct...................500.......0.........0
Total unsecured debts..........19330.....0.........-


Monthly Budget Summary
Total monthly income.................... 2,933
Expenses (including HP & secured debts). 2,934
Available for debt repayments........... -1
Monthly UNsecured debt repayments....... 0
Amount short for making debt repayments. -1

Personal Balance Sheet Summary
Total assets (things you own)........... 0
Total HP & Secured debt................. -0
Total Unsecured debt.................... -19,330
Net Assets.............................. -19,330
«1

Comments

  • fatbelly
    fatbelly Posts: 20,483 Forumite
    Name Dropper First Anniversary First Post Cashback Cashier
    edited 28 October 2016 at 3:49PM
    Hi

    If you can find an intermediary who would put you forward for a DRO, run with it.

    One problem is that the DRO portal is changing to DRO2! At CAB we were informed that this is live as of today and will work on the new Standard Financial Statement guidelines. Quite what that entails I won't know until I do one, though the old one will be running parallel for the time being.

    Anyway, I think I am in agreement with Stepchange that you have too much surplus income. I would be OK with £20 for presents but not the entertainment and gym fees. Adding the pocket money I would probably assess you as having £140 surplus.

    In practice you could make savings and maybe increase this surplus and consider a third option - a debt management plan. But even if you increase this to say £250 per month, that's still an 80-month plan, which is starting to drag a bit, compares to 36 months of payments under an IPA in bankruptcy - so I'd probably still go for insolvency given that you have a ccj and council tax in the mix.

    Is the HB overpayment a fraudulent debt? If so, it won't be cleared by insolvency. Ask me for a definition of fraud if you're unsure
  • AllyMac
    AllyMac Posts: 102 Forumite
    How soon can you get out of that £65 phone?
    And £85 for the gym?
    And you don't need £46 for clothes month in month out. Easy to go zero on clothes for a good few months.

    What are the other child related expenses?

    £34 on your hair every month is a lot.

    And there is definitely slack in your groceries budget for 1 adult and 1 child. £100 I reckon.

    Your two smallest debts under £250 each (TW & HSBC) could be gone in a month each, with the cutting back above - which isn't even cutting things really tight.
  • fatbelly
    fatbelly Posts: 20,483 Forumite
    Name Dropper First Anniversary First Post Cashback Cashier
    AllyMac wrote: »

    Your two smallest debts under £250 each (TW & HSBC) could be gone in a month each, with the cutting back above - which isn't even cutting things really tight.

    You'd pay them ahead of the council tax and the ccj?
  • sourcrates
    sourcrates Posts: 28,870 Ambassador
    First Anniversary Name Dropper First Post Photogenic
    Hi,

    You have quiet a high income to be honest, I doubt very much, with the best will in the world, you could get down to less than £50 surplus at month end for a DRO to be viable, also your rent is crippling.

    There's not a lot of room for manoeuvre in your budget, you could cut the gym and one or too other bits and pieces, but that's not going to make much of a hole in 20 grand.

    I agree with Fatbelly, I would be looking at insolvency as a way out of this.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • EssexHebridean
    EssexHebridean Posts: 21,371 Forumite
    Name Dropper First Anniversary Photogenic First Post
    I'm going to take a fairly brutal approach to this so here goes - comments in red as usual...
    MM1975 wrote: »

    Statement of Affairs and Personal Balance Sheet

    Household Information
    Number of adults in household........... 1
    Number of children in household......... 1
    Number of cars owned.................... 0

    Monthly Income Details
    Monthly income after tax................ 1937
    Partners monthly income after tax....... 0
    Benefits................................ 607
    Other income............................ 389
    Total monthly income.................... 2933

    Monthly Expense Details
    Mortgage................................ 0
    Secured/HP loan repayments.............. 0
    Rent.................................... 1566 :eek::eek::eek: Is it a palace?! ;) seriously - are there options to move and save on this? Even for London that would be steep unless you're right in the centre
    Management charge (leasehold property).. 0
    Council tax............................. 85 With single person discount I take it? Is this over 12 months already?
    Electricity............................. 49 You can [STRIKE]probably [/STRIKE]trim this - have you checked you're on the best tariff?
    Gas..................................... 57 You can [STRIKE]probably [/STRIKE]trim this - have you checked you're on the best tariff?
    Oil..................................... 0
    Water rates............................. 40
    Telephone (land line)................... 0
    Mobile phone............................ 65 Assume this is a contract? How long left to run? Have you spoken to them to try to drop it at all?
    TV Licence.............................. 13
    Satellite/Cable TV...................... 7
    Internet Services....................... 22
    Groceries etc. ......................... 375 For you and a child you could easily drop this to £200 - I feed 2 grown adults with good appetites on less and we eat good quality food.
    Clothing................................ 46 This could reduce for the time being - eBay is good for younger kids clothes
    Petrol/diesel........................... 0
    Road tax................................ 0
    Car Insurance........................... 0
    Car maintenance (including MOT)......... 0
    Car parking............................. 0
    Other travel............................ 60
    Childcare/nursery....................... 215
    Other child related expenses............ 89 What's this for? Anything that can be reduced at all?
    Medical (prescriptions, dentist etc).... 27 Every month? If prescriptions fees do you have pre-paid certs?
    Pet insurance/vet bills................. 7
    Buildings insurance..................... 0
    Contents insurance...................... 17 This is very expensive - ours is for a 2 bed flat and I paid around £100 last year I seem to recall
    Life assurance ......................... 0
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 20
    Haircuts................................ 34 Every month? That's over £400 a year?
    Entertainment........................... 50 In the position of owing debt I'd be looking to trim this - hard I know but if you are in a major city which I assume you must be, there's masses of free entertainment for kids & adults.
    Holiday................................. 0
    Emergency fund.......................... 0
    Gym..................................... 86 You KNOW this is a luxury in your position, right? Are you in a contract? How soon does it finish? Getting rid of that equates to over ONE THOUSAND POUNDS each year
    Pocket Money............................ 4
    Total monthly expenses.................. 2934


    Assets
    Cash.................................... 0
    House value (Gross)..................... 0
    Shares and bonds........................ 0
    Car(s).................................. 0
    Other assets............................ 0
    Total Assets............................ 0

    No Secured nor Hire Purchase Debts

    Unsecured Debts
    Description....................Debt......Monthly.. .APR Are all these definitely on 0%/No interest being charged?
    Barclaycard....................865.......0........ .0
    Council Tax w/Confero..........1999......0.........0
    Drafty.........................1165......0........ .0
    EDF............................895......0........ .0
    Behind on Council Tax..........842.......0.........0
    Lawyers/CCJ....................6800......0.........0
    Wonga..........................645.......0........ .0
    Thames Water...................227.......0.........0
    HSBC...........................250.......0........ .0
    HB Overpayment.................2400......0.........0
    Tax Credit Overpaymen..........2437......0.........0
    First Direct...................500.......0.........0
    Total unsecured debts..........19330.....0.........-


    Monthly Budget Summary
    Total monthly income.................... 2,933
    Expenses (including HP & secured debts). 2,934
    Available for debt repayments........... -1
    Monthly UNsecured debt repayments....... 0
    Amount short for making debt repayments. -1

    Personal Balance Sheet Summary
    Total assets (things you own)........... 0
    Total HP & Secured debt................. -0
    Total Unsecured debt.................... -19,330
    Net Assets.............................. -19,330

    Purely looking at the "luxuries", the saving on groceries, the trimming on things like utilities, I've calculated just over £350 per month spare. I take it you're in a position of meeting your current liabilities for things like Council Tax?

    I absolutely get where others are coming from re bankruptcy etc as an option, but there is one question I will ask you - I presume that you take responsibility for at least the majority of the debts? Assuming that you do acknowledge that this is money you genuinely owe, through whatever circumstances, would you rather pay it off, if that can be achieved, and put it behind you, or take the bankruptcy route?

    I'd urge you to think carefully about the relocation issue - even a few miles can make a difference and I'm guessing your child is relatively young at present looking at the pocket money/childcare amounts? Bearing in mind you presumably commute for work in any case, are there areas you could move to which might not increase your commuting cost over-much, but would hammer that rent down? A saving of £300 - £500 a month there would make such a huge difference to how soon you could clear everything - run some figures through a calculator (I just did!) and you'll see what I mean...
    🎉 MORTGAGE FREE (First time!) 30/09/2016 🎉 And now we go again…New mortgage taken 01/09/23 🏡
    Balance as at 01/09/23 = £115,000.00
    Balance as at 31/12/23 = £112,000.00
    SOA CALCULATOR (for DFW newbies): SOA Calculator
    she/her
  • sourcrates
    sourcrates Posts: 28,870 Ambassador
    First Anniversary Name Dropper First Post Photogenic
    If you could move some were cheaper, that would be a great help, easier said than done of course.

    I`m not a big fan of cutting budgets to the bone, you must have quality of life, and i would always put quality of life above any debt repayments.

    Yes on paper that £300 odd pound monthly saving would repay your debt in around 7-8 years, but in the real world, i dont think you could cut your budget that far, it would be a constant struggle for up to 8 years, with no spare money at all, sorry, thats just not doable in my book.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • fatbelly
    fatbelly Posts: 20,483 Forumite
    Name Dropper First Anniversary First Post Cashback Cashier
    edited 28 October 2016 at 4:00PM
    I agree. For someone on nearly 3k per month income, but still using Drafty (89.7% APR) and Wonga (higher than that) to prop things up, while still not paying ccj and council tax, it is going to take some effort to move to a balanced budget.

    But coming on here and posting was a brave and right thing to do.

    TBH if you're happy where you are and it works for you, I wouldn't move. Not if you're looking at bankruptcy/DRO. The OR does not usually force people into cheaper properties, although they can.
    In considering whether alternative rented accommodation is suitable for the reasonable domestic needs of the bankrupt and his/her family, the stage a child has reached in his/her education (for example where he/she needs to remain at the same school to complete a significant exam year) or the care needs of a dependant (e.g. day care or respite care) will need to be considered by the official receiver. These matters should be taken into account when making any decisions regarding the flexibility of the bankrupt and his/her family in moving to alternative rented accommodation. It may also be necessary to delay collections under an IPA or agree a payment holiday (for example for 3 to 6 months) to allow the bankrupt to find alternative accommodation.

    Also relevant, just noticed this
    In normal circumstances membership of a sporting club, gym, golf club, stables etc. is not considered an essential day-to-day living requirement. Where sufficient evidence is provided to suggest that the expenditure is necessary, the official receiver should make a decision based on the circumstances relevant to the individual. An example of individual circumstances affecting this type of expenditure might be where the bankrupt has evidence from his/her GP prescribing exercise as an essential health treatment, which may in turn require the bankrupt to pay for membership of a local gym to fulfil this treatment.
  • MM1975
    MM1975 Posts: 30 Forumite
    Hi everyone - thanks so much for all your comments - I wanted really honest feedback. I thought I posted after my post about the gym - it's for my daughter and myself and includes childcare for her. I suffer from severe depression and anxiety and I joined the gym on the recommendation of my GP and therapist. I know there are cheaper out there but none of the other ones I looked at in our area provide childcare outside of working hours. (Most are 9 - 11am! Not helpful)

    For the other points:

    Rent - yes it's London. And yes it's shocking but this is pretty median for London rents in Zone 2. I was paying more previously in Zone 3. I can walk to walk from here which is wonderful all round (the transport costs are for work related travel which we're not reimbursed for London travel), and my daughter is in a good (state) school. We moved here in March and I seriously looked at moving further out (Zone 6 or even further). The problem was that my commuting cost went way up (£150+/month) as did childcare because I would have to use before-school care and then extended childcare after school as I couldn't guarantee being back to pick my daughter up till 7 (most after school care closes at 6:30 latest). I weighed it up and would prefer to have an extra 8 hours a week to see my daughter. Not sure the OR will agree.

    Council Tax: Not single person discount (we share the house with a friend - the total rent is £2300 ;)

    Clothing: I could drop this slightly. I have a professional job so need to look presentable. It also includes school uniforms, school shoes, etc.

    Hair: I acknowledge this is high but I work in media and as above looks are important. This isn't monthly - I have a colour every 10 weeks.

    Other Child Related Expenses: This is actually a combination of school meals (no I don't qualify for Free School meals) but looking at my notes it also includes £10/week for work meals for me.

    Medicines: This is a combination of additional things I take to deal with my anxiety and depression - it works out to about £95 every quarter.

    Mobile: This is high mostly for work. Sometimes I get part of it back. Sometimes I don't (the rules seem willy nilly). They don't deem my position "high" enough to have a work phone but I can't do my job without one. I'm currently trying to make that point.

    With regards to work - I'm currently desperately trying to get promoted. I'm working well above my "official" level but am not renumerated for it and my line manager and I have made a strong case for it. I won't know until just before the new year if I've been successful (and I haven't had any indication how much more salary I could get).

    As Sourcrates said - I could pay the debts off in around 8-9 years (probably longer as the Legal CCJ are allowed to continue adding interest ad infinitum) but it would be a constant struggle to live on such a tight budget and I truly believe it would have a detrimental effect on my mental health.
  • gr1340
    gr1340 Posts: 80 Forumite
    First Post First Anniversary Combo Breaker
    Can I ask what the £607 a month benefit relates to?

    I can't see how you would get that amount on that wage unless it is carers allowance or similar.
  • fatbelly
    fatbelly Posts: 20,483 Forumite
    Name Dropper First Anniversary First Post Cashback Cashier
    This is zone 2 London with LHA rates around £300 per week!

    I'm gonna guess HB and CB
This discussion has been closed.
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