Debt Relief Orders (DRO) - Information & help thread

sourcrates

Hi Chezney 19,


If you have debt with your current bank, then obviously the account will close.
If you dont have any debt with them, depending on the bank, you may be able to keep the account, some banks routinly trawl the insolvency register, and if your name is found, you will be given two months notice usually.

Opening a new basic account can be done in 5 mins online, so its no real problem if they do close it.

For DRO purposes, the only thing that matters is if you meet the £50 disposable income threshold or not.

Obviously the other criteria apply as well, but dont make this more complicated than it need be.

Chezney19

I have basic cash account which is OD by £38! So nothing major

I’m purely wanting to know if DRO is best option for my situation or admin order ? I cannot give definite figure as ironing differs so much that it’s not set income as such ... I will call advisor today again and see what they say. I just don’t want to have a DRO and end up not being able to have bank accounts etc

sourcrates

Chezney19 wrote: »

I just don’t want to have a DRO and end up not being able to have bank accounts etc

You will have A bank account, a DRO is not as rigid as bankrupcy for example, you will not really know your in one.

For your income, just take an average month, that you can provide proof for if asked, such as a pay slip or bank statement, multiply by 12, that will get you a figure you can work with.

I believe you can sign a statement of fact (or somthing of that nature) to say this is my income/expenditure etc.

Your DRO advisor will explain everything to you, the 12 months pass so quickly, you will wonder :


(A) why i didnt do this sooner,

and

(B) what all the fuss was about...........

fatbelly

For an Admin Order you would need to have

• at least two debts
• one of them being a ccj (sounds like you have that)
• total debts under £5000

But tbh if that is your situation and your surplus income is under £50 per month, it would be simpler and cheaper to do a DRO

As for the HCEO, don't tell him you're doing a DRO and avoid him as much as possible. The car is not available to him (also invisible as far as a DRO goes) but that will not stop him harassing you and possible clamping it.

Robbie64

Hi. If possible can someone put my mind at rest as I'm in a bit of a panic. I'm working with StepChange and have been sent a Debt Relief Order Application Agreement to sign and complete and to return along with proof of income (which is ESA and PIP) and name and address of my creditors and how much I owe. Also on the form is a section that says if I have a pension fund with a current or previous employer to supply the name of each employer and pension or payroll number with them. I used to be in the Civil Service and have a deferred pension which I can draw in full at 60 or which can be drawn at a reduced rate before that (I am currently 55). I didn't know if this question applied to me so I phoned StepChange for clarification and I've been left feeling very anxious by what turned out to be a lengthy conversation with the person I spoke to. They said I need to put down who I have the deferred pension with and my payroll or staff number. I said I thought a Civil Service pension that hadn't yet been applied for would have no effect on a DRO and indeed I had read this somewhere a few weeks ago (though in time honoured fashion I now can't find where I read that). However the guy said there was an insolvency test (which I had also read about) that if I could draw down a lump sum to cover the debts then a DRO may not be applicable.


Can someone advise me: would a yet-to-be-claimed Civil Service pension really stop me from getting a DRO? It wouldn't be much anyway as I was only in the Civil Service for 12 years and left in the 90s. I have no other pensions due. I thought that if a pension hadn't been claimed then it would be ignored. I do realise some people aged 55+ can claim money against a pension pot and then get a smaller pension somewhere down the road but it's not like that in the Civil Service Pension Scheme. It's essentially a type of final salary scheme (I think it's classed as a defined benefit pension scheme?) and what's more when I worked there it was non-contributory. Even if it does have no effect I'm worried that someone having to check with the administrators of the Civil Service pension scheme will slow things down so much. The administrators are notoriously slow at dealing with any queries.



I've been asked to mention my Civil Service pension on my form: what should I write? And also is there any resource (a web page for example) I can print off and enclose if it wouldn't have any effect.


Sorry for the lengthy post but I'm panicking. I'd got everything together to send off the agreement and was making this final phone call before doing so for clarification. I'm now feeling very panicky and unsettled. I appreciate any helpful advice anyone can give me.

fatbelly

Robbie64 wrote: »

Hi. If possible can someone put my mind at rest as I'm in a bit of a panic. I'm working with StepChange and have been sent a Debt Relief Order Application Agreement to sign and complete and to return along with proof of income (which is ESA and PIP) and name and address of my creditors and how much I owe. Also on the form is a section that says if I have a pension fund with a current or previous employer to supply the name of each employer and pension or payroll number with them. I used to be in the Civil Service and have a deferred pension which I can draw in full at 60 or which can be drawn at a reduced rate before that (I am currently 55). I didn't know if this question applied to me so I phoned StepChange for clarification and I've been left feeling very anxious by what turned out to be a lengthy conversation with the person I spoke to. They said I need to put down who I have the deferred pension with and my payroll or staff number. I said I thought a Civil Service pension that hadn't yet been applied for would have no effect on a DRO and indeed I had read this somewhere a few weeks ago (though in time honoured fashion I now can't find where I read that). However the guy said there was an insolvency test (which I had also read about) that if I could draw down a lump sum to cover the debts then a DRO may not be applicable.


Can someone advise me: would a yet-to-be-claimed Civil Service pension really stop me from getting a DRO? It wouldn't be much anyway as I was only in the Civil Service for 12 years and left in the 90s. I have no other pensions due. I thought that if a pension hadn't been claimed then it would be ignored. I do realise some people aged 55+ can claim money against a pension pot and then get a smaller pension somewhere down the road but it's not like that in the Civil Service Pension Scheme. It's essentially a type of final salary scheme (I think it's classed as a defined benefit pension scheme?) and what's more when I worked there it was non-contributory. Even if it does have no effect I'm worried that someone having to check with the administrators of the Civil Service pension scheme will slow things down so much. The administrators are notoriously slow at dealing with any queries.



I've been asked to mention my Civil Service pension on my form: what should I write? And also is there any resource (a web page for example) I can print off and enclose if it wouldn't have any effect.


Sorry for the lengthy post but I'm panicking. I'd got everything together to send off the agreement and was making this final phone call before doing so for clarification. I'm now feeling very panicky and unsettled. I appreciate any helpful advice anyone can give me.

Hi Robbie

I saw your post earlier but it looked like it would take a long time to read...

So you list your pension - list more than one if you have more than one. The main reason is so that the DRO unit can check that it's an approved pension and not you just shuffling 100k into an account somewhere.

Now what the guidance says is

With effect from 1 April 2015, individuals aged 55 or over with a personal pension can withdraw all or part of their pension as a lump sum.! If a debtor has a pension fund and is 55 or over the intermediary will need to consider if they are eligible for a DRO.

The AI will need to establish the following:

The age of the debtor
The total value of the personal pension fund
The total amount of their liabilities

If the debtor is 55 (or will be by the end of the moratorium period) and their total pension fund is in excess of their total liabilities, the AI should refer to the DRO Team.

If the AI has established that the pension benefits are less than total liabilities, any potential DRO applicant can be advised that a DRO application will not be affected by the personal pension.

Having just looked at the guidance it's not quite correct, is it? It is only Defined Contribution schemes that this should apply to.

Robbie64

Hi, thanks for your reply and for taking the time to read what I wrote - again sorry about the length.


My Civil Service pension is the only pension I will have.The guidance out there is a bit confusing. As you posted the guidance refers to a "personal pension" but as you point out the guidance should only apply to a Defined Contribution Scheme pension. I don't have a pension pot that I can draw against as mine is a Defined Benefits Scheme pension from what I can see. It is an approved pension by the HMRC (which I would hope so given it's a public sector pension!)

The guy I spoke to didn't seem overly familiar with public sector pensions and how they work as he did at one stage ask if I knew the value of my pension fund (i.e. I assume he meant was it worth more than my debts, again it's not that kind of pension scheme, it doesn't have an overall value as far as I can tell) then went on to give an example of his mum having a pension pot worth £35,000 and drawing out £5,000 of it. I simply can't do that with mine, there isn't the ability in the Civil Service pension scheme to do that. It's either draw the pension at 60 or draw it earlier at a reduced rate. The guy checked with his Team Leader who said that they thought my preserved pension shouldn't affect my DRO but that just left me even more panicky. I phoned up seeking a simple answer and ended up having a conversation for quite some time that left me feeling panicky.

I did find something a few weeks ago that put my mind at rest but I now can't find it. The only thing I can find is an article at a website called called Debt Camel which gives much the same interpretation as yourself (again sorry for this becoming a lengthy post but I thought it worth posting):

If you are thinking about a DRO

If you will be under 55 on the day your DRO is approved, it doesn’t matter how large your pension pot is, it will be ignored as you will be too young to access it at that point.

If you will be 55 or over when your DRO is approved, the Insolvency Service’s guidelines say:


“Where the debtor is over 55 and has access to an undrawn personal pension fund intermediaries are asked to consider whether the insolvency test has been met and at the date of the [DRO] application .. the debtor is unable to meet their debts … In a DRO, an intermediary who is concerned that the available fund is considerably higher than the outstanding debt is asked to contact the DRO Team to establish whether the official receiver will in the circumstances grant the application.“


This is saying if you could have taken money out of your pension and that would have been enough to repay all the debts that would be included in your DRO, then you are not really “insolvent” and your DRO application will not be approved.


The guidelines say “personal pension”. I understand this refers to a defined contribution pension, where you have a “pot of money” that you could access. It doesn’t refer to a defined benefit scheme, where your pension will be linked to your final salary.


If you have a defined benefit pension that isn’t yet being paid to you, this can be ignored (unless it will start to be paid to you within the one year DRO period… if this is the case you must talk to the adviser setting up your DRO about your situation.)

Should I quote the above when sending in the agreement form? Or would just mentioning that it is a Civil Service pension be enough? I was hoping that applying for a DRO would help ease worries and not cause more.

Shakeyatictacs

Good evening,
Could I get some advice on the following please?
I have spoken with Stepchange today who reluctantly agreed to support an application for a DRO. Reason for reluctance was that I have a deficit of around £60 per month after a DEA is paid from my wages, the advisor wasn't happy with this so we altered the figures (food and shopping went from £394 to £350 etc) until it showed a surplice - then advisor said I was only eligible for Bankruptcy. I was not happy with this as I felt coerced so asked they change it back to my original SOA which then made me eligible for DRO.
I didn't/forgot to tell them that I have a Help to Save Account which currently has £405. I was planning on saving up, and earning bonus, until I had enough to pay for my bankruptcy application before I knew I would be eligible for a DRO. So whilst I am relieved in one sense that this is an option, I am now concerned that this Help to Save account could jeopardise this. I am waiting for the application form via post but just need some advice on whether:
A - do I need to declare this as its an HMRC help to save scheme (couldn't find any info on this)
B- declare this account and continue with the DRO application
C - declare the account but withdraw the £405 and use toward the £90 fee

Any help would be gratefully received

Thank you

fatbelly

Shakeyatictacs wrote: »

Good evening,
Could I get some advice on the following please?
I have spoken with Stepchange today who reluctantly agreed to support an application for a DRO. Reason for reluctance was that I have a deficit of around £60 per month after a DEA is paid from my wages, the advisor wasn't happy with this so we altered the figures (food and shopping went from £394 to £350 etc) until it showed a surplice - then advisor said I was only eligible for Bankruptcy. I was not happy with this as I felt coerced so asked they change it back to my original SOA which then made me eligible for DRO.
I didn't/forgot to tell them that I have a Help to Save Account which currently has £405. I was planning on saving up, and earning bonus, until I had enough to pay for my bankruptcy application before I knew I would be eligible for a DRO. So whilst I am relieved in one sense that this is an option, I am now concerned that this Help to Save account could jeopardise this. I am waiting for the application form via post but just need some advice on whether:
A - do I need to declare this as its an HMRC help to save scheme (couldn't find any info on this)
B- declare this account and continue with the DRO application
C - declare the account but withdraw the £405 and use toward the £90 fee

Any help would be gratefully received

Thank you

The money in the scheme would be regarded as an asset and should be declared. You are allowed to have up to £1000 of assets when entering a DRO. If your 2-year bonus hits during the moratorium then you need to work out how much that will be and whether that will take you over the limit. This would not necessarily mean that you lose the DRO as the rules are more flexible for 'after acquired assets'. From the guidelines:

Help to Save Scheme

This scheme, administered by HM Revenue and Customs, is open to working people who receive Working Tax Credits, and those who receive Universal Credit with a household income or individual income of at least £542.88 in their last monthly assessment period before their Help to Save application.

Help to Save started with a trial in January 2018 and is available to all those eligible, from October 2018. From January 2019, HM Revenue and Customs will begin to invite Working Tax Credits customers to the trial with the expectation that Universal Credit customers will start to be invited from April 2019.

Once confirmed as eligible, customers can start saving straight away. All transactions, including checking their balance and paying in savings, can be managed in an online account available through GOV.UK.

Customers can save up to £50 each month. At the end of two years, savers will get a 50% bonus based on the highest balance achieved. Customers can then carry on saving for another two years and get another 50% bonus on their additional savings. Over four years, those saving the maximum amount of £2,400 will receive bonuses of £1,200. Money paid into the account can be withdrawn at any time, but this could affect the size of the bonus payment.

Based on the above monies saved in the Help to Save scheme should be treated as an asset.

Any payments in to the scheme after a DRO must be made from allowable surplus income and the debtor will need to consider whether by continuing to pay they still meet the DRO asset criteria during the moratorium period.

Where a lump sum is received and the value of the debtor’s total property (including the lump sum) does not exceed £1,000 no action will be taken.

Where a lump sum is received and the value of the debtor’s total property (including the lump sum) is between £1,000 and £1,990 the Official Receiver will consider the circumstances of the case and may not revoke the DRO.

Where a lump sum is received and the value of the debtor’s total property (including the lump sum) exceeds £1,990 the Official Receiver will consider the circumstances of the case but it is likely the DRO will be revoked.

fatbelly

Shakeyatictacs wrote: »

Good evening,
Could I get some advice on the following please?
I have spoken with Stepchange today who reluctantly agreed to support an application for a DRO. Reason for reluctance was that I have a deficit of around £60 per month after a DEA is paid from my wages, the advisor wasn't happy with this so we altered the figures (food and shopping went from £394 to £350 etc) until it showed a surplice - then advisor said I was only eligible for Bankruptcy. I was not happy with this as I felt coerced so asked they change it back to my original SOA which then made me eligible for DRO.

This bit is confusing. If you have a DEA then it sounds like you have a debt to the DWP. This is likely to be a qualifying debt for the DRO so the DEA will stop and the debt will be frozen. So your surplus income would have to be <£50 before the DEA is taken into account. We would therefore be expecting a deficit budget as things stand.