Debt Relief Orders (DRO) - Information & help thread

snowhusky

Hi
Just thought I'd share my experience. I was directed to the CCCS by my bank following an unsuccessful claim for my Bank Charges Reclaim to be heard under the financial hardship banner. They in turn did a full budget and said I'd definitely qualify for a DRO as my 'spare' money after all priority commitmments was just £38 (it needs to be under £50). I won't list all the other criteria as I see they've already been mentioned, but I fitted them all.

HOWEVER when I called the CCCS DRO helpline to apply, I was told I did not qualify after all. Why? Because one of my formal commitments is a loan payment I make to my father for a loan he took out FOR me, to pay off some of my debts some years ago. Naturally should I stop paying him, he would default, so to me (and the initial counsellor) it counted as a Priority Payment. However, the third time (yes I got through two interviews with them before they decided this!) I spoke to the CCCS they said that I could either count him as a creditor, in which case I would default on him- NOT an option, or it counted as a 'preferential payment' which would be looked upon unfavourably by the courts as I was essentially paying one creditor substantially more than another. For this reason they recommend I did not apply for the DRO as I would be rejected.

Can anyone tell me if they've been in a similar position, and if so, the outcome? The counsellor said I could try, but that "if the courts got wind of it, they would consider it fraud and revoke the Order". Is this really true? Surely a debt is a debt and better to be paying some than none?

For now I am sticking with my Debt Management Plan,which I am switching from a private company to the CCCS as they do not charge a monthly fee, but I am going to be no better off and life will continue to be a real struggle. If anyone knows whether I can go for a DRO please let me know, as the first two CCCS counsellors I spoke to seemed convinced that I qualified.

Good luck to you all and thanks for reading!!

thepurplegoldfish

Hi One & All,

I owe 12K and I have saved the £90 for the DRO (not applied for yet), however I am now looking at getting 2K back-payment from the DLA for Mobility & Care, will this money be 'taken'?

Also my Employment Support Allowance has been under paid for 6 months and I am looking at getting the difference back as one lump sum too, will this money be 'taken'?


What about Bankruptcy is that a better option? Oh someone HELP!!!


Thanks

fatbelly

snowhusky wrote: »

HOWEVER when I called the CCCS DRO helpline to apply, I was told I did not qualify after all. Why? Because one of my formal commitments is a loan payment I make to my father for a loan he took out FOR me, to pay off some of my debts some years ago. Naturally should I stop paying him, he would default, so to me (and the initial counsellor) it counted as a Priority Payment. However, the third time (yes I got through two interviews with them before they decided this!) I spoke to the CCCS they said that I could either count him as a creditor, in which case I would default on him- NOT an option, or it counted as a 'preferential payment' which would be looked upon unfavourably by the courts as I was essentially paying one creditor substantially more than another. For this reason they recommend I did not apply for the DRO as I would be rejected.

As I see it, you have no legal liability for this at all. Legally it is your father's debt. He would have to include it if he went for a DRO but you cannot include it in your DRO. Neither can you put it as legitimate expenditure.

However, on a DRo you will always have some surplus income, maybe not very much, and so (especially with careful budgeting) you should still be able to give your father something each month as a freewill gift.

serenity34_2

snowhusky wrote: »

HOWEVER when I called the CCCS DRO helpline to apply, I was told I did not qualify after all. Why? Because one of my formal commitments is a loan payment I make to my father for a loan he took out FOR me, to pay off some of my debts some years ago. Naturally should I stop paying him, he would default, so to me (and the initial counsellor) it counted as a Priority Payment. However, the third time (yes I got through two interviews with them before they decided this!) I spoke to the CCCS they said that I could either count him as a creditor, in which case I would default on him- NOT an option, or it counted as a 'preferential payment' which would be looked upon unfavourably by the courts as I was essentially paying one creditor substantially more than another. For this reason they recommend I did not apply for the DRO as I would be rejected.

Can anyone tell me if they've been in a similar position, and if so, the outcome? The counsellor said I could try, but that "if the courts got wind of it, they would consider it fraud and revoke the Order". Is this really true? Surely a debt is a debt and better to be paying some than none?

To be fair to the CCCS counsellors you spoke to DROs are very new and there are still some grey areas ( I've had to email the Insolvency Service a few times with queries which aren't covered in the regulations / legislation ). A DRO is essentially a form of insolvency which means that you have to declare ALL creditors ( including friends and family ). With an informal arrangement like a DMP you can choose to treat the family debt as a priority.

With a formal insolvency route ike a DRO then this choice is taken away I'm afraid. As CCCS have said you could in theory apply for a DRO but you would be paying a non rfundable fee of £90 and would likely be rejected. You would be seen as having treated the family debt at a 'preference' which isn't allowed in DRO/bankruptcy situations.

You could of course consider bankruptcy as an alternative ( I'm not claiming to know enough about your circumstances to discuss this; just using it as an example ) but you would still have the issue of the debt to your father. The fact he took out a loan in his name is a separate issue - he is solely liable for that debt. If you went bankrupt the OR would be likely to ask your father to repay any monies you paid to him if they felt it was preferential treatment.

I hope this makes things clearer but I can completely understand your frustration.

elfieb

thepurplegoldfish wrote: »

Hi One & All,

I owe 12K and I have saved the £90 for the DRO (not applied for yet), however I am now looking at getting 2K back-payment from the DLA for Mobility & Care, will this money be 'taken'?

Also my Employment Support Allowance has been under paid for 6 months and I am looking at getting the difference back as one lump sum too, will this money be 'taken'?


What about Bankruptcy is that a better option? Oh someone HELP!!!


Thanks

From what I understand, DLA is not counted as income when applying for a DRO.
Someone please correct me if I am wrong

serenity34_2

thepurplegoldfish wrote: »

Hi One & All,

I owe 12K and I have saved the £90 for the DRO (not applied for yet), however I am now looking at getting 2K back-payment from the DLA for Mobility & Care, will this money be 'taken'?

Also my Employment Support Allowance has been under paid for 6 months and I am looking at getting the difference back as one lump sum too, will this money be 'taken'?


What about Bankruptcy is that a better option? Oh someone HELP!!!


Thanks

It's impossible to advise on the best course of action without knowing much more about your overall circumstances and the type of debt you have. I would strongly recommend you speak to someone at Natonal Debtline on freephone 0808 808 4000. They're a charity and the advice is free and confidential; they will ask you some questions and advise on all options open to you. If you don't feel comfortable on the phone you can email them direct from their website. You can stay anonymous if you wish.

In terms of the underpayments on your benefit then I would firstly ensure that you have completed your budget sheet on the basis of the correct level of award ( ie you haven't used the lower amount from when you were underpaid as this will make your surplus lower). In theory it may be seen as an 'asset' which would take you over the £300 limit thus unable to apply for a DRO but I'm not sure if the fact that it's effectively your 'normal' income just in one go would make a difference. I will try to find out and come back tomorrow but if anyone else knows off the top of their head please shout up!

I've had a quick look on the Insolvency Servoce website and some of the DRO technical stuff I have but can't find anything...leave it with me.

Just to theow it in there as a thought - is the lump sum already spoken for in terms of being needed? Daft question I know but the reason I ask is that you may be able offer some or all of your creditors a Full and Final settlement for a lot less than you actually owe. There's a good factsheet about this on the National Debtline website ( sorry I can't post links yet! )

serenity34_2

elfieb wrote: »

From what I understand, DLA is not counted as income when applying for a DRO.
Someone please correct me if I am wrong

Essentially this is correct - it would still need to be declared as income but then the whole amount would then be fine to be listed under expenses. This is confirmed by the Insolvency Service guidance notes for internediaries

serenity34_2

OK, just found this:

'Cash at bank or building society refers to free capital and would not include funds that are due to be paid out for living expenes, in the normal course of events'

Again, from the internediary guidance notes. Not specifically referring to your benefit 'repayment' but it would be a lump sum in yoiur bank. To my mind, as long as you can earmark it for essentials then you wouldn't need to declare it. This isn't a definitive answer though I will still try to look into it a bit more for you.

coachandy

We have been advised today the DRO is an option my us. Read through some of the posts on here and as we arent at retirement age would money that is in a pension fund effect that option?

fatbelly

coachandy wrote: »

We have been advised today the DRO is an option my us. Read through some of the posts on here and as we arent at retirement age would money that is in a pension fund effect that option?

money in a pension fund counts towards your £300 asset limit - that doesn't make sense to many of us but that's the way the guidance is set out as things stand