best way forward? debt relief order?

miner-dave

im having trouble financially and cant make my repayments at the moment. i've spoken to CAB who suggested a debt releif oreder. however. i know this stays on your file for 6 years and you cant get credit. i'm in the process of writing to my creditors with a re-payment plan that i can afford. they have told me though, that i will still get a default on my credit file, and that this lasts for 6 years anyway. which is worse? i was planning on opening my own business in the next few years, which would harm my credit file more, and how can i recover?

Tixy

A DRO is a form of insolvency, its very similar to bankruptcy in that respect (although cheaper).
A self-managed DMP (or one arranged by a charity for that matter) will end up with defaults on your file and in some circumstances can mess up your credit file for longer than a DRO. However as a DMP is informal then you don't have to dclare it to anyone else.

A DRO does need to be declared if you are asked by an employer/credit institution if you have ever been insolvent for the rest of your life.

However it really comes down to what you can afford. if you are eligible for a DRO then you must have no more than £50 available to pay your creditors each month. How much are your debts? how long will it take you to repay them on that kind of level of payment?

fatbelly

You're asking 'which is worse for my long-term credit rating?' I agree with Tixy - probably a dmp if it's going to last longer than 12 months.

But I think you should be asking 'How can I best get debt-free?' If you have significant debts (five figures?) and can only offer less than £50 per month then a 20-year dmp is less attractive than a 12-month DRO.

It's hard to be specific without full details from you but, for those that qualify, DROs seem to be working well so far.

miner-dave

thanks for the replies. i'm still in two minds :-( does anybody know whst effect a debt releif order has. eg can you still keep a bank account? can you keep your sky/cable tv subscription on direct debit? does it automatically wipe everything through ALL your creditors, or can you choose if you want to keep certain credit cards? thanks again if anybody can help !

Tixy

Hi Dave

Its probably worth you having a look at this thread http://forums.moneysavingexpert.com/showthread.html?t=1385275 which is all about DROs and I think contains some commonly asked questions.

You have to make sure you include all creditors on your DRO application for them to be included, ie if you forget any then you will still owe that money.

I am not sure (but I would imagine) that you are not able to keep any credit cards active and use them.

With regards to the tv subscription - I believe this would be classed as a luxury so would not be allowed expenditure to work out your surplus, if however you chose to use some of the allowed surplus of £50 for this I don't see why it could not be on dd - but they will advise you better on that thread if you ask specific questions there.

fatbelly

miner-dave wrote: »

can you still keep a bank account? can you keep your sky/cable tv subscription on direct debit? does it automatically wipe everything through ALL your creditors, or can you choose if you want to keep certain credit cards?

OK - quick answers cos I'm going out

You can keep Sky but it's not an allowable expense - so it has to be paid for out of your surplus income (which must be less than £50 per month)

All your debts must be listed and these are discharged (at the amount listed) at the end of the DRO - so it's a bit different to full bankruptcy.

Credit cards with a balance on them would have to be listed but one with nil balance (or even in credit!) would not be a debt and would not be listed. I don't meet that very often. I suspect that if they were owned by a banking group that was informed of your DRO, they might well be cancelled anyway, but that would be a decision for the card supplier, not the Insolvency Service.