Would paying off a mortgage be considered 'deprivation of capital'?

smyffie

Jowo wrote: »

Are 'priority' debts defined as such to help debtors understand which to pay first and which ones they should postpone or negotiate lower payments. In other words, priority debts are related to debt repayment strategies to help those with creditors manage their repayments - could it be that this definition is separate from the benefits system and shouldn't be wrapped into Deprivation of Capital issues?

But nonetheless, the DoC area is very complex and the guides that have been produced for the decision makers who review benefits claims do contain some guidance about those who pay off their debts.

It's still up to the authorities to have to prove the individual knowingly got rid of their capital to improve their benefit claims.

Here's the HMRC decision makers guide to help the OP understand how they would be judged from a tax credit point of view. The OP should read through the entire guidance to get the complete picture.

For example, it says "If a person uses capital to repay a debt, the decision maker should consider carefully whether the debt had to be repaid at this time. If there is no legal obligation or pressure to repay the debt now, part of the purpose may have been to get benefit or more benefit..Applicant's or partner's have no choice if they use their capital to pay
1) for the necessities of life, such as food and fuel or
2) debts which are...immediately repayable and...legal debts capable of enforcement

Applicant's or partner's have a choice if they
1) give their capital away
2) spend their capital extravagantly or imprudently even if they say they have used it to pay for the necessities of life
3) pay back a debt before the agreed date, such as when they pay off their mortgage and the agreement says it is not due to be repaid for another 15 years
4) pay more than the amount due on a debt , such as when they pay more than the minimum payment on a credit card debt
5) pay back a debt which is not legal and incapable of enforcement.

*******

Here is one of the DWP many guides for its own decision makers on capital and how it can affect their means tested benefits.


"The following are further examples of when a person may have deprived themselves of capital a lump sum payment has been made to someone else, for example as a gift, or to repay a debt...

When capital has been used to repay a debt give careful consideration as to whether the debt needed to be repaid at that time. If there was no legal obligation to do so then it may be that

part of the claimant’s purpose was to obtain or increase the amount of benefit."

Many thanks for the links. They were tough reading but at least do give the facts that the descision makers have to look at, even if their decsision may depend on which side of bed they got out of in that particular morning.


It does open up a whole new can of worms though. I imagine Dep of Cap would be applied for the following:-
1. If I spent any redundancy on any training schemes to get myself more chance of returning to work and therefore hopefully no longer needing to claim any benefits
2. IF I lived a stones throw from my current employment and did not own a car. In order to get back into the labour market (and even get to interviews etc before any job offers are recieved) it is fair to assume I would need to buy one, and again be penalised by the benefits system.
The second of these does NOT apply to me and I certainly do not intend to buy another or even replace my car for the sake of getting state help, its just an example of how someone 'could' be affected.

The first example was something I was considering tho but will have to reconsider this as well as the mortgage payment. I never really believed it before, tho so many people say it:- that the benefits system favours those who dont really want to work (and can manipulate the rules by whatever means they can) over those that worked hard all their life, save for retirement/put children thru university etc and are knocked for six by bad fortune. But I'm sure that a whole different discussion so please ignore my rant!

Mojisola

I think you would be alright with paying for training if it was clearly linked with improving your chances of a job. Also, a reasonably priced second-hand car would be acceptable in the second instance. If you spent the redundancy money on a top-of-the-range new car, it wouldn't be.

Mojisola

If you used capital before you become unemployed, there would be no issue about deprivation of capital unless it could be shown that you were aware of the upcoming job loss and had deliberately spent the money in order to be able to claim benefits.

real1314

skcollobcat10 wrote: »

Yes, I agree, and also if the other partner has savings separately it has nothing whatsoever to do with the partner that has become unemployed, unless the partner is claiming benefits for both of them.

If he is claiming only unemployment benefit for himself/herself, well the other partner can pay off whatever debts are outstanding eg. the mortgage etc, the benefits office cannot tell them what to spend their money on.

I think dep. of capital is only an issue if the unemployed partner is claiming benefit for both partners. Is this correct?

No, not really.

If someone is claiming "just for themself", then they would only be claiming the Contributory element of JSA, roughly £65 a week, and non-means tested (so no capital issues) which they would only get for 6 months.

If claiming for a partner, the whole measn test comes into it.

Mojisola

skcollobcat10 wrote: »

That would be fine for me as he would not be claiming for me.

As real1314 says, that would be fine while he is receiving benefits for the first six months if he is able to claim JSA based on his NI contributions. After that, he would have to claim means tested benefit and then he will be looked at as part of a couple and your income will be taken into account.

DevilsAdvocate1

Personally, I would pay off the mortgage as that way you will never be homeless. If it comes to it and you don't find another job, you would not need a massive income to pay for the general bills so I would look for something at the time just to tide me over (minimum wage type of job).

D.

quintwins

hi i have no backround of this at all (altho this has been very interesting reading) i was just wondering if you were on means tested benefits and saving to buy a house would paying a deposit be classes as depriciation of capital

tbh i prob would have said pay off your mortgage however since reading this thread i'm not so sure, however if you did pay it you would have less outgoings and you could get any job going to get you by til you got one better suited even if it's stacking shelfs in tesco it will still pay the bills

NASA_2

smyffie wrote: »

Hi All.

This is my first time on here so please keep any unpleasantness to a minimum! (I have read some other threads!)

Anyway on to the question...I believe there is a likelihood of being made redundant shortly. Having been at the same company for over fifteen years and being relatively well paid and not blowing it all on drugs, drink and women, I have been able to overpay the mortgage such that my redundancy payout would be more than enough to clear it. What I need to know is if I don't manage to gain employment within the first six months (while I can claim contribution based JSA) will the fact that I have used the redundancy money in this way be classed as deprivation of capital if I need to claim income based JSA, and maybe council tax benefit. To my mind to pay off the mortgage must be the correct thing to do as if I instead use the redundancy to pay the monthly payments until its all gone, the JSA would then be insufficient to pay them (even less so if interest rates return to their long term average). As we all know the eventual outcome of mortgage payment failiure I really need to avoid that possibility.

Can I say I don't consider myself to be a scrounger from the state, at 39 years of age this will be the first time I have been unemployed. I have 'gladly' paid the highest rate of income tax when my earnings dictated such. I certainly hope to be back in employment ASAP but as my previous career was very specialised I do not condider it possible to get a similar job, and will therefore doubtlessly need to accept a much lower paid job, which is another reason that I want the mortgage cleared.

I hope this all makes sense and someone can give me some good advice with regard to this.


Smyffie

As an enforcable debt (ie. they can take your home) I think it would be a harsh decision maker that would decide it is deprivation of capital.

NASA_2

quintwins wrote: »

hi i have no backround of this at all (altho this has been very interesting reading) i was just wondering if you were on means tested benefits and saving to buy a house would paying a deposit be classes as depriciation of capital

Depreciation (Value of your capital going down) is a yes but it would not be deprivation. You are allowed to buy a house.

quintwins

NASA wrote: »

Depreciation (Value of your capital going down) is a yes but it would not be deprivation. You are allowed to buy a house.

thank you i have never acually thought of this before until i read this thread, hope things work out for you op