Could a Debt Relief Order be for the solution?

poormummy_3

Hello

We have just had our application accepted for the Mortgage Rescue Scheme. We were hoping that the equity would clear all our debts but unfortunately, the housing association have offered us less than we were expecting.

I've just come across 'Debt Relief Orders' and am wondering whether it might be the solution for me. Am I right in thinking that a DRO is the same as bankruptcy but for smaller amounts of debt?

What would happen if our family income were to increase during the 12 months? eg. if my dh got a job.

Has anyone experienced any negatives with a DRO?

Thanks for your help

radio-jo

You can't get a DRO if you own a house (well, POSSIBLY if it's in negative equity). If your husband's income rises to the point where you have more than £50 disposable income per month then your DRO will be cancelled and your debts won't be written off.

I recommend speaking to CCCS http://www.cccs.co.uk/ or National Debtline (who are angels!) http://www.nationaldebtline.co.uk/

dancingfairy

Hmm -it could be complicated from what I can see.
You can do a DRO if you don't own a home, so presumably? when you sell the home to the housing association etc then you are no longer and MAY be eligble (subject to the other rules as well).
Are the bank willing to sell leaving you with a shortfall? How much will the shortfall be do you think?
df

poormummy_3

Thankfully the house isn't in negative equity - we'll get just under £5k back to pay towards our debts. We'll still owe £16k though, so looks like we might have to go bankrupt.

fatbelly

radio-jo wrote: »

You can't get a DRO if you own a house (well, POSSIBLY if it's in negative equity). If your husband's income rises to the point where you have more than £50 disposable income per month then your DRO will be cancelled and your debts won't be written off.

You can't get a DRO if you own a house. Full stop. Equity does not come into it.

Also, partner's income is not directly involved. The DRO Unit reminded Intermediaries earlier this year that the income/expenditure must be the applicant's only. This can lead to some odd-looking I/E statements but a rise in partner's income would probably not cause a problem. It might even mean that means-tested benefits paid to the applicant are reduced!

Anyone owning property in the two years preceding a DRO application will come under a bit of extra scrutiny and the DRO unit will want to see the completion statement. They will ask questions about what happened any (5k?) surplus paid out.

The 15k limit applies to the individual. But joint debts count against each partner. So if it's not 16k of joint debt, you're probably over that hurdle.

P.S. Full & Final settlements of 30% are not unknown

poormummy_3

It's all so complicated, I feel like my head's going to explode.

So... how does it work then say, if I got a DRO but my husband didn't?

radio-jo

poormummy wrote: »

It's all so complicated, I feel like my head's going to explode.

So... how does it work then say, if I got a DRO but my husband didn't?

Well I presume you own your house jointly, so neither of you can get a DRO.

I know it's very confusing but I really recommend speaking to someone at National Debtline or CCCS. They really helped me when I was considering bankruptcy and steered me down the DRO route.

poormummy_3

The house sale is just going through, so we'll soon be renting it back from the housing association.

When it is sold we will have £4800 cash with £21,000 of debt. I spent the day phoning our creditors to negotiate discounted settlement offers. I managed to get the £4800 to pay off £11,500 worth of debt.

So we would end up owing about £10,000. Although this seems pretty low, we still have no way of paying it back. We would both need to get a DRO, if we go down that route, because of outstanding joint debts.

radio-jo

You should be ok then. Just be very careful you don't give 'preference' to any creditor when you are making repayments/settlements as this can cause your DRO to be rejected.

fatbelly

poormummy wrote: »

It's all so complicated, I feel like my head's going to explode.

So... how does it work then say, if I got a DRO but my husband didn't?

If you qualify, but he doesn't, then he would have to consider another option like bankruptcy.

But honestly, with 21k of debt between you and a lump sum of 5k on the way, I wouldn't be looking at bankruptcy or a dro.

I'd be looking at full & final settlements, maybe preceded by token offers for a bit.

You won't get the best deals by phoning and asking. It all needs to be done in writing. You make a low offer and ask them to respond in writing.

The fact that you spent a few hours phoning around and got some creditors to agree to 50% (or below) means they would definitely be open to lower offers.