If I pay off debts from my redundancy will it affect any benefits?

normdeplume

Dear all,

I recently lost my job and was given a redundancy package. To pay off what I owe would swallow most of it but would leave me with enough to pay rent, bills etc for 2 months.

Yet there's something reassuring about having all the money in a savings account. Plus the buffer is nice while I try and find freelance (patchy but I've had a little work).

As I write, I think I know what I should do... for some reason, I just can't quite bring myself to do it. Should I pay part of the debt off... or just bite that goddam bullet?

And will repayment affect any benefits I can claim?

Thanks in advance for any thoughts.

Ndp

[X-post from debt-free board]

paulwellerfan

as i said on the df board just pay off the debt you will feel better for it.
any monies over will be a bonus.

bobajob_1966

Will you be claiming means tested benefits? Is your capital (before any repayments) over £6,000 or £16,000?

normdeplume

It's over 6k. I'd be claiming umemployment benefit and housing benefit. I'm not sure if they're means-tested?

bobajob_1966

Have you been working for the past few years? If so, you will be entitled to Conts Based JSA, and this is not affected by savings. However housing benefit will take into account any savings over £6,000. You would be best to seek agreement from your local authority before spending your savings, as if they feel you have intentionally deprived yourself of the capital you will be treated as still having it and hence not receive your full HB entitlement.

normdeplume

Thanks Bob. I was working for five years before being laid off.

suelees1

Bobajob's right about the Jobseekers Allowance. For the first six months it should be contribution based (ie based on your NICs) but after that will be income based which is a means tested benefit with housing and council tax benefit.

Unless the debts are immediately due it will be seen as deprivation if you pay them off.

For each £250 or part thereof between £6K and £16K you will lose £1 pw from your HB. Anything over £16K and you have no entitlement to any means tested benefits.

So if you have less than the upper captial limit once it becomes income based JSA you will lose £1 pw from that but as you will still be in receipt of some JSA you'll get full HB/CTB

property.advert

I think I could make a rational argument that were the OP to inform his lenders that he was unemployed and had cash sitting there, they may well call in his debt. Very few debts are actually non callable.

As benefits are not intended to service debt repayments, I could use that as another good argument that they should be paid off now.

I'd be happy to argue these and other points with some official who wanted me to accept paying off debt was deprivation of capital.

suelees1

I've been dealing with such issues for my clients for 20+ years. I believe it certainly will be considered as deprivation if you simply chose to repay and if there was 'a significant operative purpose' to obtain benefit.

This has been considered by various Commissioners in Social Security appeals.

In the context of the legal language used for the deprivation test, if the OP discharged his debts to reduce his redundancy payment in the expectation this would entitle him to benefits (or additional benefits ) it would be deprivation.

....and what's more if this is the case the DWP will consider it to be notional capital and treat you as having it even though it's spent

pstuart

If a claim was to be made for just HB (slightly off subject here), are the LA's forms less 'intrusive' than the DWP?

McKneff

property.advert wrote: »

I think I could make a rational argument that were the OP to inform his lenders that he was unemployed and had cash sitting there, they may well call in his debt. Very few debts are actually non callable.

As benefits are not intended to service debt repayments, I could use that as another good argument that they should be paid off now.

I'd be happy to argue these and other points with some official who wanted me to accept paying off debt was deprivation of capital.[/QUOTE]


And you'd lose every time,