Help from friends or family

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david_m4
david_m4 Posts: 54 Forumite
edited 11 January 2012 at 11:34AM in IVA & DRO
Hi,

What would happen if a relative paid off some of my debt to get it below the DRO limit? Would their finances be investigated as a result, when I applied for the DRO? And could they choose which debt(s) to pay off, without either of us getting in trouble for giving a preference?

Also, I would want to eventually repay this person after I get discharged. Can I do that, provided I wait til the end of the DRO?

Dave

Comments

  • caz2003uk
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    As far as Im aware....that would be seen as a preferential payment and in the 2 years before a DRO you can't be seen to prefer one creditor over another

    All debts must be included in the application,

    but and im sure someone will either agree or correct me...if your family friend splits the money equally between all creditors and this brings you under the amount then that would be ok? (again im not 100% sure on this especially as it creates a debt of the same value to your family member?)

    Also would interest still be going on to your debts which would increase them again taking you over the £15k?
    :jEngaged 25/12/11 :j
    :smileyheaMarried the man of her dreams and became Mrs M on 26th April 2013 :smileyhea
  • wba31
    wba31 Posts: 2,189 Forumite
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    caz2003uk wrote: »
    As far as Im aware....that would be seen as a preferential payment and in the 2 years before a DRO you can't be seen to prefer one creditor over another

    All debts must be included in the application,

    but and im sure someone will either agree or correct me...if your family friend splits the money equally between all creditors and this brings you under the amount then that would be ok? (again im not 100% sure on this especially as it creates a debt of the same value to your family member?)

    Also would interest still be going on to your debts which would increase them again taking you over the £15k?

    If the payment goes directly from 3rd party to creditor it is not a preferential payment, it's only preferential if the payment comes from the applicant themself.

    how much over the £15k limit are you? anymore than £700 and it'd be cheaper and simpler to apply for bankruptcy
  • caz2003uk
    caz2003uk Posts: 673 Forumite
    Wedding Day Wonder
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    wba31 wrote: »
    If the payment goes directly from 3rd party to creditor it is not a preferential payment, it's only preferential if the payment comes from the applicant themself.

    I didn't realise that, i assumed it was the same no matter where the money come from
    :jEngaged 25/12/11 :j
    :smileyheaMarried the man of her dreams and became Mrs M on 26th April 2013 :smileyhea
  • david_m4
    david_m4 Posts: 54 Forumite
    edited 11 January 2012 at 4:14PM
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    £17,600 :-o

    But that includes a £500 Barclays overdraft which I need to pay off so I can definitely still have a bank account in my DRO year (I owe Smile £2000 so the Co-op is out), and a £1500 HSBC overdraft which I really want to pay off so I can try to keep it as my main account. HSBC have never screwed me over and I don't want to leave them if I can help it, especially not to Barclays.

    Then there is a £700 tax credits overpayment which I might not have to include at all. HMRC are making no effort to chase me for it and I'm not sure if they regard it as a debt. The last letter I had from them, in July, said they would deduct the money from my future tax credit payments. Even though I am not entitled anymore and have not renewed my claim in this tax year, so there won't be anything they can deduct it from. If I was in line for an income tax rebate in April, I guess they might take that?

    If I accept the help I've been offered to pay off the two banks, I'd only be £600 over the limit even if I do owe HMRC. Going bankrupt would mean I still had to find that much to pay the court fees, and bankruptcy seems much more onerous and stigmatising.

    In a couple of years I want to move to New Zealand, and I think a bank there might ask "have you ever been bankrupt". I'm willing to bet they won't ask "have you ever had a debt relief order", cause they wouldn't know one if it hit them on the nose.

    Thoughts?

    Dave
    wba31 wrote: »
    how much over the £15k limit are you? anymore than £700 and it'd be cheaper and simpler to apply for bankruptcy
  • wba31
    wba31 Posts: 2,189 Forumite
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    My thoughts are below in red
    david_m4 wrote: »
    £17,600 :-o

    But that includes a £500 Barclays overdraft which I need to pay off so I can definitely still have a bank account in my DRO year (I owe Smile £2000 so the Co-op is out), and a £1500 HSBC overdraft which I really want to pay off so I can try to keep it as my main account. HSBC have never screwed me over and I don't want to leave them if I can help it, especially not to Barclays.

    As far as I am aware there are no banks who will reject you for a new bank account because of a DRO. I know it is different with bankruptcy but I think there are more banks than normally talked about who will give you a bank account. I think £2000 to keep banks happy is silly money.

    Then there is a £700 tax credits overpayment which I might not have to include at all. HMRC are making no effort to chase me for it and I'm not sure if they regard it as a debt. The last letter I had from them, in July, said they would deduct the money from my future tax credit payments. Even though I am not entitled anymore and have not renewed my claim in this tax year, so there won't be anything they can deduct it from. If I was in line for an income tax rebate in April, I guess they might take that?

    Whether they are chasing you or not, a DRO intermediary WILL class them as a debt and is expected to include them within your DRO

    If I accept the help I've been offered to pay off the two banks, I'd only be £600 over the limit even if I do owe HMRC. Going bankrupt would mean I still had to find that much to pay the court fees, and bankruptcy seems much more onerous and stigmatising.

    I would think now, it will cost someone (maybe you, maybe a family member) £700 to go bankruptcy, draw a line under it, move on, or it could cost in excess of £2500 for in effect the same thing. The DRO can be revoked at any point in the 12 months remember, payrise, new job, inherit any assets etc. once the bankruptcy is done, it's done, and the debt is gone

    In a couple of years I want to move to New Zealand, and I think a bank there might ask "have you ever been bankrupt". I'm willing to bet they won't ask "have you ever had a debt relief order", cause they wouldn't know one if it hit them on the nose.

    I would advise you to maybe research this and get advice. I have looked at moving to New Zealand since i was 18, mountains rain and rugby, sounds like the perfect country, but im 26 and the wife is adamant we wont move from our postcode, let alone to the other side of the world. but if it is a reality for you, ill come with you - i mean, get some advice from the NZ tourist board maybe about whether bankruptcy could affect a move. I understand that work permits are really hard to get in NZ anyway...

    Thoughts?

    Dave
  • david_m4
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    Hope you can talk her into it! See you at the airport mate :-)
    wba31 wrote: »
    I have looked at moving to New Zealand since i was 18, mountains rain and rugby, sounds like the perfect country

    I'm studying computing and already work part-time in network technical support, and network analyst was on the skills shortage list last time I checked. My wife is a postdoc university lecturer so she would qualify as well, and she wants to go. So I think moving to NZ is a serious possibility. I'll have to finish my course and have left insolvency far enough behind :-P to have saved a couple of grand, but then I think we can do it.

    As for the £2600 difference between DRO and bankruptcy, you are absolutely right it's silly money just to keep one particular bank happy. I can live without HSBC. But I do think being able to honestly answer no, if I am ever asked if I've been bankrupt, will be worth quite a lot to me at some point. And in effect, the difference is smaller for me.

    First there's the £700 in bankruptcy fees. Then I am selling my car, which I should get £600 for. Then my wife is paying off Barclays for me (£500 which I will eventually pay her back, but not til I'm in the clear) so that if I have to go bust, I will be able to have an account. I wasn't sure about the situation with DROs, but I know the only two banks that allow undischarged bankrupts as customers are Barclays and the Co-Op. I owe the Co-Op £2000, so Barclays it has to be.

    So the extra money I'd have to find for a DRO is actually just £800, and I will be able to get it from a relative. Still think it's not worth doing?

    Thanks for advice so far btw!

    Davey
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