Social fund loans in bankruptcy from March 19th 2012

fermi

The Insolvency (Amendment) Rules 2012 (2012 No. 469

A Statutory Instrument amending the Insolvency Rules 1986 was laid before parliament on 27th February 2011.

The amendment relates to discretionary Social Fund loans (budgeting loans and crisis loans) and has the effect that such loans will be outside the scope of a Debt Relief Order and will still be repayable both during and after discharge from bankruptcy.

The amendment comes into force on 19th March 2012 and will apply to applications for Debt Relief Orders and petitions for bankruptcy made on or after this date.

Ineedaname

So if someone chooses the low cost repayment route of a Government loan they have to pay it back, but if they take out a high interest payday loan it can go into their BR... Hmmmm...

Not suggesting the payday loan should be excluded, just that those taking out crisis loans are often struggling for more reasons than being in debt and may continue to be in a dire financial situation after BR if they continue out of work with minimal benefits.

debt_doctor

Well i wasn't aware that was coming!

Thanks Fermi.

DD

fermi

fatbelly posted that up on the DRO board yesterday. I hadn't a clue either.

I think the first that a lot of people will know is when they go to the DRO login

https://www.insolvencydirect.bis.gov.uk/dro/wizard/start.aspx

and see the big important notice.

debtinfo

I suppose the rational is that this type of loan is intended to help people in a crisis situation. If it could be totally written off in a bankruptcy would that make the authorities less likely to give them out right when people needed them if bankruptcy was looking likely.

debt_doctor

My view is that the minister for the DWP has realised that they have been found to be acting unlawfully under the present wording of the Insolvency Act (Payne & Cooper v DWP) and has consulted with the minister for BIS to change the legislation.

I seem to remeber Fatbelly being worried they may do that in response to the High Court ruling.

DD

fermi

Links here to the reasons they claim for doing it.

Explanatory Memorandum 21kB

Final Impact Assessment 2.9MB

2nd one of those has most revealing detail

rossireps

Does this mean that I now do have to continue paying my loan back?
sorry Im not good with understanding some things would explain why the dwp have been ignoring my letters if I do

fermi

rossireps wrote: »

Does this mean that I now do have to continue paying my loan back?
sorry Im not good with understanding some things would explain why the dwp have been ignoring my letters if I do

No it doesn't.

It only effects people who will be going bankrupt from March 19th onwards this year. People who went BR before that will still have their loans covered by their bankruptcy.

rossireps

thanks fermi
right step up a gear watch out dwp!

fatbelly

debt_doctor wrote: »

My view is that the minister for the DWP has realised that they have been found to be acting unlawfully under the present wording of the Insolvency Act (Payne & Cooper v DWP) and has consulted with the minister for BIS to change the legislation.

I seem to remeber Fatbelly being worried they may do that in response to the High Court ruling.

DD

You've a good memory, DD. I think I said 'we might have won the battle but lost the war'. I'm not pleased to be proved right but I think there was an inevitability about it.

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