Should I use reundancy pay to clear 0% debt

lammylover

My husband has been made redundant and finishes next week. We have some debts which the redundancy pay will cover. However they are on 0% credit cards at the moment. Did we ought to pay them off or put the money into savings accounts and pay off gradually to maybe earn a little interest??

We read somewhere that if he goes on to claim income based benefits (he's 62 so job not looking likely) they will want to know where money has gone.
Thanks :undecided

BP1987

I would advise you pay off the debts with the money and save what ever is left over. How much redundancy money are you looking at? how much debts?
Are you both working age?

BigAunty

You are enquiring about possible 'deprivation of capital' issues. It's a complex area and each investigation is done on a case by case basic, not the kind of fixed black and white rules that you are hoping for.

See if you can find the Decision Makers guides (staff manuals) on this topic.

I've browsed them and they gave me the impression that paying legally due debts shouldn't be an issue but paying down debts ahead of their repayment schedule could be. People interpret this as credit card debts are fine to pay whereas paying back a loan early is not. Take expert advice and do plenty of research. Don't rely on people like me giving advice on forums, you need to satisfy yourself.

Poppie68

If you pay of your debts this could be seen as deprivation of capital,especially as your debts are on 0% credit cards. When you apply for income based benefits they will still treat you as having the money..

Do you work? do you rent and pay your own council tax at the moment, do you have savings, how much redundancy and how much debt will you be paying off?

fluffymovie

Poppie68 wrote: »

If you pay of your debts this could be seen as deprivation of capital,especially as your debts are on 0% credit cards. When you apply for income based benefits they will still treat you as having the money..

Do you work? do you rent and pay your own council tax at the moment, do you have savings, how much redundancy and how much debt will you be paying off?

This really isn't true and I keep saying this on similar threads but no one seems to listen!!!

The main issue when considering deprivation of capital is what was the main operating purpose of taking that action. If we believed it was to claim benefit, then that would be but releasing yourself from debt when you have the funds to do so is NOT deprivation!!!! It's sensible money management for those who have had a change in income and may not be able to service the debt in future!

xylophone

Surely there is no "repayment schedule" for a credit card debt?

Surely too if you know that the interest rate will be prohibitive once the 0% ends, it is common sense to repay in full?

And you wouldn't be repaying with the primary objective of obtaining means tested benefits?

pmlindyloo

You do not say whether you are working or not or have pensions or savings etc but you might want to investigate whether you would be eligible for Pension Credit. (At the present time only one of a couple needs to be eligible to claim for both.)

Deprivation of capital is used (as already said) only when it is proved that you have 'used' any capital to be able to receive means tested benefits.

Certainly this link

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS48_Pension_Credit_fcs.pdf?dtrk=true

says that paying off debts is not deprivation of capital.

I would add, however, that the fact this link relates to Pension Credit only must be noted. I believe case history shows that where 'older people' claiming PC pay off debts it is considered to be a sensible thing to do ( and not deprivation of capital) as their ability to service the debts at this time of their life is likely to be less easy than those of 'working age'.

[Deleted User]

the rules are simple paying off debts where the payment isnt due or overdue or the interest rates excessive is DOC,that said paying off a 0% cc would be DOC unless the rate reverts to 1000%(e.g),there is no difference btw between loans and cc

BigAunty

woodbine wrote: »

the rules are simple :paying off debts where the payment isnt due or overdue or the interest rates excessive is DOC,that said paying off a 0% cc would be DOC unless the rate reverts to 1000%(e.g),there is no difference btw between loans and cc

On the deprivation of capital DWP decision makers guides I browsed, there was scant information other than legally due debts weren't an issue but early repayment was.

Absolutely nothing stated about the difference between loans and credit cards, very little other guidance or context, not even a definition of what 'legally due' means. Certainly nothing on whether it is fine to pay off a credit card bill if it attracts/doesn't attract a zero interest rate on it.

That's why I find it amazing that people post really strong opinions that 'full credit card repayment is/isn't acceptable' on queries like these.

As a personal opinion/hunch/assumption, I really can't see why there is an issue with someone paying off a credit card in one lump sum. The person owning it may have the option to make minimum repayments but its not a loan where there is a set repayment schedule and the zero balance is fixed for a particular date. When the credit card bill is received, surely the sum is legitately due but its simply up to the credit card owner if they don't pay it in full and choose to carry it over?

lammylover

Thanks everyone I'll investigate further now rather than rashly paying everything off!

bloolagoon

BigAunty wrote: »

On the deprivation of capital DWP decision makers guides I browsed, there was scant information other than legally due debts weren't an issue but early repayment was.

Absolutely nothing stated about the difference between loans and credit cards, very little other guidance or context, not even a definition of what 'legally due' means. Certainly nothing on whether it is fine to pay off a credit card bill if it attracts/doesn't attract a zero interest rate on it.

That's why I find it amazing that people post really strong opinions that 'full credit card repayment is/isn't acceptable' on queries like these.

As a personal opinion/hunch/assumption, I really can't see why there is an issue with someone paying off a credit card in one lump sum. The person owning it may have the option to make minimum repayments but its not a loan where there is a set repayment schedule and the zero balance is fixed for a particular date. When the credit card bill is received, surely the sum is legitately due but its simply up to the credit card owner if they don't pay it in full and choose to carry it over?

Wouldn't it come under spending to get benefits.

Ie most people don't pay off a zero interest loan, they'd put money in their bank account. So it's likely that if they did pay off 0% then ask for benefits they could decide it was to get benefits.