Savings vs. debts! Deprivation of assets?

oxcat1

Myself and my partner have run up credit card debts of £13,000.00. These are all on 0% deals, and up to now we have been managing the monthly repayments,gradually chipping them down. Over the last couple of years, I have also managed to build up savings of £9000.00. We don't have any property and rent privately.

I have now been diagnosed as terminally ill, with a life expectancy of about 2 years. My husband is giving up full-time work in May to become freelance, enabling him to spend more time with and caring for me. It was because of this massive change in our situation that I let the savings build up - I didn't want to do anything until I had some idea what our future looked like.

I want to apply for ESA, and have been told I should be eligible, but know that our savings our too high. Obviously I will use the savings to clear as much of the credit card debt as I can - we will not be able to afford the monthly repayments otherwise. However, looking at the ESA form, this could count as deliberate deprivation of assets, and I will have to declare these savings, even though obviously the debts are greater?

Is this correct? I just took my eye off the ball for a few months during several long hospital stays,and I just left the savings/debts balance until I knew what our future looked like. I have to clear most of the credit cards as we won't be able to afford the repayments on one self-employed salary (I imagine c. £150 a week), plus ESA if I am successful, but it looks like I will get penalised for this. Can I write a covering letter to the form or will it not be read?

Thanks

Caz3121

you could still qualify for means tested benefits with £9k in savings, although they will be reduced by £1 for each £250 over £6k

If you use the savings for the normal monthly payments, rent etc, once you get below £6k (this may take months depending on the payments to come out) then your reduction will be removed (it will be reduced as your savings decrease)

If you spend the savings with the purpose of being able to claim means tested benefits then the decision maker may decide this was deprivation and you would be treated as if you still have the money

If you qualify for contribution based ESA, the savings will have no relevance, if not, your husbands income may end up affecting it more than the savings
Have you looked into PIP - this also is not affected by savings

oxcat1

Thanks, Caz.

I just wish I had known to pay off the debts sooner. I was just so distracted with being so poorly and getting this horrible diagnosis that I just let the two balances build, without giving any thought to it until I had time in my life to give it some consideration.

I will still pay off as much as I can of the credit cards as we won't be able to afford the monthly repayments, but obviously I will also have to declare the savings that I have had, prior to paying these debts.

Thanks.

rogerblack

As implied above it's somewhat irrelevant I suspect.

Firstly. 9000 pounds worth of savings will affect your benefit by (9000-6000)/250 = 12 pounds a week.
Secondly - if you do not qualify for contributions based ESA, you will not be paid if you have other household income of 150/week. (or at most several pounds).

If you qualify for contributions based ESA in the support group, then savings are never counted.
In the work-related group, they will be after one year - but again - as above, other income will wipe it out.

Paying off CC debt can be not deprivation of capital - but only if you are paying off the debt for some other reason than to get more benefit.

Your benefit is affected by 12 pounds a week by the savings.
If your interest is more than 12 pounds a week, then clearly that would be the other reason.
With 0% cards - this doesn't apply.

RAS

When do the 0% deals end? What is the on-going rate?

Mojisola

oxcat1 wrote: »

Over the last couple of years, I have also managed to build up savings of £9000.00.

I have now been diagnosed as terminally ill, with a life expectancy of about 2 years.

I want to apply for ESA, and have been told I should be eligible, but know that our savings our too high.

Sorry to hear your news.

AIUI, spending capital on a funeral plan doesn't count as deprivation. That would reduce the lump sum.

Also, money spent on items to make your life more comfortable - such as new bed/mattress, more suitable furniture, mobility equipment, etc - also shouldn't be a problem.

Once you are below the £6k limit, you could use some of that to reduce the debts.

Check out the care and mobility related benefits as well as ESA.

Mojisola

oxcat1 wrote: »

Myself and my partner have run up credit card debts of £13,000.00.

I have to clear most of the credit cards as we won't be able to afford the repayments on one self-employed salary (I imagine c. £150 a week), plus ESA if I am successful

Are all the debts in joint or separate names?

It might be worth concentrating on paying off any in your partner's name so that he is left in a better financial position.

I would get advice from a free debt-relief advisor on how to deal with the debts.

BigAunty

longtomboy wrote: »

Most if not all people know that with capital above £6000 comes a reduction in means tested benefits.


How someone can prove that a deprivation is not a deprivation is beyond me. But knowing that it will happen is generally enough for the DWP to say that it was one of or the main reason for disposing of the capital.
...

It is up to the DWP to prove that a claimant has intentionally reduced their capital to be entitled to benefits, not hearsay or hunches or assumptions. It isn't enough evidence that there is a 6k capital threshold that is allegedly known widely - the DWP have to prove in the specific case that the claimant knows about it, for example, by being turned down for a previous claim precisely for that reason.

Deprivation of capital is a complex area and the OP is right to seek expert advice. I would advise her to post on the Debt Free wanabee board to get general advice on the alternative options for dealing with the debt.

I've had a browse at the Decision Makers guides (staff manuals) and I did get the strong impression (which the OP should verify) that it is only the early repayment of loans, when there is no need to do so, that can cause an issue. I interpret this as paying off a mortgage loan ahead of term or bank loan before its contractual term.

There was definately no clause in the guide that told the DWP employee that there was anything wrong with paying off credit card bills, nor anything concrete that said it could be done. What it did say (if I remember correctly and the OP should do research in this area) is that there isn't an issue with paying off debts that are 'legally due'. This is why I think (and the OP should check) that there should not be a problem paying credit card debts as there is a contractual obligation to do so.

specialboy

OP, do you need any equipment/furniture to help make your life easier? Is you car suitable for your needs? Spending on such items would probably be ok as long as you are not just buying for buyings sake

rogerblack

BigAunty wrote: »

It is up to the DWP to prove that a claimant has intentionally reduced their capital to be entitled to benefits, not hearsay or hunches or assumptions.

True - however this implies in many peoples minds something much more than is actually required.
This is not proof to 'beyond a reasonable doubt'.
The proof they need is only 'on the balance of probabilities'.
That is - they need to decide that it's more likely than not.

You can appeal the decision, but it never has to be proven to beyond a reasonable doubt - even if it goes to tribunal.
(It does have to be proven so if it is later the subject of a criminal fraud prosecution arising out of the overpayment)

oxcat1

Thank you so much for all this advice.

To be honest, I don't need to reduce my savings simply for the sake of it - our credit card debts exceed our savings, even if I spent every last penny of savings clearing the debt, which I am reluctant to do because of the self-employed/freelance/unknown nature of my gusband's career, and the fact that he has no accident/illness insurance and would not be eligible for SSP. That concerns me more than anything at the moment, although obviously as time goes on, we shall, of course, spend any remaining savings on making life as manageable as possible, even if that is with equipment at the expense of a 'rainy day fund.'

I need to reduce our credit card debts as the likelihood is that we will not be able to make the monthly repayments, and obviously that will quickly lead to serious problems. Whether the DWP consider I *needed* to do that seems to be open to debate, from what I understand from all these discussions?

The credit cards are in either my husband's name or my own - not joint - and have various finishing dates for the promotional rates, from November this year, to November 2015, I think, after which they will revert to standard credit card APR rates, and as we will have a very low income, it is unlikely we would manage to get another promotional rate at that time.

When I look at the ESA form, it asks only about savings, and about savings I have had in the past. If I enclose additional paperwork, proving the credit card debts, and explaining about struggling to make monthly repayments, are they likely to read it?

Thank you also for the information from the decision maker's guide. I'll have a look. I just don't see where on the form I am meant to tell them?

Thank you again.