Pre DRO

loveduppaul

Hi Guys,

Wondering if anyone can help me out. My girlfriend has got herself in a bit of a muddle, running up just over 15k's worth of debt (15,700 to be exact) obviously she can't go for a DRO at this point but was wondering how we could get the amount down.

she has one debt of around 1500, which I thought if I offered them a full and final settlement of around 750 and they accepted then this would bring her under the 15k and also give a little bit of room just in case other things add up to more.

Would that be looked at unfavourably by the DRO administrator? in effect there would be preferential treatment to a single creditor, not by her directly but by a third party (ie me)

The other option was to offer 1k in equal sums to all her creditors (so 200 quid each) the risk she faces then is that she doesn't have as much leeway and could just be swallowed up in interest.

The other is obviously full bankruptcy, much more straight forward but also has a more serious tone to it.

Any advice is appreciated.

Foxy-Stoat_3

If the debts are a few years old, you could try reclaiming PPI and knocking the balances down a bit. What are the interest rates on the debts?

What does she earn, anyway of changing her lifestyle for a few years and clearing them down? Maybe transferring some of them on 0% interest cards and concentrating on the higher interest debt.

loveduppaul

Hi, thanks for the reply....

no PPI can be claimed as it wasn't sold with any of the debts. The only thing I believe she has is doe sofa protection insurance product from DFS... not sure how easy it would be to claim mis-selling on that (she didn't realise she had it)

She currently earns 16k, lives in a small flat. she is limited to what she earns due to medical problems she has (organ transplant plus a few other complications) She hasn't got a particularly good credit rating so no ability to transfer to a 0%.

We currently don't live together, I do have a reasonable credit rating and could probably get a loan to clear everything for her at a much lower rate than she is paying but most of her debts are from a previous relationship and her ex stopped paying. i personally don't want to get into a situation that if we broke up I personally would be lumbered with 15k worth of someone else's debts.

I looking at options for her, at current rates it would be around 15 years before she could pay them off even by cutting back. She has sought the advice of CAB and they said DRO but only if she could get the amount under 15k. I am quite happy to gift her 1K to reduce it under 15k but want to know the best way of reducing the balance, obviously offering a full and final for a bill around 1500 would be the quickest but would potentially show favouritism to one debtor, if spread across all debts I am just worried it will get swallowed up in charges and interest.

Thanks again

longtermplanner

I think you should pay her bankruptcy fees for her. It really isn't worth trying to bend the DRO rules.

wba31

There's no bending of rules here, if the payment goes directly from you as 3rd party to the creditor, it is in no way a preference by your girlfriend.
If you gave her the monies to distribute herself, then she would have to make pro-rata payments. So if you are adamant that this is the route to take, make the payment direct to one creditor, pay off a small debt if possible, but then she needs to act sharpish in setting up the DRO. Find out how long it takes the bureau to do it all...

As an advisor I would lean more towards bankruptcy, it is the cheaper option on the whole, yes it has a slightly more complicated process, but at least it is all enveloping. Ive seen cases were debt is at £15500 for example, £600 is paid off to get it down to £14900, but then interest is added on taking debt back over £15k (not exact figures but you get my drift...)

Did the CAB discuss bankruptcy with her?

fatbelly

I take it none of these debts are things that she would be paying down in the ordinary course of things, like benefit overpayments or fuel arrears on a key meter, or rent arrears, or council tax.

Any payday loans where the lender treated her unfairly?

Any utility bills where the company might have a charitable trust (NPower, EDF, British Gas)?

If there are no other factors that might put her off bankruptcy, that's where I would probably go. You can help her with the £525 Official Receiver fee and try to get remission of the court £180.

longtermplanner

fatbelly wrote: »

I take it none of these debts are things that she would be paying down in the ordinary course of things, like benefit overpayments or fuel arrears on a key meter, or rent arrears, or council tax..

I'm not sure why this question is relevant?

I have seen too many clients financially handicapped and having their lives ruined by benefits overpayments and utility arrears being recovered "in the ordinary course of things". These too will be erased by bankruptcy giving a genuine fresh start.

(I know you know this fatbelly, I just am unclear what pint you are trying to make?)

loveduppaul

Hi thanks for all your great advice.

Luckily no utility arrears or benefit overpayments, its simply a case of not enough coming in to live on and pay down the debts. Its mainly credit card debt, no payday loans or anything really nasty.

There is a car that will be VT'ing, car is worth around 2.5k with about the same amount owing, overall good condition but will have to wait and see what the finance company are like to hand it bank.

My personal view is the same as you guys, bankruptcy is the 'easier' way, and more encompassing, this will take care of the car, and stop anything from popping up in the future.

The main thing she is mindful about is being listed in the paper, and also having to sit in front of a judge. I have tried to help remove these fears but thats the main reason she is wanting to go DRO over bankruptcy. I have mentioned she would still be listed on the insolvency register no matter what.

I think she just feels DRO isn't as serious as full bankruptcy.

Thanks again everyone

wba31

loveduppaul wrote: »

The main thing she is mindful about is being listed in the paper, and also having to sit in front of a judge. I have tried to help remove these fears but thats the main reason she is wanting to go DRO over bankruptcy. I have mentioned she would still be listed on the insolvency register no matter what.

I think she just feels DRO isn't as serious as full bankruptcy.

Thanks again everyone

The only paper bankruptcy is listed in is the London Gazette, it no longer goes into a local paper.
The bankruptcy hearing with a judge is an informal meeting with the district judge in their chambers (office). They will be double checking that advice has been received the client is doing the best thing. In some courts the judge looks at the forms without the client present and a meeting is not required.

DRO is just as serious as bankruptcy, it's a legal form of insolvency. I see too many clients who do not understand why we as intermediaries have to be so precise to avoid issues for them, the client, once a DRO has been submitted.

If i were you I would be looking to get more advice on bankruptcy, it would be cheaper for you, and with the issue of the current debt level and having to hand back a HP car pre-DRO, a lot less stressful for both of you I imagine...