Can I cancel my DRO?

Rabbitqueen

I have recently been awarded some benefits and would like to set up a DMP. As I would like to pay off my debts, I was told a dmp doesn't blacken your credit rating as much as a DRO does. And in years time my credit rating would be improved with a dmp?

I want to pay 20 a month. Step change said they would gladly set up a DMP with me, but can I cancel my DRO because I really want to. I am 20 and don't want to lumbered with it for the next few years on my credit rating. Due to getting a flat or whatever comes my way. I am going to uni soon and want to sort this out before then, thank you.

Any advice on the impact of DROs and DMPs would be great.
X

jamesd

DRO is a form of insolvency and for the rest of your life when asked whether you have ever been made insolvent the correct answer is yes. This is a question that you are most likely to be asked on a mortgage application. Normally the effect of that would decline over time, particularly for one of lowish value taken when you were young. Do be sure to preserve your records so that in the future you can prove what happened and that it was paid off.

However it is done, the most important thing affecting your credit record now is how much of the original default amount is repaid and how fast that happens. Full repayment looks better than even agreed partial repayment. Faster payoff means it leaves your credit record sooner.

You can cancel a DRO and switch to a DMP but I suggest being cautious about doing that [STRIKE]compared to offering to temporarily increase the DRO payments for as long as you can continue to do that[/STRIKE]. This way you are still protected from excessive lender demands by the DRO that they have no choice but to follow.

longtermplanner

Paying only £20 a month your debts will be marked as defaulted on your credit file if they aren't already.

In this situation there will be virtually no difference credit rating wise between a DMP and a DRO. The defaults will stay on your file for 6 years as will the DRO. In 6 years everything will drop off whichever option you go for.

Changing to a DMP would only improve your rating if there was a realistic chance of your clearing the debts in a couple of years in a DMP. In that case in say 4 years time it will probably be bwtter to have defaulted debts 4 years in the past than a DRO 4 years in the past. But from what you have said this just isnt likely.

There may be reasons to change from a DRO to a DMO but your credit rating isnt one of them.

longtermplanner

jamesd wrote: »

Faster payoff means it leaves your credit record sooner.

Not true, your credit history including defaults will remeian for 6 years whever you do.

I don't know whether it is permitted to cancel a DRO and switch to a DMP but I suggest being cautious about doing that compared to offering to temporarily increase the DRO payments for as long as you can continue to do that.

Do you know anything about DROs ? In a DRO your don't make ANY payments and it's not possible to make any ever. Are you getting this confused with bankruptcy? They are very different.

jamesd

Rabbitqueen, have a read of this from the Insolvency Service. The bottom of page 7 has the bit about ending the DRO and starting a DMP. Do use care though, remember you can't have a new DRO within six years of the last one. Probably best to ask Stepchange about their recommendation for the safest for you way to do this. That's also a good time to ask them how long the debts will be shown on your credit record if you don't terminate the DRO and if you do then repay over time under a DMP.

It's also worth knowing that the usual twelve month discharge for a DRO applies if your circumstances haven't changed. Maybe not if there has been a big improvement. Since you're dealing with Stepchange you should probably ask them about this, though since you're planning to pay anyway it won't really matter to you.

longtermplanner, lenders who ask about insolvency are also likely to ask what happened and whether the money was repaid and that does make a difference to how the credit record is viewed. That makes a difference. The insolvency doesn't just vanish after six years even though if no payments are made it won't be on the main credit record of the credit reference agencies after that time, so it won't show up on ordinary searches.

It's not true that it's prohibited to make payments to the creditors covered by a DRO ever, at a minimum the termination of DRO option exists. You might also consider why the Insolvency Service describes it in this way "you must ... not make payments direct to creditors included in the DRO; (NB. You may wish to seek your own independent advice regarding certain liabilities, such as rent arrears)".

So far as being removed after six years whatever you do, consider what happens if you cancel the DRO, as Rabbitqueen is planning, then take three years to pay. How long from the date of the now--terminated DRO will the debts remain on the credit report? Maybe I'm wrong about that but I expect it to be six years from the final payment, not six years from the granting of the DRO.

National_Debtline

Hello there,

If you were to end a DRO for whatever reason, it will still sit on your credit file. As such, if your intention is to end a DRO with a view that it might increase your credit worthiness you may wish to reconsider your options.

If your financial circumstances have recently changed, you may find that the DRO could end up being revoked if your disposable income rises to more than £50 per month.

Do consider running through your options with your intermediary.

Best wishes,

David @ National Debtline.