DRO and preference debt

iceblink

Hey guys,

So I'm in the waiting list for a DRO and in the meantime I'm struggling to keep up monthly payment minimums, mostly by selling possessions on ebay.

I really need to cancel my direct debits and just pay token payments until my DRO goes through but I'm wondering if I do this and pay say £5 each to my creditors (3 credit cards, 1 payday loan, 2 catalogues) would I then need to stop paying my landline or mobile phone telephone bill or give them £5 too?

I didn't add my landline or mobile phone to the DRO as I'm not behind with them. (landline is shared between our household but is in my name, and I pay £10 a month total for my mobile) so I just pay these in full each month.

TL;DR, If I pay my landline and mobile phone bills in full but only pay token payments to my other debts, am I showing preference?

fermi

From DRO notes

A preferential payment is a payment which puts one creditor (or creditors) in a
better position than other creditors. It does not include payments made under
any existing credit agreement or under an order of the Court.
An example of a preferential payment could be when a debtor pays a creditor
in full without paying his other creditors anything at all, thus placing one
creditor in a far better position than the others. Contractual payments made to
creditors are not considered preferences, if it can be shown that there is no
intent on the part of the debtor to prefer but each case will be judged on its
own merits.
Intermediaries should be aware that payments to family or friends who have
lent money are most likely to be considered preferential.

iceblink

I can't work it out though, on one hand from those notes I'm paying non-priority debt in full while not paying the others, on the other hand it's a contractual payment.

I glean two different things from it, I don't wanna make any wrong move here as if the DRO is rejected due to my own misunderstandings, I'm screwed.

HappyMJ

A landline phone rental is an expense. It's not a debt.

A mobile contract can be considered an expense too which prioritizes it above debt repayments.

iceblink

Thanks guys!

Not too bothered about my mobile phone, it's up to date mostly because it's cheap. I need to keep paying the landline as others in the household rely on it and the internet.

Just discovered one of my creditors (payday loan) isn't a direct debit but something called a "continuous payment authority" Anyone have any experience with these? Sounds like I need to call somebody to get a stop on this before my DRO comes into play.

fermi

Needs to be cancelled with BOTH the bank and the payday loan company.

In theory, one or the other is enough, but these things are notoriously difficult with some payday companies, so if you do it with both then there is maximum comeback if they continue to allow payments to be taken.

See: http://moneyaware.co.uk/2012/07/how-to-cancel-a-continuous-payment-authority-cpa-on-a-payday-loan/

and http://paullewismoney.blogspot.co.uk/2012/04/the-continuous-payments-racket.html

iceblink

fermi - good info, thanks.

I'll call the bank tomorrow and send off a letter to the loan company in question too. If a CPA company successfully takes money from my account after a DRO is granted, does that put my DRO in jeopardy as technically I've repaid them (against my will and wishes?)

May have to open a Cashminder and switch my benefit payments to it, to be on the safe side.

fatbelly

iceblink wrote: »

If a CPA company successfully takes money from my account after a DRO is granted, does that put my DRO in jeopardy as technically I've repaid them (against my will and wishes?)

No, it gives them a problem because they've ignored an instruction from the Insolvency Service. They'll be ordered to refund you.

But you should still cancel all payment methods to your creditors ahead of the DRO, and there is no point making £1 or £5 payments or contractual minimum payments either. Just pay your £90 fee and stop paying your creditors!

iceblink

fatbelly - thanks for the advice.

I'll get all the direct debits and CPA cancelled tomorrow morning, it will be a relief to. Would you say it's a good idea to also write some template letters to the companies involved telling them the situation (stopping payments as struggling with debt, taking advice from stepchange) or just sit and wait it out?

fatbelly

iceblink wrote: »

fatbelly - thanks for the advice.

I'll get all the direct debits and CPA cancelled tomorrow morning, it will be a relief to. Would you say it's a good idea to also write some template letters to the companies involved telling them the situation (stopping payments as struggling with debt, taking advice from stepchange) or just sit and wait it out?

Where bailiffs are involved I say definitely don't alert them to what you are doing.

With other debts it doesn't make any difference whether you alert them to what's coming or not.

If you send a template letter, they are required to give you 'breathing space'

https://www.nationaldebtline.org/EW/sampleletters/Pages/Hold-action-on-your-account-%28sole-name%29.aspx

Waste of postage in my opinion but it's up to you.