Credit use in DRO

alltaken

Is it possible to use a credit card during a DRO? If for example a person has a credit card that is active and has a nil balance before the DRO.

Could that card be used for purchases of groceries etc and paid in full each month, the same as the budget agreed with the intermediary?

Is there a restriction to credit use? Not credit application of more than £500 but it's actual use?

Thanks

fatbelly

Sudden flurry of DRO posts and interesting question!

The rules talk about not 'obtaining credit of more than £500...' - I wonder if the intention was to restrict using credit during the moratorium but, as you say, that's not how it's worded.

It's possible the provider would notice you on the register and withdraw the credit but just as possible that they may not.

Interesting.

alltaken

fatbelly wrote: »

Sudden flurry of DRO posts and interesting question!

The rules talk about not 'obtaining credit of more than £500...' - I wonder if the intention was to restrict use of credit during the moratorium but, as you say, that's not how it's worded.

It's possible the provider would notice you on the register and withdraw the credit but just as possible that they may not.

Interesting.

That's my thoughts, the lender may care to check or the customer may inform the creditor and retain their credit facility.

Any rules on using existing credit facilities whilst in a DRO? I guess it would be that should any new debt be incurred it's payable and can't come out of the agreed budget?

I wonder if the insolvency service has any issue with credit facilities carrying into a DRO? Potentially used.

fatbelly

I really don't know the answer. I'm sure if I was going to do a DRO I would want to keep my Tesco Clubcard Credit Card for buying things, and pay it off each month.

There are a few other intermediaries on these boards and they may have some case knowledge on this

alltaken

Any particular reason you would want to maintain a credit card? Credit score?

fatbelly

alltaken wrote: »

Any particular reason you would want to maintain a credit card? Credit score?

Clubcard points

National_Debtline

fatbelly wrote: »

Sudden flurry of DRO posts and interesting question!

The rules talk about not 'obtaining credit of more than £500...' - I wonder if the intention was to restrict using credit during the moratorium but, as you say, that's not how it's worded.

It's possible the provider would notice you on the register and withdraw the credit but just as possible that they may not.

Interesting.

Hi fatbelly/all


Interesting indeed! I've chatted with our own intermediaries about this and they agree that it might be possible in theory to use the card post-DRO approval. A couple of caveats:


- If the balance was brought down to £nil within the two years prior to the DRO, it may be flagged up as a "preference" by the intermediary and could result in the DRO being rejected. If, on the other hand, the card was taken out but simply never used, it may not be an issue.


- Just to repeat fatbelly's observation, the card issuer may carry out periodic checks on its customers' creditworthiness and may reserve the right to withdraw the card if such checks reveal the customer has entered an insolvency process.


We don't tend to witness much of the post-insolvency process with our clients, so it would be interesting to hear of anyone who has been in this particular scenario.


Dennis
@natdebtline

alltaken

My partner had that exact advice today, she has a credit card applied for 2 weeks before entering the DRO, with a nil balance, unused per se.

Further to the above posters answering my questions. The credit is allowed to be used rather against the point of the DRO, even a credit limit over £500 doesn't require the insolvent person to notify the creditor, they may check etc etc.

Truly bizarre.

My partner will be using the card to rebuild her rating whilst in the DRO, a small head start.

Would a bankrupt be allowed to carry across an unused card in the same way?