Please help. Dro and bankruptcy

Stevo824

Hi all.
Heres our story.
my wife has been lumbered with a debt of around £17000 in total from a previous partner. She has been paying these debt companies via payplan with a token payment of what we can afford over the last 6 years. Now on this year's review last month payplan said because she can't afford to pay enough per month to make it worth while so they have shut her account down and basically said to either go bankrupt or handle the repayments herself and gave her a diy pack. We have a 3 year old and my wife is diabetic so were living on my wage alone and some credits. We have been talking to CAB and national debtline about her going bankrupt or a Dro, were not financially tied.
We sold her house last year, because she had a very poor credit file with defaults from the debts and couldn't remortgage so were stuck on interest only and we couldn't afford me to take the mortgage on my wage and didn't want to join our finances as my credit file is clean, she had around £3500 left from the sale once all payments were taken out and we used that to get our new house on my name alone, the only house we could get was on a shared ownership 5% mortgage.
So with the fact she had £3500 left from her house last year in June we have been told by debtline that a dro would be thrown out because of the £3500 asset from the house so she has to wait until that is over 2 years before she can do a dro. She was looking into going bankrupt but again we can't get a straight answer from anyone on weather to or not. She has no assets, only a car which I bought myself that's worth more than 1000.

Is there anyone who's been in a similar situation who could help? Does she really need to declare that she's had that 3500 asset from her old house and she can do a dro?

We just want closure on these debts now.

Thankyou for any help in advance.

sourcrates

Hi,

Yes restrictions on a DRO are similar to Bankrupcy, you are allowed assets of up to £1000 and you can't of disposed of any assets within the last two years.

To be honest, Bankrupcy sounds like the better option for her, as your assets are assessed by the official receiver to see if they can be sold or not, some good information here :

https://www.gov.uk/bankruptcy/overview

National_Debtline

Hi Stevo824,


Based on the details you have mentioned there could be a couple of issues with doing either a DRO or bankruptcy at all going forward. The equity that she received must be declared as it was an asset, and because it was more than £1000 in the last 2 years it would mean that getting a DRO off the ground at the moment would be too difficult. However, it may also cause problems in the future with both options because she has reinvested this money into the home you now live in.

Although it is a shared ownership property (with a very small mortgage percentage), and it is only in your name, her 'investment' could mean that she has a 'Beneficial Interest' in the property. This is something that is only normally calculable in insolvency options, such as DRO's and bankruptcy. Beneficial interest is an amount of money that she is deemed to have in the property and is calculated based on things such as, how much she paid in initially and the equity, how much she pays monthly to the household, family circumstances etc. (I am afraid there is no exact formula).


If her beneficial interest exceeds £1000 even after 2 years of selling her home then a DRO is still unlikely to be an option. And bankruptcy could place the property at potential risk of being seized depending on her level of interest. This is obviously a complicated situation and I think you will need more detailed and personalised advice to find the best route forward, good luck,


Laura
@natdebtline