Bankruptcy or DRO confused

927

Debt is £27k, four creditors.
My SFS shows a surplus of £7.46 a month.
Creditors receiving £1 token payment a month (been in place a month)
Single parent with one child.
I don’t own a house, only asset is a car worth £930 on Parker’s valuation. Car is solely used to take 3 year old to nursery. Car costs are £210 a month (tax, mot, ins and fuel)

My parents have offered to pay for debt to below £20k to enable DRO rather than bankruptcy. Reasons for this are I want to keep my child at his nursery. There are ones I can walk to but child is settled. Once at school it will be much easier to find a job if I have a car.

CAB advisor says debt should drop to around £19500 before he’ll put in application. Does this sound ok?

I’m supposing it won’t update my Experian report in time so insolvency service would ask further questions. Does anyone know what these might be?

I have wondered if bankruptcy would’ve easier and quicker, parents buy a car and I be registered keeper rather than owner. BUT I guess if car not exempt then the associated costs will be used for an IPA for 36 months so in all the same amount would be paid.

Are there any reasons my DRO may be refused as it will be obvious the figure has dropped to enable it?

Thank you.

sourcrates

Hi,

A DRO is less invasive, the intermediary will not submit the application if there was a chance of it been refused, basically if its submited, it normally gets approved.


Your parents making payment for you to lower the debt should not be a major issue as long as each creditor is treated fairly.

Insolvency service do not scrutinise too closely.

National_Debtline

Hi 927,


I would suggest you take more advice before asking your parents to pay £7500 off your debt. I understand that your main concern is losing your car in bankruptcy, and whilst I cannot guarantee you would keep it, it would be unlikely for the Official Receiver to be interested in it based on the Parkers valuation. In a worse case scenario, where the OR does take the car, your parents may consider buying a car (for less than £7500) and allowing you to use it - not gifting it to you - so you have a car (as long as the OR will allow the running costs of the car).


If your parents were to pay the £7500 off your debts it would need to be done on a pro rata basis, so all the debts receive a fair amount and it is unlikely a DRO application can continue until they have a credit file confirming the debts are under £20,000. They may ask for proof of the payments/ statements, but normally they would want the updated credit file.


Laura
@natdebtline

fatbelly

OK, your plan would work because there's a principle that a third party can do what it likes with its money, so there would be no particular need to pay pro-rata. You're not showing preference.

And although I understand where he's coming from, there's no need to pay down to £19500. As long as you know the exact figures then £20k is the threshold and you just need to get below it.

However, it seems a mighty expensive way to keep a £930 car.

I'm wondering if there are any other things you could do to get the debts below 20k.

You say you have £27k of debt and four creditors. You're anonymous here. Can you tell us how much you owe to who?

927

Hi,

Virgin - 3617
Barclaycard - 9338
Halifax - 6671
Mbna - 7572

If I file for bankruptcy and the car is not classed as exempt that is a big risk in my eyes. From my perspective I do need a car. I understand my parents could buy a car and I could use it but how would I pay for the tax, insurance, mot and fuel. I thought if an OR decided I didn’t need a car then they would also not allow funds to run or maintain a vehicle. Am I wrong?

The CAB advisor I saw said he would put in the notes that the debt has dropped to below £20k and they would then investigate further. Is this not normal procedure either?

927

Also I was set on bankruptcy until the advisor suggested a DRO because I wanted to keep the car. I am concerned I would receive an IPA as the car would be taken and then the associated costs used for this.

My advisor said none of the figures on my SFS flagged up or seemed unacceptable to him. The big BUT is I know it’s very dependent on the OR and for all I know they could cut my spending and give me a big IPA anyway.

My income is benefits only, I get some child maintenance and plan on looking for part time work once my child goes to school next September.

fatbelly

927 wrote: »

Hi,

Virgin - 3617
Barclaycard - 9338
Halifax - 6671
Mbna - 7572

If I file for bankruptcy and the car is not classed as exempt that is a big risk in my eyes. From my perspective I do need a car. I understand my parents could buy a car and I could use it but how would I pay for the tax, insurance, mot and fuel. I thought if an OR decided I didn’t need a car then they would also not allow funds to run or maintain a vehicle. Am I wrong?

The CAB advisor I saw said he would put in the notes that the debt has dropped to below £20k and they would then investigate further. Is this not normal procedure either?

With £27198 across 4 mainstream credit cards I don't have much in the way of options for squeezing you into a DRO.

And yes, if the DRO Unit sees debts over 20k on your credit report they will want a note (and possibly evidence) of the new figures. They could ask questions if they see large recent payments but I've never seen this. Again this could be explained in a note on the application.

fatbelly

927 wrote: »

Also I was set on bankruptcy until the advisor suggested a DRO because I wanted to keep the car. I am concerned I would receive an IPA as the car would be taken and then the associated costs used for this.

My advisor said none of the figures on my SFS flagged up or seemed unacceptable to him. The big BUT is I know it’s very dependent on the OR and for all I know they could cut my spending and give me a big IPA anyway.

My income is benefits only, I get some child maintenance and plan on looking for part time work once my child goes to school next September.

You would NOT receive an IPA if your income is benefits only.

31.7.40 IPA or IPO should not be sought where bankrupt’s sole income comprises state benefits

(Amended March 2014)

An IPA or IPO should not be sought where the bankrupt's only source of income is state benefits. In the context of this chapter "state benefits” refers to all forms of income supplement and support provided by central or local government including, but not limited to: income support, job seekers allowance, disability living allowances, incapacity benefit, industrial injuries disablement, council tax benefit, housing benefit, state retirement benefit (state pension), child benefit and all forms of tax credit (child, working and pension). Payments of a War Disability Pension (Naval, Military and Air Forces Etc. (Disablement and Death) Service Pensions Order 2006), the bankrupt having been injured on active service, should be regarded as a state benefit. There is no requirement to undertake an assessment of real disposable income where the only source of the bankrupt's income is state benefits. In all other cases an assessment should be made even if part of the household income is derived from state benefits.

As your situation seems stable for the next year, I would recommend bankruptcy, with your parents helping with the £680 fee and buying the car from the OR if necessary . It's going to cost them around £1600 max rather than £7500

927

Thanks fatbelly,
Sorry to check but couldn’t the OR ask for an IPA if they decided car wasn’t exempt and the £210 used for fuel, tax and mot then wasn’t required?

I go over and over this and worry if they take the car will they take the associated costs? If they take those then I will get an IPA surely?

Do they class the £400 I get child maintenance as income on top of my benefits?

silvercar

Do they class the £400 I get child maintenance as income on top of my benefits?

Doesn't matter. they can't take maintenance and they can't take benefits.

If you had earnings + maintenance + benefits, then they could take some of your earnings, but with no earnings there is nothing to take.

927

Thank you silvercar. That’s useful to know. I had thought maintenance (as income) could be used now.

So really all I need to decide is whether it’s worth risking the car costs being taken for IPA.