DRO help

Hickory

Hello,

I'm in a bit of a bind and need some help. I'm a stay at home mum with debts of about £14k spread over three credit cards and an overdraft. Most of the debt was acquired when I was still working. My son is 17 months old and I'm at home with him due to high childcare costs.

My partner of 11 years agreed to carry on paying the minimum payments for me whilst I stayed home with our son, but has recently told me that he's struggling to do so and doesn't think he can carry on much longer. I think I'm eligible for a debt relief order as I have no assets (no car etc), no income of my own except child benefit, and I'm not a homeowner. My partner and I aren't married and have no joint accounts etc so I don't think a DRO would have any impact on him? We are also not eligible for any benefits, except child benefit.

My big concern though is about two months ago I did a balance transfer from one of my credit cards to another as the interest free rate had expired on the one and I had an interest free offer on the other. Would this be classed as a preferential payment? The card I transferred the balance too wasn't new and it didn't completely clear the balance on the old one either. This was before I knew that the payments couldn't be kept up.

Also there has been recent spending on one of the cards which I think is bad? A new winter coat for my son and some shoes etc for him. Does this mean I need to hold off applying for a DRO? If so for how long?

And lastly I realised that I never informed the credit card companies about the change in my status from employed to stay at home mum, which began at the end of March this year. Is this really bad?

I hope someone can help as this is constantly on my mind and I'm not sure what to do! Thanks for reading!

sourcrates

Hi,

Nothing you describe should preclude you from applying for a DRO.

One important point is your income, do you meet the “less than £50 disposable income” clause ?

Hickory

Thanks for replying so quickly sourcrates.

That's very reassuring to know. Would I need to hold off applying though for a few months because of the recent spending? As recent as two weeks ago.

With regards to income, the only money coming into my account is the £89 odd child benefit money every month. My partner then transfers money as needed for mine and my son's day to day costs, groceries etc. Does this count as an income? Would his income be classed as mine and would he be assessed? He's a fairly high earner but struggling with his own debts and paying the rent and all the bills on the one income. We thought we could make it work but the reality is quite different! We're not married. Thanks for your help

sourcrates

Hickory wrote: »

Thanks for replying so quickly sourcrates.

That's very reassuring to know. Would I need to hold off applying though for a few months because of the recent spending? As recent as two weeks ago.

With regards to income, the only money coming into my account is the £89 odd child benefit money every month. My partner then transfers money as needed for mine and my son's day to day costs, groceries etc. Does this count as an income? Would his income be classed as mine and would he be assessed? He's a fairly high earner but struggling with his own debts and paying the rent and all the bills on the one income. We thought we could make it work but the reality is quite different! We're not married. Thanks for your help

DRO’s are unique to the individual, so only your income should be assessed, but you may have to provide a household budget that shows you have less than £50 left before debt repayments.

You would need to get advice on this first from a DRO intermediary as to how you go about working this out.

Fatbelly is our resident CAB intermediary, hopefully he will spot your post and provide some clarity for you.

fatbelly

sourcrates wrote: »

Fatbelly is our resident CAB intermediary, hopefully he will spot your post and provide some clarity for you.

Good prediction!

Yes, it does not sound as if there will be any problem. Obviously stop paying the cards (and using them for purchase) ahead of the DRO, and get your banking sorted out with a bank you do not have debts with.

Any joint debts will go over to the other party and, if there are joint debts that report to the credit reference agencies, that will affect the other person. Hopefully that overdraft is just in your name.

As these are all non-priority debts and not even defaulted yet by the sound of things, if you need time to sort things out, that would not be a problem.

I did a DRO for a housewife with no income of her own this week and just put a load of zeroes in the income and expenditure parts of the form, with a notice abut why that was. It got accepted but there was a query about why they could not see her on Experian (not cca debts) - she still got the DRO. They only get turned down if there is a clear breach of the rules, like trying to get a second one within six years, or deliberately omitting a debt to get under 20k.

I don't see that you using the cards within their t&cs would be a preference or an issue. At least not in practice. But some intermediaries are encouraged to flag up all the theoretical downsides. It's a good job the medical profession doesn't work like this. In your case if you went with stepchange they would advise you to wait a couple of months before submitting the application - that's a normal timescale anyway.

Hickory

Thanks for taking the time to reply fatbelly, much appreciated.

Luckily we have no joint debts, only thing in both our names is council tax but thats up to date and not in debt.

No, I've not defaulted yet. Should I be thinking about canceling the direct debits soon in preparation for the DRO? That would be a big help financially. I was thinking of applying for the DRO in November via StepChange? Is that a realistic timescale?

I realise I need to get a new bank account too, is there a particular one that would be good? My debts are with NatWest (current account and overdraft), Virgin, MBNA and Barclaycard (all credit cards). I have a credit card with Halifax that I cleared the balance on ages ago but never closed, so will I need to close that too?

Thanks so much for your help

sourcrates

Lots of banks and credit card companies are affiliated so you must be careful here.


Try CO-OP cash minder, thats a stand alone bank.


And yes, ideally you should be stopping payment now.

National_Debtline

Hi Hickory


If your debts are not affordable there's no point making further payments, especially if you are going to apply for a DRO and have them written off. You could start by sending a hold action letter which would ask them to freeze interest and put everything on hold for one month. You can find a sample letter here https://www.nationaldebtline.org/EW/sampleletters/Pages/Hold-action-on-your-account-%28sole-name%29.aspx.


Bear in mind some organisations you apply for a DRO through will have a backlog so it may be worth getting in touch now so your application can be put in their queue.


Best wishes


Susie
@natdebtline

fatbelly

Hickory wrote: »

Thanks for taking the time to reply fatbelly, much appreciated.

Luckily we have no joint debts, only thing in both our names is council tax but thats up to date and not in debt.

No, I've not defaulted yet. Should I be thinking about canceling the direct debits soon in preparation for the DRO? That would be a big help financially. I was thinking of applying for the DRO in November via StepChange? Is that a realistic timescale?

I realise I need to get a new bank account too, is there a particular one that would be good? My debts are with NatWest (current account and overdraft), Virgin, MBNA and Barclaycard (all credit cards). I have a credit card with Halifax that I cleared the balance on ages ago but never closed, so will I need to close that too?

Thanks so much for your help

Completely agree with the other advice here.

Probably even if you started the ball rolling now you would not be looking at November. I referred someone in May rather than doing it myself (as a sort of test) and she's not got hers yet.

I don't see why you should close a card if there's a zero balance on it though I vaguely remember some debate on these boards a while back.

If you wanted to look at Martin's list of best current accounts

https://www.moneysavingexpert.com/banking/compare-best-bank-accounts/

it looks like Nat West is the one to avoid but the rest are ok.

fatbelly

fatbelly wrote: »

I don't see why you should close a card if there's a zero balance on it though I vaguely remember some debate on these boards a while back.

I think this was the thread I was remembering

https://forums.moneysavingexpert.com/discussion/5410486/credit-use-in-dro

Hickory

Thanks for all of your replies everyone!

Very interesting to hear that it can be a long process. I naively thought it would be pretty swift. So I should apply really soon? I was a bit nervous to do so because of the recent spending on one of the cards so thought best to apply in November, but it sounds like I could be waiting longer? I think I will apply through StepChange, I imagine they probably have a large backlog!

Thanks for the link to the other thread FatBelly. Seems no clear answer either way! I think I will keep the card and see what happens with it, whether they close it if they become aware of the DRO.