Expenditures DRO

Anxietyoverload

Hi guys,

I did an online debt remedy with StepChange and it came up that they felt the best way forward would be a DRO.

They’ve emailed me an application pack and I’ve looked at it. I’m a bit confused as it says my application could get refused by the official receiver as I put down £60 a month for smoking and that’s considered a luxury. I completely understand that but I am wondering if it is therefore the way forward if it’s going to be rejected on that ground?

MovingForwards

If you post a statement of affairs we can have a look and give opinions.

£60 is a lot for smoking, and whilst there would be an allowable amount, it wouldn't be that much.

Anxietyoverload

I actually think StepChange may have got my eligibility for a DRO wrong anyway...

As on my financial budget sheet they requested I called before the debt remedy came up to query some income and they’ve added £166 a month in other expenses for universal credit advances and overpayments. From what I’ve googled if I got a DRO this would count as debt for that so I guess it means I have £166 spare?

fatbelly

If you post the actual figures we can make some comments on them.

There are no actual guidance figures for smoking but there is a trigger figure for food & housekeeping and it's pretty generous. Smoking costs would be in that section

It would be unusual for you not to meet the surplus income criterion if you are on Universal Credit.

Anxietyoverload

Monthly Budget Summary Amount(£)
Total monthly income 1,734
Monthly expenses (incl. HP & secured loans) 1,480
Available for debt repayments 254
UNsecured debt repayments 730
Amount short for making debt repayments -476
Personal Balance Sheet Summary Amount(£)
Total Assets (things you own) 0
Total Secured & HP Debt -0
Total Unsecured Debt -16,171
Net Assets -16,171
Household Information

Number of adults in household 1
Number of children in household 1
Number of cars owned
Income, Expense, Debt & Asset Details

Income Amount(£)
Monthly income after tax 863
Partners monthly income 0
Benefits 871
Other income 0
Total monthly income 1734
Expenses Amount(£)
Mortgage 0
Secured/HP loan payments 0
Rent 529
Management charge (leasehold property) 0
Council tax 135
Electricity 40
Gas 40
Oil 0
Water Rates 40
Telephone (land line) 0
Mobile phone 56
TV Licence 20
Satellite/Cable TV 30
Internet services 20
Groceries etc. 260
Clothing 20
Petrol/diesel 0
Road tax 0
Car Insurance 0
Car maintenance (including MOT) 0
Car Parking 0
Other travel 99
Childcare/nursery 90
Other child related expenses 10
Medical (prescriptions, dentists, opticians etc.) 14
Pet Insurance/Vet bills 0
Buildings Insurance 0
Contents Insurance 0
Life Assurance 0
Other Insurance 0
Presents (birthday, christmas etc.) 15
Haircuts 17
Entertainment 40
Holiday 0
Emergency Fund 5
Total monthly expenses 1480

Very different to what the StepChange calculator come up with... but I guess smoking isn’t on there either
and it’s a very different format. I’m really confused with it all. I’m guessing from that it seems IVA would be a better solution?

fatbelly

Hi. I'm surprised stepchange sent you a dro pack on that, because on the face of it you do not qualify.

You meet the asset criteria and the debt criteria but not the surplus income one, as 254 > 50.

With 254 surplus and 16171 debt, you would be looking at a debt management plan over 5 years. An IVA would have no advantage, full bankruptcy would limit payments to 36 months.

A dro would be a neat solution if you qualified, but we'd need more detail.

Are any of your benefits disability related, as they may not count as income.

Are you thinking of getting a car?

Some expenditure could go up a bit for the two of you - say 325 for groceries, 43 for clothes, something for contents insurance, extra tenner on elec/water/gas.

But you still look a bit adrift on that so I think I'd be talking to stepchange about a dmp.

Anxietyoverload

Thanks for your reply.

The StepChange debt remedy is a different format to this. Also as said above they asked me to call to clarify income and I said I got universal credit and they thought it seemed lower then what I should do I explained about these advances and child tax credit overpayments so they add them as ‘other’ expenses. So that was £166 a month added on as an expenditure. Then the £60 for smoking took me into DRO territory.

But yeah I realised last night it was adding those overpayments etc which would be counted as debt for DRO. Would they also be counted as debt for a DMP?

This is all really new to me. Spent so long burying my head in the sand and now it’s coming back to bite me as such. When it came up the DRO I was full of anxiety but I’d come around to accepting that and now it looks like I don’t qualify...

Anxietyoverload

Oh and the benefits are just universal credit and child benefit

fatbelly

The debts that are being paid off through Universal Credit Direct Deductions will quite likely clear in a short time.

So the dmp would start after this.

You could start a dmp with the surplus that you currently have and increase iit later. But it might be better to save an emergency fund, perhaps make token offers to the non-priority debts and start the proper dmp later.

Anxietyoverload

Thank you so much @fatbelly

I have spoken to StepChange today and gone through it all in detail. They have said my options are
1.

making the token payments like you suggested and asking my accounts and interest to be frozen and that this can happen for up to 12 months potentially? Then I could start a DMP once the UC payments go back up. Then to pay it off would take 5-6 years if they accept freezing the interest.

2. Bankruptcy - then I potentially only have to pay towards the debts for 3 years then it’d be written off.

So in a way it sounds like bankruptcy is a better option? I rent from housing association and I don’t think this is likely to change based on finances. I’m not in a job or likely to be in a job where bankruptcy would affect that and I guess either way my credit rating is screwed whichever option?

Is it worth going to citizens advice for a second opinion or will it likely be the same options?

fatbelly

Yes those are the two options I considered in post #6. Bankruptcy has an upfront fee but payments are limited to 36 months.

I don't think it would do any harm to ask someone else, particularly if you can do it face-to-face.

You didn't answer whether you were thinking of getting a car. If you did, the running costs average £100-200 per month. Provided the car itself was worth less than £1000 you might find it brings you back into DRO territory.