DRO and HP agreement

tallim

Hi,
I hope someone can help me.
I am considering applying for a DRO, as I am in a lot of debt due to a previous relationship. We could afford what we took out together but on my own I cant. It is all in my name so there is little way I can get any money from him. I have a car on a HP agreement that is worth more that £1000 but obviously I don't own it. I am up to date on payments for it and I need it for work so I cant afford to loose it. I don't want to include it in the DRO but does anyone know what will happen to it if I did get accepted for a DRO? 
Would the car be taken away? 
Would I have to include it in the DRO?
and is there anything else I need to consider before applying, I have done a lot of research into it and its mostly the car that I have the issue with because I get told different things. The CAB website contradicts itself and I spoke to someone as well and she didn't really give me a clear answer so I'm hoping someone here can.

sorry if this doesnt make sense and thank you 

mwarby

according to https://www.citizensadvice.org.uk/debt-and-money/debt-solutions/debt-relief-orders/debt-relief-orders-explained/how-income-debts-and-belongings-are-assessed-for-a-debt-relief-order/ your car won't be classed as an asset for DRO purposes

However there is a very high risk that the finance company will not be happy about the DRO and seek to end the agreement and repossess the car. This is up to the finance company to decide, so only they could answer for sure (and the knowledge of the frontline staff might vary)

So in short the HP doesn't stop you getting a DRO, but the finace company may not let you continue the HP with a DRO

sourcrates

Exact wording here - Vehicles on hire purchase

"If you've got a vehicle you're paying for on a hire purchase (HP) or conditional sale agreement, it won't be counted as an asset. This is because it doesn't belong to you until you've made all the payments on the agreement. However, you may not be allowed to keep making the payments while the DRO is in force.

Even if you're not behind on HP payments, your lender may be allowed to re-possess your vehicle anyway. This is because some HP agreements include a clause which automatically lets the lender end the agreement and re-possess your vehicle if you enter any kind of formal insolvency arrangement, including a DRO".

Basically, if a DRO is the way forward, you have to be canny, and do some pre-planning, stop making the car payments, repossession may take conciderabley longer due to the current covid-19 situation, use the money to buy a good reliable, car under 1k, you will then meet the criteria for assets.

fatbelly

tallim said:

Hi,
I hope someone can help me.
I am considering applying for a DRO, as I am in a lot of debt due to a previous relationship. We could afford what we took out together but on my own I cant. It is all in my name so there is little way I can get any money from him. I have a car on a HP agreement that is worth more that £1000 but obviously I don't own it. I am up to date on payments for it and I need it for work so I cant afford to loose it. I don't want to include it in the DRO but does anyone know what will happen to it if I did get accepted for a DRO? 
Would the car be taken away? 
Would I have to include it in the DRO?
and is there anything else I need to consider before applying, I have done a lot of research into it and its mostly the car that I have the issue with because I get told different things. The CAB website contradicts itself and I spoke to someone as well and she didn't really give me a clear answer so I'm hoping someone here can.

sorry if this doesnt make sense and thank you 

Yes the CAB website is pretty crap on these things.
The intermediary guidance says if you have a  car on HP, and it's up to date, and the car is worth over 1k, then you have 2 choices:
1. include the debt in the DRO. You have no further liability. Clearly the car goes back to its owner, the finance company
2. request that the debt not be included (your intermediary will have to note this on the application as the debt will show on your credit file). However, the monthly instalment will not be a valid expense.

In option 2, if you still meet the £50 surplus criterion, and a third party is willing to continue the payments, and the finance company is happy with that, then you can have a DRO and can still use the car. If the HP completed within the 12 month  moratorium then you could lose the DRO as the asset would become yours and would need to be valued. If this happened after the moratorium, there would be no problem.