DRO and salary deductions

Bumblebee1814

Hello

I have just been granted a DRO last week and had a couple of questions. I have tried to ask the DRO Adviser but they did not seem to be any clearer and thought maybe someone here may have some experience.

I currently have a Credit Union loan secured to my savings and repayments were being made via a salary deduction. Some of the deduction goes towards the loan and a small portion towards savings. I realise that my savings will be offset against the loan, which I’m okay with, but wanted to know what happens with the salary deductions. Do these automatically stop? I contacted the Credit Union and they won’t agree to stopping them and have said they need to refer this up to someone senior.

I also have some rent arrears (council tenant), which I have tried to reduce for the past 6 months and the arrears have not increased. Even after the DRO ends will these arrears be written off by the Council? Again I haven’t really had a straight answer from the rent department and all they have said is that I need to continue to pay the arrears.

Thanks

sourcrates

Hi,

Don`t know about the salary deductions, your rent however can be included in your DRO, however, its catch 22, although the rent arrears will be written off, it won`t stop your landlord (the council) from taking action to evict you, so it would be wise to keep paying them if you at all can.

Bumblebee1814

Thanks for the reply. 

I’ve already agreed to continue paying £5 per week towards the rent arrears and the council have said that as long as I stick to this there is no reason for them to  start proceedings. 

I’m just not sure what happens once my DRO is finished. Are the rent arrears supposed to be written off after this time?

Also in terms of the salary deduction, the DRO adviser said that during the DRO the creditors are not supposed to collect payment. If this is the case would continuing with the salary deductions nor mean that they are collecting payment. 

fatbelly

I think you've pretty much got it. This is the official guidance on credit unions in a DRO:

Credit Union Debts
 
Loans made by Credit Unions are qualifying debts and should be listed in the DRO application.
 
Credit Union Shares
 
Any shares a debtor holds are an asset, and may make a debtor ineligible for a DRO if their value exceeds £1000.
 
If the debtor does not owe any money to a credit union, the shares must be recorded as an asset in the application.
 
Where the debtor owes money to a credit union, the outstanding balance of the loan should be considered as secured to the extent of the value of the shares/savings held. Any residual shortfall after the credit union has realised their security is considered to be a qualifying debt.
 
The secured element of the debt should be listed on the application and marked as such by ticking the relevant box. The remaining balance due should be listed as an unsecured debt.
 
Where shares are worth less than £1000 and the applicant meets the other DRO criteria the credit union can use their right of set off against any loans outstanding.

Bumblebee1814

So should I contact the CU and tell them to stop the salary deductions. They already taken a deduction this month after a DRO was granted. 

DRO adviser said that I should, but when I contacted the CU they said they couldn’t and I haven’t had a response back after they said they would refer this to someone more senior. 

fatbelly

Ask for that deduction to be refunded to you.

The OR should have contacted them instructing them not to take payment.

If the Official Receiver approves the applicant’s application and a DRO is granted, all qualifying creditors scheduled in the DRO application will be contacted and notified that a DRO has been made. These creditors will also be informed that as a result of the DRO, the debts scheduled as owing to them are irrecoverable. As such, the applicant must not make any further payments to those creditors. If the applicant receives any requests for payment from creditors that are scheduled within the DRO during the moratorium period, the applicant should indicate that they are subject to a DRO, and as such creditors have no remedy in respect of these debts. 

Actually, since the lockdown, the DRO Team have only been emailing creditors who they have an email address for, so it is possible the CU don't know about their responsibilities. 

Bumblebee1814

Hi All. 

So I completed the form for the salary deductions to be stopped which the credit union has processed. However they haven’t refunded July’s payment. In fact they used that and my savings to reduce the balance. I was expecting my savings to be used to reduce the balance so that wasn’t a surprise. 

I asked for a refund as advised above but they didn’t respond. My DRO adviser has asked me to contact them again and ask for a refund, which I have done. 

I just wanted to ask if I am entitled for this to be refunded or can the credit union say they will not refund it. 

The deduction isn’t a huge amount only £100. 

fatbelly

You could ask the DRO Team themselves for help.
The credit union  are in breach of the instructions that the insolvency service gave them, assuming that instruction got through

Bumblebee1814

So this is the response that I received back: Thank you for your e-mail. We normally refund all the funds we receive

after we were informed of the individual insolvency. Therefore I will be

happy to refund any fund we receive from the date you sent the e-mail

informing us of your DRO. As far I understand the debtor is responsible

to stop any further payments to their debts. Creditors cannot chase the

debt and the credit union did not chase this debt you fail to stop the

payment in time. It is not my intention to return the payment unless

your DRO adviser sends me the article in the law where it says that the

creditor has to refund any payments received after the DRO was granted.

fatbelly

So get the DRO team (part of the Insolvency Service, based in Plymouth) to tell them to refund it.