Should I apply for a DRO?

StevenB12

Hey everyone, 

I've spoke to an advisor at CAB and they are going to get back to me regarding I should apply for a DRO or not.

Long story short I owe about 24000 on 2 loans and a credit card, one loan has about 2 years on it and one had about 5 years, sadly these were took out when finances weren't an issue, but due to Covid and a change of jobs it had become a much larger struggle to make ends meet.

Currently at the moment my fixed bills (loans,rent,utilities etc stand at £1810 a month) so that's without shopping,car fuel etc. Probably looking at roughly 2500 a month to round it up my fixed income is 1800 a month (some overtime which can go up to about 2200 a month, my partner also pays 450 into the bills a month).

Roughly I'm left with anywhere from £25-60 for the month, sometimes relying on my overdraft, to which my next pay pays my overdraft and bills only. Household is 2 adults and one child. So we are living bare basic, no assets etc.

Would it be likely I could get a DRO or would they look at something else?

Thanks  

sourcrates

DRO qualifying criteria is a set process, so if you can tick the boxes, then you qualify.

What are the qualifying criteria for a debt relief order?

• You must have no more than £75 left over each month after paying your household bills (£50 in Northern Ireland)
• You can’t own a vehicle that’s worth more than £2,000 (£1,000 in Northern Ireland) – though vehicles adapted to help you with a physical disability are exempt from this cap
• You must not be subject to any current bankruptcy or IVA proceedings or have had a DRO approved in the last six years
• You can’t be a homeowner
• Your current qualifying debt balances must not total more than £30,000 (£20,000 in Northern Ireland)
• You can’t own assets worth more than £2,000 (£1,000 in Northern Ireland)
• You must have lived in or run a business in England, Wales or Northern Ireland for the last three years
• 
  

An official receiver will be assigned to deal with your DRO application. The official receiver will investigate all of your circumstances and can choose to decline a DRO if you've:

• Given away a property, any money or assets or sold them for less than they're worth in the last two years
• Favoured any of your creditors by paying one more than others in the last two years

It's very important that you disclose as much information as possible so that the official receiver can make an informed decision. 

If you apply for a debt relief order (DRO) it’s an offence to mislead the official receiver about your situation.

StevenB12

Thanks for your reply.

How much is checked exactly during a DRO? As I currently work on price work my monthly income changes, although most months I'm on a more or less guaranteed rate of 1810, do they check if your income changes through out the 12 months or would I have to explain that one month I may have extra then the next month have less?

I've read about people taking out DROs and then being a few hundred pound per month better off and not informing anyone, and not getting any consequences either? Not that I will be in that position, but it seems to be a very hit or miss rule on if you don't tell them you have more, you can sometimes get away with it?

theoretica

sourcrates said:

What are the qualifying criteria for a debt relief order?

• You must have no more than £75 left over each month after paying your household bills (£50 in Northern Ireland)

I believe that is £75 a month *without* paying anything to your debts - which as I think you say you have £25-60 after paying your debts sounds like it may be an issue.

sourcrates

StevenB12 said:

Thanks for your reply.

How much is checked exactly during a DRO? As I currently work on price work my monthly income changes, although most months I'm on a more or less guaranteed rate of 1810, do they check if your income changes through out the 12 months or would I have to explain that one month I may have extra then the next month have less?

I've read about people taking out DROs and then being a few hundred pound per month better off and not informing anyone, and not getting any consequences either? Not that I will be in that position, but it seems to be a very hit or miss rule on if you don't tell them you have more, you can sometimes get away with it?

No, its a very simple rule, if your income changes, up or down, during the moratorium period, you are duty bound to report it to the IS.

There are no further checks once approved, and the onus is on you to inform them.

There can be strict penalties for fraud, if found out, inc prison.

If your income is erratic, then an average will be used to calculate it, so slight monthly differences won`t matter.

Theoretica, above, makes a valid point, your disposable income limit is £75, that`s before any debt repayments are made, so be very careful how you budget, this is the one thing that is non negotiable, £74,95 your in, £75,95 your not.

StevenB12

Thanks to both of you. 

It does rary as we often work on price work as well depending on the project. So as an example this month I'm 1600 in my overdraft. This had paid the bills and I still have bills to come out. My pay will cover my overdraft but for the next month I will be using it until pay day again.

sourcrates

StevenB12 said:

Thanks to both of you. 

It does rary as we often work on price work as well depending on the project. So as an example this month I'm 1600 in my overdraft. This had paid the bills and I still have bills to come out. My pay will cover my overdraft but for the next month I will be using it until pay day again.

You should prepare beforehand, open a new basic bank account, anyone can do this, as there is no borrowing allowed, and no credit checks, your old OD and bank account, then just become another unsecured debt for your DRO.

This is a basic first step for any debt solution anyway, it also learns you to live within your means, without needing to resort to OD borrowing.

Good luck with whatever you decide to do.

1977dave

When applying for a DRO if you have a certain amount of disposable income which will increase because you're not paying your debts and possible takes disposable income over the £75, then look at your income and expenditure as Sourcrates advises above

Don't forget to include money for clothes, haircuts, prescriptions, school meals, childcare. Go through everything carefully as there may be expenses that don't come up often (Christmas, School hols) that you may have forgotten

Good luck with it all

StevenB12

Hey everyone.

So after a lengthy 2 hour call to CAD, they have advised that a DRO is the best solution so I am calling them back next week to get this rolling, opening new bank account etc a basic one and so on.

My question is though....basically I am living off my over draft this month, I have about 800 pound left of it until I get paid again at the end of the month. But I have bills to come out before then. My question is should I transfer funds from my over draft to my new bank account in order to pay the bills until I get paid? Or should I use the same bank account until the DRO has been approved??

Thank you 

sourcrates

Depends what the bills are for, don`t pay any more credit bills, if they are essential bills, use the OD money and put the debt into your DRO, you cannot afford scruples at this point.

StevenB12

sourcrates said:

Depends what the bills are for, don`t pay any more credit bills, if they are essential bills, use the OD money and put the debt into your DRO, you cannot afford scruples at this point.

Money will be for groceries etc and a few more direct debits, car insurance etc so unfortunately haven't got much of a choice sadly.