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Thinking of a DRO but still spending on my cards

in IVA & DRO
2 replies 154 views
MaMoThBuMaMoThBu Forumite
1 Post
Newbie
Hi, 

I have just over 8k of debts which I am somehow managing to make the minimum payments on, however I am a full time carer and currently on UC with the carers element and with losing the temporary increase I will no longer be able to afford to meet my commitments. 

As I have no disposable income a DRO was not recommended to me rather a breathing space order, which will realistically only help for 60 days.

I have spoke to step change and expressed an interest in a DRO instead and they are sending me the paperwork in the post. 

My question is, I am still spending in my credit cards to make ends meet, as soon as I apply for the DRO and breathing space I won’t need to do this as I won’t be paying money to creditors, but will this adversely effect my chances of having the DRO accepted? If they see transactions that are within a week of the application date would that be grounds to refuse the DRO? 

Do they go through each transaction line by line on your statements and then question you about it? 

I just don’t want to apply for the DRO and have it refused. 

Any advice would be appreciated. 

Replies

  • Sonic101Sonic101 Forumite
    135 Posts
    Ninth Anniversary 100 Posts Name Dropper Combo Breaker
    Forumite
    Hi there

    I am not sure what you mean when you say "As I have no disposable income a DRO was not recommended to me rather a breathing space order"? You do not have to have a disposable income for a DRO, in fact, your budget, taking all your necessary bills/spending into account, would only allow for a maximum surplus ("disposable income") of £75?

    If you haven't already done so, I would contact StepChange - https://www.stepchange.org/ - and/or National Debtline https://www.nationaldebtline.org/ - these are both reputable debt charities (be wary of ones with similar names, as they are usually just selling IVAs).

    WRT spending on your cards, ideally you need to stop doing this ASAP - I think one of the conditions of Breathing Space is that you should not accumulate any more debt.  If you have been putting essentials such as food and petrol on your card then this isn't the end of the world as long as you don't continue, but any "luxuries" would be frowned upon.
  • Platespinner123Platespinner123 Forumite
    27 Posts
    10 Posts
    Forumite
    Sonic101 said:
    Hi there

    I am not sure what you mean when you say "As I have no disposable income a DRO was not recommended to me rather a breathing space order"? You do not have to have a disposable income for a DRO, in fact, your budget, taking all your necessary bills/spending into account, would only allow for a maximum surplus ("disposable income") of £75?

    If you haven't already done so, I would contact StepChange - https://www.stepchange.org/ - and/or National Debtline https://www.nationaldebtline.org/ - these are both reputable debt charities (be wary of ones with similar names, as they are usually just selling IVAs).

    WRT spending on your cards, ideally you need to stop doing this ASAP - I think one of the conditions of Breathing Space is that you should not accumulate any more debt.  If you have been putting essentials such as food and petrol on your card then this isn't the end of the world as long as you don't continue, but any "luxuries" would be frowned upon.
    Some agencies don't like advising someone to get a DRO if they have a deficit budget as they would be concerned the debt will just build back up afterwards. But equally your I&E should be produced to show the situation before you make any payments towards your debts.

    You are still able to get a DRO with a deficit budget, even a substantial one. The Insolvency Service won't mind if you have a deficit budget - the reason you need to give a DRO intermediary bank statements is so they can check your income/spending isn't wildly different from what you've told them, not to go through things line by line. They don't ask for credit card statements.

    Spending on your cards - yes, there is a condition of the Breathing Space that you don't take out more than £500 new credit. In my understanding, that means increasing your credit balance by £500, even if you didn't increase your credit limit on your card(s). You can spend less than £500 on credit in that time with no issue.

    In a DRO, you have to enter all of your debts, so your credit card balances would be included. The cards would be closed as soon as the DRO application is approved.
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