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Using bank charges refund to pay bankruptcy

I have been long term reader if this forum. I have debts from years ago. I have not had any new credit in 2 years. After years of ignoring I finally sat down and looked at them. Stepchange have recommended a DMP. However, I’m in social housing. Have no assists. 

My debts are £28300. While I appreciate their advice I’m going to go bankrupt. I have an overdraft with HSBC of 4000. I complained two years ago. They have finally agreed to refund £2736 after going to FOS. In anticipation of bankruptcy Iv opened a co op cashminder account. 

My question is, once they pay I plan to transfer the money to co op account and pay my bankruptcy. I moved into our home in August and we need items of furniture, new washing machine etc. I stopped working last year to care for my disabled child and only income is benefits.

How would this be viewed by OR?

Many thanks 

Comments

  • fatbelly
    fatbelly Posts: 22,144 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Cashback Cashier
    So you're going to use the lump sum of £2736 to pay for items of furniture, new washing machine etc., then £680 for the bankruptcy.

    Shouldn't be a problem but keep the receipts.

    Did stepchange recommend a dmp not bankruptcy because they knew this lump sum was coming? If so, well done. If not, I wonder what they were thinking. Actually it sounds like you may be suited to a DRO but you are more in control of a bankruptcy application and if your only income is benefits then there should be no IPA. 

    The other advantage bankruptcy has over a DRO is that all your debts are included whether you list them or not.


  • Thank for response. I had no idea the complaint would be upheld. I used Resolver to complain two years ago and forgot about it till emailed by FOS in October. It had been with them for over a year. 

    I’m confused with stepchange as I asked for DRO as frankly was cheaper. But they recommended DMP as my income appeared high. But this due to due to disability payments for my child. 

    As a DRO has to be via them I was at their mercy.

    Now I know I have this money out of the blue I’m going to do the bankruptcy myself and finally be done with it. It seems fruitless to attempt to pay debts as I will still have over £25000 in debt. 

    Hopefully the OR will see the sense in that!
  • The DRO doesn't have to be with StepChange - why not talk to Citizens Advice about a DRO? DLA is income but you can also include the associated costs.
    You can now keep £2000 in assets in a DRO. 
  • ManyWays said:
    The DRO doesn't have to be with StepChange - why not talk to Citizens Advice about a DRO? DLA is income but you can also include the associated costs.
    You can now keep £2000 in assets in a DRO. 
    I will try CAB, that would leave more money. If they say DMP I will just go ahead with bankruptcy. I owe HSBC credit card in addition. I’m guessing I will receive a flurry of calls from them and just want it resolved now 
  • fatbelly
    fatbelly Posts: 22,144 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Cashback Cashier
    Paula94 said:
    Thank for response. I had no idea the complaint would be upheld. I used Resolver to complain two years ago and forgot about it till emailed by FOS in October. It had been with them for over a year. 

    I’m confused with stepchange as I asked for DRO as frankly was cheaper. But they recommended DMP as my income appeared high. But this due to due to disability payments for my child. 

    As a DRO has to be via them I was at their mercy.

    Now I know I have this money out of the blue I’m going to do the bankruptcy myself and finally be done with it. It seems fruitless to attempt to pay debts as I will still have over £25000 in debt. 

    Hopefully the OR will see the sense in that!
    Makes sense, Paula

    A lot of CAB debt advisers are on MAPS contracts and they are now being ordered to wind down ahead of being laid off in March. Check you're not going to be messed around if you go that route.
  • sourcrates
    sourcrates Posts: 30,615 Ambassador
    Part of the Furniture 10,000 Posts I've been Money Tipped! Name Dropper
    edited 20 November 2021 pm30 7:41PM
    Paula94 said:
    I

    My question is, once they pay I plan to transfer the money to co op account and pay my bankruptcy. I moved into our home in August and we need items of furniture, new washing machine etc. I stopped working last year to care for my disabled child and only income is benefits.

    How would this be viewed by OR?

    Many thanks 
    Lots of people do this, its a recognised way to pay your bankruptcy fee`s, and to make your position more tenable.

    The OR will not question expenditure on household goods (within reason) especially with a disabled child in the home.

    It sounds like a good strategy, and as fatbelly comments, gives you more control over things, bankruptcy today is fairly straightforward, if its just a simple case of consumer credit act debts, and nothing more complex, then it really is pretty straightforward, as your income is all benefits, there will not be an IPA made either.

    Just keep in mind, debt collection is a very long, drawn out process, you can ignore them all for a year/18 months, before even a chance of court action, most debts don`t get that far, they are usually passed from debt collector to debt collector, so you don`t have to rush things here.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • Thank you for advice. I’m going to go with bankruptcy. To not have the fear of debts, robbing Peter to pay Paul will be worth every penny of the fee. 

    Just to add Iv been reading this forum for months and the advice given is excellent.

    I think I was worried as it just seems amazing no more debt, the fact this year’s council tax inclusion, been able to do online. I know my credit file will be rubbish but it’s showing defaults anyway. 

    And I don’t ever want credit again, it’s one slippery slope and no purchase is worth that cold feeling when doing your finances!!


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