DRO and lump sum queues

Sonic101
Sonic101 Posts: 151
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edited 15 October 2022 at 3:07PM in IVA & DRO
Hi there

I was in a DMP with StepChange but my income has dropped so I am now only making token payments (via Stepchange).

I've found StepChange to be very supportive and helpful but I'm posting here because I seem to be receiving some conflicting advice and it would be really good to hear from anyone who has had experience of this (either in a DRO or as an intermediary). 

I have about 23k worth of debt, usual monthly salary leaves me with no surplus (or even a small deficit, depending on the finite details of the budget), but I sometimes get an annual bonus (not guaranteed). I am expecting to get the bonus this at the year end of March (about £800).

The quandary is that if the bonus is treated as a lump sump (asset), I would meet the criteria for a DRO as I would have way less than £2000 worth of assets and a car worth less than £500, but if it is pro-rata-ed and counted as wages it would probably take me over the £75-per-month limit. 

I have spoken to StepChange a couple of times. One advisor told me that as the bonus is only an annual lump sum and not guaranteed, it would be treated as an asset, but another advisor told me that it would be treated as income and therefore would be a problem. The IS website says this:  https://www.gov.uk/guidance/debt-relief-orders-guidance-for-debt-advisers#bonus-from-employer

The other option is bankruptcy, but I would prefer not to have to take this route as the fee is £680 I want to avoid losing my car (it's not worth anything but I understand it would be scrapped as it wouldn't be deemed "essential").

Sorry if this has been asked before, and thanks for any input x

Comments

  • fatbelly
    fatbelly Posts: 20,380
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    You've linked to the guidance we all have to follow

    'Where a bonus is received which has not already been included, the lump sum protocol applies.'

    So your intermediary doesn't include it and as long as your assets do not exceed 2k when it arrives, there's no problem
  • Sonic101
    Sonic101 Posts: 151
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    Thank you (belatedly!) for your reply.
    Submitted application last week and now waiting with baited breath, but even if it’s bad news and the DRO is rejected at least I’ll know. Uncertainty is a large part of the stress with debt. 
  • fatbelly
    fatbelly Posts: 20,380
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    The guidance hasn't changed since Feb, well not in regards to that.

    You'll be fine.
  • Sonic101
    Sonic101 Posts: 151
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    fatbelly said:
    The guidance hasn't changed since Feb, well not in regards to that.

    You'll be fine.
    Thanks - I hope so. 
    This forum has been invaluable, both reading other people’s experiences and time taken by members such as yourself to answer questions, etc, is really appreciate. 
  • Sonic101
    Sonic101 Posts: 151
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    Sorry, back again with another query about lump sum. Please bear with me as this is quite long. 

    According to the IS website:

    “If a debtor receives a lump sum of £2,000 or more during the DRO period, they must report it to the official receiver and we will consider the case based on its own merits and make a decision whether revocation is appropriate or not.”

    This I understand - but what I’m unclear about (and doesn’t seem to be mentioned anyway) is whether they take into account any cash you had in your bank account when the DRO was approved? 

    I am possibly going to get a lump sum payment from my employer which will be just under £2k. When I applied for the DRO I had a few hundred quid in my bank account which was listed on the form. If I were to get a lump sum before the end of the moratorium, would they count the few hundred quid I had in the bank the start with the lump sum - which would take  my ‘assets’ over 2k - and thus revoke the DRO, or would there be some leeway?  

    (I know that the cost of living is still going up, but unlike many other poor so-and-so’s I haven’t been badly affected YET - I’m on a fixed deal and not going to be hit by the huge energy price hike until early next year - so I doubt I’d be able to ask the IS to take rising costs of living into account). 

    Any thoughts/help greatly appreciated x

  • fatbelly
    fatbelly Posts: 20,380
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    I must admit I always assume that if my clients have 'a few hundred quid' in their account then they're midway though a benefit/wage period and that is what will tide them over to the next payday.

    As such I don't put it down as assets.

    I think the relevant date will be the date the lump sum is quantified, i.e. how much did you have in savings when you were told how much the lump sum was?

    You can probably also make out the case that you were midway though a benefit/wage period and needed X to last you to the next payday. 

    I suspect you'll be OK as long as you are honest - and the lump sum is definitely under 2k
  • Sonic101
    Sonic101 Posts: 151
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    Thanks, fatbelly, that’s helpful. I’ll just let them know if and when I get the payment,  tell them what my bank balance is at that point.

    I have no surplus income, in fact a slight minus in my budget so I would hope there might be some discretion, i.e. at most a couple of hundred over the ‘limit’ with a big rise in energy costs coming before the end of the DRO won’t exactly put me in a position to be able to afford to pay off the debts…☹️

    I’ll come back and post the outcome in case it’ll be useful for others. 
  • sourcrates
    sourcrates Posts: 28,717
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    If it`s 2k or under, I wouldn't bother rocking the boat, don`t make yourself a target 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
  • Sonic101
    Sonic101 Posts: 151
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    If it`s 2k or under, I wouldn't bother rocking the boat, don`t make yourself a target here.
    True. I understand I need to report it though. As usual I’m probably overthinking things - I suspect the insolvency service has bigger fish to fry and isn’t not going to worry much about one individual who got lump sum payment within the limits.  
  • sourcrates
    sourcrates Posts: 28,717
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    Sonic101 said:
    If it`s 2k or under, I wouldn't bother rocking the boat, don`t make yourself a target here.
    True. I understand I need to report it though. As usual I’m probably overthinking things - I suspect the insolvency service has bigger fish to fry and isn’t not going to worry much about one individual who got lump sum payment within the limits.  
    No, you don`t, guidance states a "2k lump sum or more" must be reported.

    If it`s under 2k, you do not have to report it.
    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
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