DRO - Social Fund Budgeting Loan query

Robbie64

I'm asking this question on behalf of a relative (I've already had a DRO 3 years ago and posted in this forum at the time, I was grateful for all the help).

If someone has an outstanding Budgeting Loan from the DWP Social Fund with only 7 weeks repayments left (total of £148 outstanding), would it be possible to hold back on a person applying for a DRO until after it is paid?

The reason I'm asking is, when using the StepChange debt tool, I keep getting a different set of figures / debt outcomes depending on whether the Budgeting Loan is included. Twice I even got a different suggested outcome using the same set of figures. One said that the recommended outcome is a DRO. One says that it is not recommended as income is in negative figures due to the tool adding the Budgeting Loan weekly repayments of £21.45. However if the Budgeting Loan has been paid off then a DRO is a recommended outcome as the person will have a net monthly income for non-priority debts of around £45. I've tried phoning StepChange but had to end the call after waiting for an advisor for some considerable time.

For information, the person has other debts totalling almost £5,000 to two creditors (one a catalogue, the other a well known home shopping company). However the person is in her 80s and is in poor health. She lives on Pension Credit and cannot afford to pay the two creditors any longer. I have actually been helping her pay some of her bills each month and can no longer do this as it is leaving me with little money for myself. She is never going to be able to pay off the balance as her monthly bills to these two crditors is nearly all interest. The actual balances only reduces by around £50 a month despite her paying almost £200 each month between the two companies.

Can anyone suggest what she could do? I've contacted the two companies and they are both giving her some breathing space for 30 days but I wouldn't want to her to apply for a DRO only to see it fail.

Thanks for any advice that can be given.

StepChange_Aidan

Hi Robbie,

I’m sorry to hear about your relative and I hope I can help.

A DWP Social Fund loan isn’t discharged in a DRO and would still have to be paid. If the repayments are currently leaving your relative in a negative balance on her budget, we would normally suggest putting all other debts on hold for now until her situation improves.

A DRO would be available, and she can still apply now if she wants to, but we wouldn’t necessarily recommend it until her budget is balanced.

Please bear in mind that catalogues and home shopping are non-priority debts and your relative should only pay what she can afford or the keep payments on hold. Her priority bills and living costs are more important right now.

It’s good that the creditors have already given 30 days of breathing space. Depending on her situation, your relative may also be able to apply for the formal Breathing Space scheme through StepChange. This a government scheme which places debts on hold for up to 60 days while someone is getting debt advice or setting up a solution.

I’m sorry to hear that you’ve been unable to get through to us, currently demand for our service is high. I’d recommend calling again so we can discuss a DRO in more detail, but please be aware that your relative will need to give permission for you to speak to us on her behalf. She can do this by giving verbal confirmation if she’s with you when you call, alternatively she could send in a Letter of Authority.

There’s some more information on helping vulnerable people deal with debt here.

I hope this helps,

Aidan

Robbie64

Thanks for the advice Aidan, it's most appreciated. I'll get back in touch with StepChange and will have my relative with me when I call to give permission for me to be able to speak on her behalf.

sourcrates

DRO`s are recommended, or not, usually based on your disposable income level.

If you meet all the other requirements of a DRO, yet your disposable income is over £75 per month, it won`t be recommended.

Your disposable income level must be less than £75 per month.

Jiggle around with the budget using that as a parameter.

To be honest with you, I wouldn`t bother with Stepchange or a DRO, your better off trying to get them to write off the 5k debts as uncollectable rather than going down the DRO route, at her age, if her only income is state benefits, it shouldn`t be too difficult.

You said -

"However the person is in her 80s and is in poor health. She lives on Pension Credit and cannot afford to pay the two creditors any longer".

Sad for her granted, but a very good case to have the debt written off, as affordability is everything these days.

Feel free to PM me if you want any further clarification.