DRO - Overdraft/Savings?

Dirtypunk76

Hi All,

I'm on the verge of applying for a DRO, just need to complete the paperwork over the weekend,

The vast majority of my debt is on credit cards, but the one thing I can't get my head around is that I have a £2000 overdraft with Santander, and for months now I've been getting closer and closer to the bottom of that overdraft by the end of each month. This month was the worst, I've literally got £50 left until pay day - and my salary won't get me back in the black.

So what I'm getting at is - assuming my DRO request is granted, depending what point in the month it happens, I may be stuffed if I don't have access to that overdraft. It's a cash flow issue. I have included the £2000 overdraft in the figures that I gave to Stepchange, and I also owe money on a Santander credit card, so I know that account will be closed.

I'm wondering if I should move all direct debits, and a large chunk of the £2000 overdraft to my Monzo account, to essentially use as my emergency fund since I won't have access to any credit? But I'm aware that they can refuse the DRO if they think I've recently taken out any credit without any intention of paying it back. I don't want to jeopardise the application, and also I don't want to be nefarious, it's just that I can't work out how to make the transition.

I've done my budgeting, and I know I can afford everything once I'm no longer saddled with £400 a month in CC repayments, it's just that first month of transition that I'm confused about.

Any advice appreciated.

PS - any idea how long it can take from my initial application to the debt being frozen? Is it in the order of days, weeks, months?

Sonic101

Hi there

Okay, first things first you need to get all your ducks in a row before going ahead with the DRO, including setting up a ‘safe’ bank account that’s not connected with any of the creditors to whom you owe money. Your Monzo account should be fine if you owe them no debt.

Which debt charity are you applying for the DRO through? (CAB, National Debtline, StepChange or PayPlan?). I’m assuming you will have spoken to an advisor, and I’m surprised they wouldn’t have advised you about this?

What you need to do is hold fire with getting the DRO application submitted; and arrange for your wages to be paid into your Monzo account, move all your DDs and SSs over to it. 

You are right in that you’re not supposed to use credit in the knowledge that you won’t be able to pay it back, HOWEVER, taking some money from your Santander account for essential spending (eg food, transport, etc) because you are stuck would not be the same as blowing the money on ‘luxuries’ so you should be okay on that. You must ensure that the Santander overdraft (amount you are overdrawn by) is included in the debts listed for the DRO (sounds like it is).

The moratorium period starts from the date the insolvency service grants the DRO. Very soon after after it’s approved  they will contact the your creditors.

Some people find that creditors still contact them after the DRO has been granted - but this is unusual and if they do you can just ignore them.  They may still send you statements but that’s just standard (I haven’t heard a jot from any of mine since my DRO was granted). 

Last but not least, as suggested above it’s probably worth having a chat with the advisor/organisation who’s doing the application for you.  

Dirtypunk76

Thank you for your thorough reply Sonic!

Yes in the time since I posted this I've also come to the conclusion that I'll move my salary and DDs to Monzo (I owe them no money, and don't have an overdraft with them - also, they seem excellent for budgeting. Wish I had that 10 years ago!), and then move the balance of my overdraft over too. 

Ultimately, I'm still paying the same essential bills and expenses from the same £2000 credit, it's just that it'll be moved to a different account. 

That's the strange thing - I'm using StepChange, and I haven't had a single conversation with an advisor. I went through their online questionnaire and budgeting process, and it recommend a DRO, and I was emailed the DRO application form. I presume someone will contact me after I send that in. 

I have never missed a single payment, so I haven't been chased for anything so far. Hopefully it stays that way. 

Anyway, thanks again for your answer, it has helped me think things through more clearly. 

Unfortunately Monzo don't offer a partial switch service, and I can't close the old account, so I'll have to move everything over manually. But a small price to pay of I can get out from under this hellish debt burden. 

sourcrates

A basic first step before entering any debt solution is to make certain you have a safe bank account, with a bank with whom you have no debt.

Your overdraft at your old bank will be included in your DRO.

So, you start again with a new basic bank account, with no borrowing facility, this should also help you to budget better, so that when your DRO completes, you don`t repeat your old bad financial habits and you learn to live within your means, so you won`t have need of an overdraft.

ToxtethO'Grady

Why are you moving the money over? All you have to do is ask your employer to pay your wages into the Monzo account rather than the Santander.

Santander will freeze the overdrawn account when the DRO goes ahead and on the 12 month completion all interest and charges are included.

MrFrugalFever

Just wanted to throw something else out there…OP, before you apply for a DRO, perhaps posting an SOA on here to see if any savings could be had, you say you haven’t missed any payments yet so there’s maybe a slim chance you can get out of this yourself?

More info as to why you’re considering DRO would help here.

Dirtypunk76

Thanks all. Have moved everything (all available cash, SOs, DDs, and salary) over to Monzo. Applied for DRO. 

I take home just under 2k a month, but privately renting alone which is bloody expensive! My landlord just put the rent up again, which has kind of brought this all to a head. £900 a month rent. 

I've got a total of just under 25k debt spread over 5 CCs and a 2k overdraft. 

I'm spending about £400 a month in minimum repayments. It's crippling me. Each month I get paid and my overdraft is getting to about zero, and at the end of each month I've been getting closer and closer to the bottom of the overdraft. This month I'm on track to be about £200 over. I'm all out of credit. So it's the end of the road. 

I've been stubborn/in denial, and insisting that I could pay my way out of this, I just needed to borrow a bit more money to get me through the next couple of months, and then, somehow, I'll work out how to earn a bit more money to pay it off. 

(Meanwhile I'm diagnosed with severe depression, but I won't bore you with that. Just to say that the idea that I would be mentally strong enough to earn more money somehow is laughable)

Anyway. So, I'm thinking that a DRO would be the quickest and easiest way to get out from under this rock. I'm not taking it lightly, but once I finally faced facts, I actually feel much calmer. 

My landlord is also a friend of a friend, and I'd be mortified if I couldn't pay the rent or if he found out. I was considering applying for Breathing Space, but they had a warning message on the application saying that they may contact my landlord. Now, I think they mean if I'm in rent arrears they'll contact him, which I'm not, but even so. I think I'll just sit tight for the DRO. 

Have cancelled all CC direct debits and manually paid them £1 each this month. 

Dirtypunk76

Should also point out - DRO was also recommended by StepChange. Wasn't just my idea!

sourcrates

OK, now stop paying your debts, it`s just wasted money.

A £1 payment from you, costs them an additional 50p in bank charges, they are losing money processing your payment, so they won`t thank you for it.

fatbelly

Breathing Space is a waste of everyone's effort here.

Just get on with the DRO, if you qualify