DRO - should I be worried?

Livmad

Hi all, 

I recently had a huge win and had a big debt written off. This change in fortune now means I qualify for a DRO, where before the only option was bankruptcy due to the size of my debt. 

I am on a DMP with stepchange and some of my debts are 15 years old and in recent years took out a couple of credit cards, not to be frivolous, but just to afford to live. Stepchange have advised me that my creditors might see this as fraud and I may be sanctioned for it if I go ahead and apply for a DRO. Is this likely to happen? I’m not a criminal, just overstretched on credit - twice. 

fatbelly

It wouldn't be fraud.There is a sight chance of a Restriction Order if you took out credit that you knew you couldn't pay but i think that's unlikely

However, the payment you made may be regarded as a preferential payment and you are supposed to treat all creditors equally in the run-up to a dro.

What was the reason that you chose this one particular debt to pay off with your windfall?

sourcrates

I think they may tell you that just to cover themselves, been in debt is a civil matter, not criminal.

The only real pre-requisite is that you have not favoured one creditor over another in the last two years, taking on extra credit is something lots of folk do, most without malicious intentions.

Stepchange no longer do DRO`s, but can put you in touch with an intermediary, the intermediary will go through your situation with you, and will not submit your application unless they are 100% certain it will be accepted, so there is no risk here, and if you are one of the, I think less than 1% of applicants that get refused, then its only £90 you will have lost.

As an example, in 2019, 27,497 DRO`s were approved, and 78 were refused, that`s 0.28%.

Livmad

fatbelly said:

It wouldn't be fraud.There is a sight chance of a Restriction Order if you took out credit that you knew you couldn't pay but i think that's unlikely

However, the payment you made may be regarded as a preferential payment and you are supposed to treat all creditors equally in the run-up to a dro.

What was the reason that you chose this one particular debt to pay off with your windfall?

Hi Fatbelly, I didn’t have a windfall, I had a debt written off. I didn’t ask for this, they wrote to me off their own backs and said the most recent payment would be considered full and final. I’d been paying it for 15 years it was a mortgage shortfall. 

Livmad

I had always intended to pay everything back. Some was in a DMP and some was taken out, but a family member was covering the cost. I guess it looks like preferential payments, but that was never my intention. I just made bad decisions I guess. 

I never thought I would qualify for a DRO, but the write off was huge and changed everything. 

sourcrates

How long ago are we talking here, as its the last two years that matter for DRO purposes ?

fatbelly

Livmad said:

Hi Fatbelly, I didn’t have a windfall, I had a debt written off. I didn’t ask for this, they wrote to me off their own backs and said the most recent payment would be considered full and final. I’d been paying it for 15 years it was a mortgage shortfall. 

In that case then, there's no problem. You should avoid saying that you had a huge win. One creditor wrote a debt off. You might be asked where it went but you can evidence that it was a creditor decision.

Sounds like you're good to go