DRO now or later?

Nametaken44

Hi everyone

I’m in £43000 debt and gone through the process with step change who have recommended a token payment plan and a DRO. 

I think the reason they have suggest the token payment plan is because I told them I am expecting my income to change - next month I am starting a new job and getting a £6000 pay rise. 

I receive about £520 a month from universal credit - this varies between 450-600 as my current salary varies based on the number of days in the month and overtime.

With the new salary my universal credit will reduce and so I am not expecting to receive more than £220 extra per month.

With my budget with step change I have said there’s £15 left per month after bills but I have been strict and there’s certain things I have left off and not been buying due to a lack of funds (tv license, home insurance etc) I would definitely spend the extra money from the new job and have less than £75 left over but I’m concerned if I do the DRO before the new job then report the new income there could be issues?

I have been making minimum payments on all my credit cards but I have now exhausted all lines of credit so I am looking for a solution very soon.

The questions I have

Should I wait to start the new job before staring the DRO? If so should I wait for the first payslip? 

Reading through this forum it seems the advice is to make zero payments to creditors? Would the DRO be refused for making the minimum payments as all of them (15 companies) are receiving different amounts?

My new job has a salary sacrifice scheme, I opted to put 5% into it before i thought about doing the DRO but I’m wondering if I should increase that to reduce my monthly income and so universal credit isn’t reduced as much. How much of my wage can I put into it?

I’ll be taking money from practically all banks will I be able to get a mortgage in like 7 years time or will they remember me and refuse to lend? This answer probably won’t make a difference as I think I will need to do the DRO, there’s no way for me to pay my debts off.

Below is the budget I submitted with step change. Will it be ok for me to add another £200 of spending in here when I get the pay rise?

Rent £1,050.00

Dual fuel £125.00

Council tax £171.00

TV licence £0.00

Water supply £130.00

Car insurance £31.56

Road tax £27.92

Fuel, parking and toll road

charges £80.00

Dentistry £25.00

Breakdown cover £13.00

School uniform £8.33

MOT and ongoing vehicle

maintenance £27.50

After school clubs and school trips £4.17

Groceries £650.00

Mobile phone £31.01

Hobbies, leisure or sport £80.00

Gifts £57.00

Meals at work £15.00

Pocket money £21.67

Alcohol £30.00

Laundry and dry cleaning £38.00

Household repairs and

maintenance £16.67

Nappies and baby items £7.00

Clothing and footwear £95.00

Hairdressing £15.00

ManyWays

I am usually in favour of waiting a few months when there is a big change coming up so you go into a DRO knowing exactly what your situation is.
It doesnt sound as though there is any way you will be able to clear the debts without defaults, either with a DRO or low monthly payments, so there is no reason to scrape to make unaffordable minimum payments. You could ask Stepchange for a breathing space now and cancel all the payments. This will let you start spending "normal" amounts for lines on your expenses that you know are unsustainably low at the moment. 
The budget, how many adults and how many children is that for? Do you have a partner who is paying some of the costs? 

My new job has a salary sacrifice scheme
is this to increase your pension payments above the normal level? Or for savings or what? 

Nametaken44

ManyWays said:

I am usually in favour of waiting a few months when there is a big change coming up so you go into a DRO knowing exactly what your situation is.
It doesnt sound as though there is any way you will be able to clear the debts without defaults, either with a DRO or low monthly payments, so there is no reason to scrape to make unaffordable minimum payments. You could ask Stepchange for a breathing space now and cancel all the payments. This will let you start spending "normal" amounts for lines on your expenses that you know are unsustainably low at the moment. 
The budget, how many adults and how many children is that for? Do you have a partner who is paying some of the costs? 

My new job has a salary sacrifice scheme
is this to increase your pension payments above the normal level? Or for savings or what? 

Thanks for your message.

I think I agree breathing space might be the best option until I get the payslip for my new job and then I can budget around that. 

I have 1 child and a wife who doesn’t contribute to the costs or have any income.

The salary sacrifice scheme I can set how much I put in for the future when I finally get a pension. I opted for 5% as that’s what amount I need to pay in for the company to contribute the max but I’m wondering about upping it to 10 or 15% but I don’t want to do so if the insolvency service would take a negative view of it.

sourcrates

Breathing space is a complete and utter waste of time, even most debt advisors dislike it as its far too watered down from what was originally proposed, the debt collection process is very slow, it can take many months before your debts see any action of any kind taken, you can quite easily stop payments, and wait 3/4 months to see if your situation changes before deciding on a course of action.

The debt charities are mainly creditor funded so have an obligation to rush people into debt solutions, when in reality there is no need to rush into anything, take your time and go at your own pace, nothing is going to happen here if you don`t pay for a while.

RAS

Stepchange don't offer DROs, it's mainly Money Wellness or CAB.  

I'd suggest that you look at the SOA calculator in sourcrates' signature and add in the things you've currently left out.

You need advice on the use of salary sacrifice, certainly beyond the 5%.

Agree with sourcrates that you are better just to stop paying and save some money before starting any debt solution. An instant access ISA might be useful.

You might want to set up a new email address just for the creditors and change your details on their sites. 

All important documents have to be sent by post.