State pension and an IPA

mountainstream

Hi, and I'm looking for a bit of help for a friend of mine who's in her 60's and will be applying for bankruptcy in a few weeks but is confused about her state pension.

She receives the full new state pension which is paid at £921 every 4 weeks which is her sole source of income and most of her social housing rent and council tax is paid through housing benefit and council tax reduction. I don't know the exact figures but she has to pay £4-5pw for both so is left with around £225pw out of her pension. I know these figures are changing soon as her pension, rent, and council tax are all going up and although I don't know what these actually are I gather she'll be a few pounds a week better off.

She's been getting advice from various debt charities about bankruptcy but she says she's been given conflicting information regarding her pension. She's been told on the one hand that as her state pension is her sole source of income and a benefit(?) - excluding housing benefit which is paid directly to her towards the rent and council tax reduction which is taken off the bill - then she won't be subject to an IPA.

However she's also been told that because she has around £225pw (currently) to live on she will be subject to an IPA. She isn't in receipt of any other benefits apart from the housing benefit and council tax reduction mentioned above so does anyone know which advice she's been given is correct?

Thanks.

fatbelly

It's a state benefit, though contribution-based. There will be no IPA.

https://www.gov.uk/guidance/technical-guidance-for-official-receivers/35-income-payment-agreements-and-orders

However...with that income she should be showing no surplus. Help her to sort out her income/expenditure statement

And why does she not qualify for a DRO?

mountainstream

https://forums.moneysavingexpert.com/discussion/comment/81943645#Comment_81943645

Thanks for the reply.

I genuinely don't know the finer details as she doesn't talk about it much but as she got so confused she confided in me to a limited extent.

I really don't know about her expenses but she doesn't have any luxuries that I know of. Shops at Aldi and Lidl mainly, no Sky etc or broadband, basic PAYG etc, smokes a bit. I don't know too much about DRO's but I'm fairly confident she would breach the £75(?) monthly threshold.

I have no idea how she's arrived here apart from the usual CC's, loans etc. I believe the debt is near 30k and I may possibly be wrong in that she's applying for bankruptcy rather than being made bankrupt so I'll have to check.

I don't think she's trying to avoid anything but she just wants to know where she stands with her pension.

fatbelly

Off the top of my head, of that £225

Food & housekeeping incl cigs 60

Clothes 5

Elec 15

Gas 15

Water 15

Phone 10

Broadband 10

Travel 25

Medical 10

Hairdressing 10

Pets 10

Contents insurance 10

TVL 5

Presents 10

Repairs 10

Surplus 5 per week. Shouldn't be that difficult.

RAS

As fatbelly says, and if any of those elements are actually higher, based on bills, she should use them.

What we do see here is that people have been robbing Peter to pay Paul and scrimping on essentials. DRO and BR SOAs are supposed to be liveable not punishment.

And DROs are free, no fee to pay. Suggest she goes and sees CAB as they are more experienced with DROs.

luvchocolate

On my benefit letter there is an amount the government says pensioners need after paying rent and council tax.

The new finance year amount is £256 per week so I'm pretty confident no IPA

Look at the price of spectacles these days

Brie

The OP states "she is getting advice from various debt charities". I wonder if they are in fact charities but rather companies that make money off people in debt and therefore might be directing her to more expensive options from which they can take a slice.

So Citizen's Advice, StepChange, NationalDebtline, Christians Against Poverty (CAP) and Community Money Advice (CMA) are the ones she should talk to. SC & ND tend to do things by phone/email while the others tend to be face to face. Check which can help out sooner rather than later and go with that.

I can't see how someone on a income from SP can exceed the £75 a month spend if a proper expense report is done. The only other reasons for not doing a DRO would be too much in assets, a car being the most likely if it's worth more than £4k. And if a DRO is not possible why not a minimal DMP paying creditors £1 a month? The only problem might be council tax but that didn't seem to be mentioned. Bankruptcy just doesn't sound right in this situation.

fatbelly

The advantages of a DRO would be no fee; advice from a debt adviser; assets not seized; generous exclusion of asset value

Advantages of bankruptcy would be: all debts included even if not written on the application. Er, it's a do-it-yourself application (not sure if that's an advantage but could be if you get stuck with a nitpicking DRO adviser). Usually not worth the £680 fee so if you qualify for both, usual advice is go for a DRO and see if it sticks.