DRO Criteria

Wannabe2018 · 29 August 2018 at 8:52AM

Good morning!

I am in a bit of a mess, and have finally pulled my head out of my a**e and am facing up to things.

My total debt is £12491.38, mostly short term and pay day loans, plus catalogues and three CCs.

I have been talking to StepChange, and they have suggested Bankruptcy. I asked why not a DRO (I have a car worth £630 and no other assets), they said that my budget has too high a surplus, but then said that I was prompted to change my spending amounts because my budget was in deficit (overspend) - I am totally confused!

I altered my budgeted amounts to the ones they suggested, and was given my 'solution'.

I can't afford the bankruptcy fees. Should I just change my spends back to what they really actually are, and go with that?

Thanks for any help!

National_Debtline · 29 August 2018 at 11:39AM

Hi there and welcome to MSE,

In order to qualify for a DRO you would need to have less than £20,000 of debt, less than £1000 worth of assets (plus you can have a car worth up to £1000) and less than £50 per month surplus for the debts. The best thing I can suggest at this stage is that you post your SOA so that we can see what sort of surplus you have. You should list your expenses honestly, and if you have more than £50 per month available, a DRO is unsuitable, but other negotiation options may suit you more so than bankruptcy.

If you have payday/ short term loans, then you also need to ensure that you have cancelled the continuous payment authority with the banks, to prevent them taking anymore money from your, just cancelling the direct debit may not be enough. We have a sample letter to help you - https://www.nationaldebtline.org/EW/sampleletters/Pages/default.aspx

Laura
@natdebtline

sourcrates · 29 August 2018 at 12:13PM

You do not want to be going bankrupt for 12k.

Its a bit OTT, post up your SOA then we can see where your money goes to.
You need a surplus of £50 or less to qualify for the DR0, if you dont have that, maybe a debt management plan would be suitable.

Wannabe2018 · 29 August 2018 at 2:38PM

I have a surplus of £79 a month, but that is including non-accurate totals of what I actually spend (what I actually spend leaves me brassic!), so I was advised to decrease my food shopping etc to their recommended levels, which took me to the £79 surplus.Is this fair? Should I not just be honest?

I don't overspend on things hugely (not that you would think that given the debt I have), my biggest outlay after rent is food, I have a rather selective diet due to Crohn's disease, I eat as little as possible but I still have to eat something!

I also have two elderly cats and two guinea pigs, they are all insured and that costs quite a bit each month. However, if I cancel this I will be stuffed if they need any medical attention at all..

I also have a logbook loan on a car worth £730, but the loan including interest comes out at more than that - I have asked the company for advice, as I really cannot lose the car, as I commute in every day and there is no public transport, it's a 21 mile drive each way so cycling wouldn't really be an option either. I was told by SC I would have to sacrifice the car. I've read my agreement and it doesn't say this, but should I include this payment in my outgoings for the DRO?

Wannabe2018 · 29 August 2018 at 3:34PM

Here is my SOA. I have basically lived off of credit for years, and lived well beyond my means. I am aware of this. It's only because of family bailing me out that I have survived.
Please don't tell me how stuoid I am, I know that, I am just looking for help and support.
The loans marked with a * are untraceable - not on my credit reports, nor can I log in to the related online accounts. I only know I have them because I had written all of my accounts down as I went..!

Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1921
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1921

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 94.34
Rent.................................... 950
Management charge (leasehold property).. 57
Council tax............................. 141
Electricity............................. 45
Gas..................................... 45
Oil..................................... 0
Water rates............................. 17
Telephone (land line)................... 35.99
Mobile phone............................ 107
TV Licence.............................. 25.08
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 200
Clothing................................ 0
Petrol/diesel........................... 90
Road tax................................ 3
Car Insurance........................... 34.94
Car maintenance (including MOT)......... 0
Car parking............................. 10
Other travel............................ 8
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 10
Pet insurance/vet bills................. 62.03
Buildings insurance..................... 0
Contents insurance...................... 16.81
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1952.19

Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 730
Other assets............................ 0
Total Assets............................ 730

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(0)........0
Secured Debt.................. 1601.....(94.34)....387.5
Total secured & HP debts...... 1601......-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Loan 1.........................2268......35........0
Loan 2.........................737.14....120.......0
Loan 3.........................510.42....5.........0
Cat 5..........................52.74.....11........0
Cat 4..........................138.49....37........0
Cat 3..........................1296.69...78........0
Cat 2..........................69.96.....12........0
Cat 1..........................169.72....39........0
CC 3...........................112.4.....8.7.......0
CC 2...........................185.45....23........0
CC 1...........................205.03....27........0
Loan 13........................152.......15........0
Loan 12........................539.71....93........0
Loan 11........................469.19....138.......0
Loan 10........................696.48....161.1.....0
Loan 9*........................25.05.....0.........0
Loan 8.........................154.07....148.......0
Loan 7.........................275.......15........0
Loan 6*........................343.53....0.........0
Loan 5.........................456.54....119.......0
Loan 4.........................3622.91...210.......0

fatbelly · 29 August 2018 at 6:31PM

Before we get into the detail, what is this?

Secured Debt.................. 1601.....(94.34)....387.5

OK, it's the logbook loan. Hang on while I check the guidance

Log book loans - Where a Bill of Sale has been properly registered
with the High Court (and generally the log book loan companies do register the bill of sale properly) the lender is a secured creditor. This type of financing is typically a short term loan and title to the property may revert back to the debtor during the moratorium period. Depending on the value of the vehicle and the probable increase in disposable monthly income, the debtor could become ineligible for a DRO and would face revocation. In respect of listing repayments as an allowable expense, you should follow the guidance for vehicles on HP

Does your loan agreement complete within the next 12 months?

Daniel1971 · 29 August 2018 at 7:18PM

The amount you are spending on phones wouldn’t be acceptable within a debt relief order or bankruptcy. Could you reduce this?

MovingForwards · 29 August 2018 at 8:41PM

Management charge when you are in a rental?

Spread your council tax over 12 months and make sure you are claiming single person discount.

Your mobile phone is way too high.

£3 a month car tax? What car do you have. You have also not included anything for repairs/mot.

You may be able to trim a couple of quid off your contents insurance.

Nothing for haircuts, clothes and gifts? I would put £5 in each of those.

Wannabe2018 · 30 August 2018 at 9:16AM

Thanks for the replies..

The logbook loan is 18 months, and has 14 months left, so wouldn't finish during the moratorium period.

The phone contract(s); I have one main phone and one tablet, on o2 refresh, so I pay an amount for the device and an amount for the contract each month, once the device is paid off I can cancel the contract, but the amount to clear one device is currently £292, which I don't have to hand. If I cancel them now and add the debt to the DRO, I will lose my phone and can't currently afford a new one.

The management charge is actually a 'No Deposit Option' payment, which I took instead of paying a rental deposit when I moved in as I couldn't raise one. I have to pay this for the duration of the tenancy (didn't know where else to put this).

The Council Tax payments started in July when I moved in in May (their delay not mine), so this is the amount I need to pay (including 25% discount) to cover all the months in this tax year I am there - this is without the two month payment free period.

My car tax is £30/year (Ford Ka 2009), so was advised £3/month.

The contents insurance was the cheapest I can find that included tenants liability, but happy to search again.

I haven't had a hair cut or bought clothes for years! Christmas and birthdays have been on credit, but yes, I could add this amount on for each, but am worried about being told not to (Stepchange advised me not to have an emergency pot until I was in a better position).

National_Debtline · 30 August 2018 at 3:54PM

Hello again,

As your car is worth less than £1000, the monthly payments for the log book loan could be permitted on a budget. If the agreement doesn't have an insolvency clause in it then the only other issue could be how much the payments actually cost (£94.34 per month, over 18 months means repaying £1700 for a £700 car). The insolvency service could decline the application, if they felt that you were depriving the creditors of funds unfairly.

I am afraid I agree the phones could also be an issue, not just the monthly payment being high, but also the value of the items. They would be considered an asset, and if they are worth more than £1000 in total with other assets you have (excluding the car), then I am afraid that would disqualify you from a DRO.

You should certainly add a budget for hair cuts, clothes and gifts. Your food budget at £200 for a single adult seems fine, but if you need to amend this that could still make a DRO possible. There are figures that the creditors/ insolvency service work within in terms of expenses, and if you exceed these then an advisor should make you aware of that and encourage your to decrease them, which may have been what happened when you spoke to Step Change.

Laura
@natdebtline

fatbelly · 30 August 2018 at 4:45PM

1. Are the logbook loan payments an allowable expense? Yes - it's treated as HP

Debtor has hire purchase agreement with no arrears for a motor vehicle worth £900.
Action: The debtor can either:
1. Schedule the whole liability in their DRO application and this would count towards £20,000 liability parameter
2. Choose to exclude the liability from the DRO application in which case it would not be a specified qualifying debt and not count towards the £20,000 liability parameter. Inform DRO Team about any liability appearing on the debtor’s Experian report that the debtor has chosen to exclude
Outcome:
1. Debt is a specified qualifying debt and one that would be discharged at the end of the moratorium period. Debtor unable to maintain payments and creditor’s only remedy would be to seek recovery of their goods
2. Debt is not a specified qualifying debt and the debtor would remain liable. As the vehicle in question is worth less than £1,000 the repayments on the HP agreement would be an allowable expense.

2. Are the phones a disqualifying asset? Probably not - you have an asset limit of £1000. It doesn't sound as if the resale value of what you have is anywhere near that.

3. Are the contract phone payments unreasonable to the point that your application would be declined? No, but you might want to 'aspire' to a lower figure

4. Are your other expenditure figures sensible? No. Other suggestions made here for haircuts, clothes and gifts (maybe 10, 20, 20 per month)are good. I would also add

Car maintenance (including MOT)......... 20

as you're going to easily spend £240 per year on a 9-year old Ka

DRO Criteria

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