Author Topic: Debt Relief Order  (Read 6525 times)

mikkilaw

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Debt Relief Order
« on: Sep 12, 2012, 11:26:26 AM »

I have recently been successful in applying for a Debt Relief Order and thought it would be a good idea to share my experience, hopefully for the benefit of others.


To cut a long story short, I had approximately £13,000 of unsecured debt which was being taken care of via a self-administrated Debt Management Plan. My creditors had frozen the interest and I was paying approximately £200 a month in total, this was all ticking along fine until my landlady served an eviction notice on me at the end of 2011. This was because another tenant in the property had failed to pay the due rent. She was unable to find another tenant to replace him, and I was unable to take on the entire house due to my financial circumstances. This meant that my landlady's only option was to rent the house as a whole to a family of couple.


In order to mitigate the risk of homelessness and ensure that I would be able to cover the cost of moving and paying a deposit on a room etc., I had no choice but to break my DMP. I wrote to each of my creditors explaining the situation, and at first they were understanding. But when, after a couple of months, I was still unable to resume payment at the same rate I had previously been paying, they started to become tetchy. A big part of the reason for this was that my rent and other expenses were very much higher at the new property, and so the £200 I had spare previously became more like about £70.


During this time I consulted a debt management company (on the recommendation of someone on this forum). They were very helpful and provided me with some good advice and so I decided that I would set up an arrangement through them. Managing the DMP myself had become difficult when my circumstances changed and I felt that having a third party company acting on my behalf would make life easier for me. Then disaster struck! One or more of my creditors must have posted something very negative on my credit file and, because I worked in Financial Services I was dismissed from my job!


At this point I once again wrote to my creditors (or rather the debt recovery conmpanies that were by now managing the various accounts) and explained that I would not be able to continue with payment in any form until such time as I found employment. Bizarrely, it was actualy on the recommendation of one off these collection companies that I should go and speak to the Citizens Advice Bureau, advice which I am very glad I took!


The CAB put me in touch with a local organisation for helping people with legal and financial matters. The guy that looked after my case basically asked me all about my circumstances, and then suggested a Debt Relief Order as the best solution.


Because my debt was less than £15,000, my assets worth less than £300 and my disposable income less than £50 a month, I was a suitable candidate for this type of debt solution. The DRO cost £90 and was approved by the Insolvency Service within 24 hours.


I am now subject to a 12 month moratorium, during which time my disposable income cannot exceed £50 a month, or else the order will fail and my liability to my creditors return. But after the year all my debts disappear and I can return to a normal, debt-free life!


Has anyone else on here had experience to this type of debt relief solution?

James Falla

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Re: Debt Relief Order
« Reply #1 on: Sep 14, 2012, 09:45:45 AM »
Hi there mikkilaw
Good to hear from you again. I am sorry to hear that you lost your job in the end. I know that all along you wanted to avoid a Debt Relief Order or Bankruptcy because of credit rating implications. However your case has highlighted the fact that if you do use a Debt Management Plan this will not necessarily protect your credit rating (generally speaking missed payments and default notices will be recorded).
I am very pleased that you have now resolved your debt problem with the DRO solution once and for all. This is proving to be a very successful solution for many people who's debts are less than £15000 and have little or no income or assets. I recommend it a lot to the people who seak my advice. Approximately 8000 every quarter currently use this solution to resolve their debts so you are not alone :)
Hopefully you will be able to find a new job soon. However as you mention you need to remember that one of the criteria of the DRO is that your disposable income must not be more than £50. If you get a new job during the 12 months of your DRO and this means your disposable income rises higher than £50 then your DRO will fail and you will go back to owing all of your debt. This is one of the crazy rules of the DRO as in affect it stops people trying to improve their situation while they are in a DRO....
Good luck to you :)
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mikkilaw

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Re: Debt Relief Order
« Reply #2 on: Sep 15, 2012, 12:19:31 AM »
Thank you James!

One thing I did wonder about the Debt Relief Order is this: Yesterday I was offered two weeks temporary work. The rate of pay was about £400 a week so, for fourteen days, my disposable income would have exceeded £50 a month. Do you think I would still need to notify the Insolvency Service about such a short term change in my circumstances? Do you know if there are any strict guidelines governing this? I didn't take the job, as I wanted to be on the safe side, but just wondered if you had any thoughts.

To be fair, I can see why they have the moratorium period, as otherwise a person could run up a load of debt, blow it all by losing their job and obtaining a DRO, then go straight back into a £60,000+ a year job without paying the debt. But from where I stand it does seem a daft rule, like you say it effectively prevents people trying to improve their situation!


Steven Jackson

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Re: Debt Relief Order
« Reply #3 on: Sep 17, 2012, 10:53:25 AM »
Hi mikkilaw

Good to hear from you again although as James mentioned I am sorry that things have not worked out better for you. In terms of getting temporary work while in a DRO, as far as I am aware there are no specifics on this. However I would have thought that the Official Receiver in charge of your case would take a sensible view and allow you to take such work without it affacting the DRO. The intention of the rules is that if your income changes permanently thus allowing to your pay your debt then you should do so which is perfectly reasonable. However a change that affects your position for just one month I am sure would be OK.
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Debra

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Re: Debt Relief Order
« Reply #4 on: Sep 18, 2012, 11:42:21 AM »
Hey!


Good to hear that you are almost done with your debt  :) , having the advice of good financial consultant matters a lot. Good that you found a one. If you need any help regarding this then feel free to talk with us.



mikkilaw

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Re: Debt Relief Order
« Reply #5 on: Sep 20, 2012, 12:45:21 PM »
Many thanks Steven and Debra!
The toughest part of my situation is going to be working out how to live for the next year on £71 a week :)

James Falla

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Re: Debt Relief Order
« Reply #6 on: Sep 21, 2012, 05:33:52 PM »
Hi mikkilaw
If you are able to find a job that pays you more than £71 a week during your DRO do not discount it. Remember the rules state that your disposable income must not rise above £50 a month. However as a single person if you are living in lodgings or a shared house, I would be very supprised if your reasonable personal expenditure would be any less than c£800 a month if you include everything....
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