Will compensation affect my benefits- using it to pay off debt

[PeppyCrab]

I’ve just received confirmation that my settlement of £10,000 is due to be paid for historic child abuse. I currently receive universal credit due to disability and mental health issues compounded by this process.

i have debts I intended to partially pay off with this money:

£1400 overdraft
£1200 credit card
£1400 loan
£7,700 on another credit card

ideally I’d use some on an electrician as my house is in dire need of emergency electrical work!

The amount won’t cover everything and ideally I wanted to pay off the £1400 loan (as high monthly payments) and around £5000 of the £7,700 credit card (or maybe I should pay off the full amount to show if asked In the future, that it was literally just used on debt and benefits shouldn’t be penalised for this)

my lawyer said I should consider a pi trust but this is generalist advice and she doesn’t know whether or not I’m on benefits. However these take time and cost about 10% of what I’m receiving and I read that there is a 52 week grace period from dwp? I intend ideally to just receive the money and pay off my debts and continue as I am due to the grace period?

Though I don’t know if the insurance company or the assets of the offending body that pay the compensation notify the dwp? And how can they cut my benefits if I already have no money, loads of debt and use this to pay my debt? I don’t have time or can really afford for this money to be spent on opening a pi trust so I’m really hoping that it would be ok to receive the money and pay off debts and continue with my life? This money is meant to be a compensation of extreme harm and help me to recover from this, it’s also in the grand scheme of things not a large amount of money and will be used on debt.

I’m just really hoping someone can advise me as advice is not clear online! And please no snarky comments as I’m feeling quite fragile today, this has been a long settlement process and extremely damaging on my mental health. It has caused me to be unable to work at present, hence currently on UC but I am hoping to rebuild my life soon and get back into work.

The test for deprivation of capital looks at whether you “knowingly reducing your money, savings and investments” and doesn’t consider you to have done so if you use it to pay off debt. Likewise, essential repairs such as emergency electrical work won’t be disallowed, whereas cosmetic work would be.

You can have £6000 savings before it affects your benefits ,and up to £16,000 before they are removed completely.

Yeah this seems to be the advice I’m getting, as it’s going on debt, and then a small amount on essential maintenance, and I’ll keep all receipts just in case, it should be ok. I hope so as I really need to be more financially stable and get this paid off

If you received this compensation for abuse you must have suffered significantly. If you pay this money off your loan and keep receipts/paper trail to show this and pay down some of your debt this is not deprivation of assets but using common sense to get out of debt so pay less interest on debt. I'm so sorry you were abused but hope you can draw a line under it now and look forward to better times ahead. Don't let it drag you down anymore. ❤️

Thank you, that’s very kind of you 💓 now that the process is over, it’s time for me to try move on and focus on the future, clearing some debt and getting back into education.

My mum was knocked down and in hospital for over 9 months and left with disabilities. She received a large amount of compensation and it does not affect her benefits. The council/benefits office are aware of the money and we have in writing from them that because its compensation to be used to help her it's not classed as savings. She's also been interviewed to clarify the situation and they knew to the penny how much she has in her bank. I would assume your situation would be much the same. 💐

Thank you, this is reassuring 🙏🏻 I’d have all the evidence for them to show what it’s for if they needed or they’d be welcome to contact the solicitor and see my receipts

And I’m sorry to hear that about your mum, I hope she is ok 🙏🏻

Is this a payment from the Criminal Injuries Compensation fund? If so my understanding is that it is then exempt from the normal rules.

Paying best would not be deprivation of assetts

if I was you I would

£1400 overdraft
£1200 credit card clear this completely
£1400 loan pay your remaining £1100 off of this debt. Leaving £300 remaining
£7,700 on another credit card Clear this completely

then all payments that had been going to the other 2 credit cards should go to the remaining £300 to pay it off asap and then the amount spent on all 3 now paid off loads to the £1400 overdraft. This should pay your debts off quickly.

Unless the electrics are dangerous id hold out until you are debt free as that will feel amazing and happen quite quickly with the bulk of it paid off. Then cut up the cards

It isn’t, it’s a redress scheme payment

This might help with reasoning for figuring out which to pay:

the loan is near the end so payments are still £250 a month, that’s why I wanna clear this one first

the 1200 credit card has very low monthly repayments of £20 so this one is less priority

the overdraft is arranged and again very low cost per month

the large credit card is interest free for another year, repayments lessen as the amount lessens, at the current balance they’re £190 a month but if it was halved for example then payments would be around £100 per month

I used to not understand how easy it was to get into debt, but I used to earn a good wage and spent 3 years being good with money to buy a house, then when the mortgage went through I stupidly relaxed too much, took out a large credit card to do stuff around the house, not knowing that I wouldn’t be in that job for much longer. (I also have severe medicated adhd so a long time of trying to be self controlled sort of unravelled at that time and with all the stress of the redress process my mental health was shot). Luckily I’m not being hit by huge interest on anything and once it’s paid off I’m not doing that again!

i just need to work out which things to prioritise as I can’t pay it all off at once and want to have the lowest monthly payments possible so I can budget and clear the remainder and try finish college 🙏🏻

thinking

1400 loan paid off

I forgot I owe 1800 to self assessment for my old job and this is urgent/the right to pay instalments is no longer available, they gave extra time for a couple of months so I need to pay this. Hmrc actually owes me an equal amount but they won’t balance out and say I have to wait for my refund and still pay this debt which is frustrating. However, when that amount owed from them comes back, I could clear the rest of the credit card!

6000 to large credit card (though again, this is interest free for another year so I don’t know if this is right decision and I should pay off the

1200 credit card first as has some interest?)
slowly trying to creep out of overdraft, it should be at around 1000 soon

electrician wise I’ve kept to just urgent works and contacted someone I know who’s an electrician so hopefully will be a little cheaper, I think around £200

I'm sure this doesn't affect benefits at all.

Hi you may have this sorted out but if not your solicitor should have informed you, I myself have received compensation from the HIA redress board. When the scheme was set up the Northern Ireland assembly and UK parliament both passed legislation to discount our compensation from means testing were your benifits are concerned. The solicitors probably aren't saying anything to try and get more money for a trust fund . Hope this helps from a fellow survivor.

Oh wow thank you, that’s really good to know 🙏🏻 thank you for taking the time to post and I’m wishing you peace and recovery for your future x