Please can anyone help re Stepchange, DRO etc

[chalip]

I will write a separate post explaining how I got into this mess but the short version is I've been in debt for the majority of my adult life. I used credit to manage a short fall during maternity leave and had to keep applying for more credit to pay back the previous, I am now at a point where I have no money left over and this year I, very stupidly, have just ignored it. I literally withdrew the amount of money we would need for food/energy on payday and wouldn't look into my bank. That would mean certain payments would not be made so now I am behind with a lot of payments. It's not an excuse but I just felt exhausted and I could not think about money any more.

I am in a lot of debt, compared to my earnings.

I finally contacted Step Change to sort a budget and they have suggested a debt relief order, but this is worrying me. It's hard to explain why but it feels huge to do this, I am worried I will do something wrong and end up in more trouble than when it began.

Does anyone have any experience of how DROs work?

What happens if my circumstances change? I know I will have to inform the insolvency agency, but what happens then? Will I have all of the interest I've avoided added back on?

I have a headache thinking about it all, it took all of my energy to contact Step Change, I now have no idea if this is the right decision for me?

Surely I can't just write off this debt? It was my own stupidity that got me into this mess, why would someone 'let me off' with money I owe?

Thanks for reading.

I just wrote a long post that went on and on so I will try to bullet point instead.

• I was given a HA flat at 16 and a social worker advised me to get a credit card and always pay it off in full

-I did this and ended up with a good credit score, the balance on the card went up to £5000

-I got pregnant and had DD who spent months in hospital and me and her father had to use the credit card to cover expenses.

-when we tried to chip away at the balance he then lost his job

-we used the credit card again and I took out a loan to make up the shortfall

-he got a new job but after a few months the payments for the card and loan were becoming difficult to manage so I (stupidly) extended the loan and added more money to it to lower the monthly payments, I paid the extra loan amount off the credit card.

-we split up, he kept making his side of the payments and paid maintenance but I struggled to keep up my side so (stupidly!!) extended the loan again to lower payments again

-it has been a cycle of this ever since, getting more credit to pay for previous debt. I also had to use credit when our washing machine broke for example

-there came a point when I no longer got access to the better credit because I was behind in my payments, so I would have to apply for credit cards/loans with worse rates.

I know how stupid I have been, I knew that each time I applied for another loan but I genuinely saw no other option.

I am now at a point when I don't have the money to cover all of these payments and pay my usual bills.

Debt adviser here. Are all the debts in your name? If some are joint or in partners then you would still have to pay them. How much do you owe in total and do you work? To qualify for a DRO you have to have £75 a month or less left over after ‘reasonable’ expenses. If this changed during the one year moratorium period of the DRO and you were deemed able to pay your debts the DRO could be revoked. In that case you would have to negotiate repayment terms with your creditors (so essentially you’d be in the same position as you are now but with more money as your income would have gone up). DROs can be an excellent way for people to get a fresh start. Stepchange are good - you could try CItizens Advice too - they have a specialist DRO unit. Only way it will work in the lobby run though is if you stop using credit. You can access charity grants if on UC etc to get washing machines etc - from the local council or via CAB etc.

@PalmedOlive thank you for your reply.

All debts are in just my name.

I am working part time and I get tax credits as a 'top up'. I can't increase my hours because my child has some minor additional needs and would not cope in childcare, and if I did increase my hours I would lose the £300 I get in tax credits.

The budget showed I have just under £20 after all payments have been made, I never have £20 though because there's always something.

I did not know that about citizens advice, thank you.

As I see it, things like DROs exist precisely for people like you who have been trapped in a spiral of paying more and more to cover debts they never get out of.

I hope you can find the right way forward that will give you a breathing space and allow you to relearn money management and achieve stability. Keep asking questions until you understand things.

Good luck!

Are you expecting your circumstances to change at all in the next 12 months?

Is there any reason you think a DRO isn't the best option for you, or are you just worried because it seems too 'easy?'

You said that you don't actually have the £20pcm spare. Do you think you'd be able to manage on your income if you had no debt repayments to make? The DRO is supposed to be a solution but if you feel as though you can't afford to manage on your income you're likely to get into debt again very quickly.

Did Stepchange talk to you about applying for Breathing Space while you're considering your options?

I agree with pp. Sounds like you would be a good candidate for a DRO and it could make a big difference. If you have rent arrears then you’ll need to discuss that with an advisor as arrears have to be included which can be tricky with private landlords. All social housing providers have their own policy on how they deal with that. There’s good info on the Citizens Advice website, or on Stepchange or the National Debtline. Avoid all others (except gov.uk) as they are usually linked to companies trying to sell IVAs which would be a more expensive and not as good alternative for someone in your position. Good luck!!

I applied for a DRO 2 years ago with step change. Best thing I could have done! I was debt free after a year. I’ve got a credit card now to start building my credit but obviously that’s personal choice. I’m able to pay it off each month now so I don’t worry about it.

Thank you all so much for your replies.

It's hard to put into words what worries me about the DRO, it is a case of it being too easy, I have struggled with debt for 12+ years and to have that go away sounds too good to be true.

I also have been stung with tax credits, having to pay back an overpayment so I think this plays into my thinking of something will go wrong.

I don't imagine my circumstances will change in 12 months no.

My wages and tax credits add up to £1100 a month, I pay around £550 in loan/credit card payments and I can't imagine having this money 'spare' iyswim.

I was a Debt Counsellor for 25. I still work in the debt field but also volunteer at Citizens Advice.

Based on your circumstances, a DRO sounds like the best option for you at this time.

You appear have struggled with debt for years and this will give you the opportunity to be debt free. The relief you will feel will be immense.

I know it all sounds scary but the DRO process exists to help people in your exact situation.

Hi all,

Doesn't a DRO negatively impacted your credit rating? So wont this hinder your chances of getting a mortgage/loan etc approved?

I too have been threw this just now with step change. I wanted to pay a something a month towards my debt which is around £20 thousand. They advised to do a dro . I’m so worried that people will find out about this who are close . Also that it will effect my bank and me having my mobile phone etc.

I’m now in the same boat!
im currently half way the my application for a dro
its been an anxiety ride for me. I’m an anxious person anyway and I too feel like it’s got to be to good to be true. But my thinking is what have I got to loose. I’m up to my eyeballs in debt with constant threats etc. A dro does damage your credit score, you can be seen as someone who is in a dro but it’s wiped 3 months after your dro is ended. Any success sorties or positive messages would also be appreciated! X

Hi,

I have been looking into a DRO, so they have access to your wage slips and bank to see your income over the 12 months? Do they control your bank ? Or is it all self reporting ? It's all a bit confusing for me .

thank you