A reader asked me recently: “I applied for a Debt Relief Order last year and my debt was discharged a few months ago. Now I am working and I have a good income. Can I speak with my creditors and pay off my debts? Can I cancel my it ?”
There is a procedure to cancel a bankruptcy even after you are discharged – it is called “annulment”. It is usually extremely expensive as you have to repay not just your own debts but the Official Receiver’s costs too.
But none of these grounds applies to the reader because his DRO has completed. Once that has happened, there is no way to go back and cancel it.
This is why a DRO is not a good solution for people with a temporary debt problem. If you know that you should be able to get a good job in the next few years and then repay your debts, look at a Debt Management Plan instead.
“But I want to repay my creditors”
Strictly you don’t have any creditors anymore because your debts no longer exist. Personally, I wouldn’t worry about banks or credit card companies – they took a business decision to lend to you and they charge enough so they make a profit even if a few loans aren’t repaid. And any debt collectors your debts were sold to would only have paid a few pennies in the pound for your debts.
“It seems wrong to have taken the easy way out”
You made what was probably the right decision at the time. If you feel you owe society something in exchange for your clean start, then the best thing to do is to make sure your finances never get into a mess again:
- save up a good size emergency fund – aim to have for 3-6 months expenditure in a savings account;
- get a good budget, including putting money aside for long term items such as replacing your car;
- make regular pension contributions.
“I want it off my credit record”
That’s not going to happen – the DRO marker will drop off your credit record six years after the DRO started. There are ways to improve your credit record in the meanwhile, see Clean up your credit file after a DRO for details, but it’s not going to be great until the six years are up.
If you are in a good enough position now to want to get a mortgage, then the money you would have used to repay your debts will be the start of your deposit. Set up a monthly standing order to put more money aside. You could talk to a “bad credit mortgage broker” when you have at least 20% deposit saved – but you might get a much better deal if you wait until the six years is over.