A reader asked: I want to give £4,000 each to my children – it’s money from their nan who would have wanted them to have it. But one daughter started a DRO a few months ago. I think she would have this money taken away so should I buy her a car instead? Things are difficult for her as she gets no child maintenance.
What happend if you give her cash?
If you give her the money now, she wouldn’t have it taken away. A Debt Relief Order (DRO) isn’t like bankruptcy or an IVA where if someone gets a large windfall they lose it.
But her DRO would be cancelled (the legal term is “revoked”) if you give her that much. See What happens to a DRO if you get some more money for details.
If her DRO is cancelled, she still has the money but also all her previous debts. She could use the money to settle some of the debts – with full and final settlements she may well be able to clear a lot more than £4,000 of debt, but perhaps not all her debts, it depends on how large they are. But the DRO will stay on her credit record for the next six years anyway.
Your other option is to give her most of the money after her DRO has finished and her debts have been wiped out. You could say give her £500 now for immediate needs and the rest when the DRO ends. A present of £500 wouldn’t affect her DRO, though she should report it to the Official Receiver.
Giving a car – it depends on how you do it
If you give her a car, then much the same would apply as giving her cash. It is one of the conditions of starting a DRO that any car has to be worth under £1,000 so by getting a more expensive car in the middle of her DRO is it very likely to be cancelled.
There is a way around this – you can buy the car and let her drive it. She could be the registered keeper, have the insurance in her name etc, but legally you would still be the “beneficial owner” of the car, so this wouldn’t affect her DRO. If you do this, I suggest you confirm this in writing by sending her a letter or email saying you are happy for her drive your car for as long as she needs it, but could she return it to you if it ever isn’t wanted.
If you are going to do this, make sure she can afford to run the car. You may think that a car would make her life a lot easier, but if she is struggling for money now, the insurance, MOT, parking costs all need to be thought of, it’s not just the petrol.
Talk to your daughter!
You need to make sure this is a nice surprise for her, not one that causes her any problems. I think you have to talk to her about it.
Personally, I don’t think giving her the money now and having her DRO cancelled is a good choice. Waiting until the DRO has completed could make so much more difference to her family over the next few years. But some people hate the idea of not paying their debts, so it’s possible she could prefer to have her DRO cancelled and settle her debts. This isn’t my call and it really shouldn’t be your call either…
And if you are thinking of a car instead, she needs to think about the costs before saying Yes.
An emergency fund in a DRO or IVA
Improve your credit score after a DRO
A Guide to Debt Relief Orders
Jane Clack says
You would be surprised the number of people this can happen to. As a debt relief order intermediary I always make it very clear to applicants what can happen with windfalls or anything that puts them over the asset limits. Your advice is very sound.
Priscilla Baxter says
I am also a DRO intermediary and I have two other things which I would like intermediaries and clients to be aware of :as they have come to my attention recently
1. if the client inherits money after a death they are deemed to have had the money at the date of death and not when they actually receive it months, or years later. This has recently happened to a client of mine.
2. It is worth being aware that the version of the Experian report which we and the client see is not the same version which the DRO Unit sees. I have recently had a client’s DRO declined as DRO Unit version of the Experian report showed a mortgage in his name which did not appear on our version and of which the client was only vaguely aware!.
Anonymous says
Hello,i got a car on lease for three and a half years. I have only three more payments and will have to hand the car back as there is a £5000 final payment. I know you are only allowed a car valued at £1000,i don’t have any money for a car and need it for my work desperately as there is no means of transport and i start real early in the morning’s. Is there any way the dro company can help me out with this situation. I’m entering the dro in three months when i hand the car back. I am really worrying over all this.
Sara (Debt Camel) says
Sorry a lot of questions:
How much are you paying a month for the car finance?
Have you asked the leasing company how much it would be if you took out another lease on the car for three years?
How large are the debts going into your DRO?
How far is your work and have you looked at other options such as a moped if there is no public transport.
Who is setting up your DRO?
Anonymous says
I’m paying £182.00 a month on my car finance. I would not be allowed to lease that particular car out for another three years. I either hand it back and get nothing. Refinance the £5000 or take a new car out on lease,which i don’t think your allowed to do if i enter a dro. My work is nine miles from my home,a moped is not an option. CAB is setting up my dro.
Sara (Debt Camel) says
Well there are some other options. You could not make the lease payment for the next three months, increasing the debt that goes into your DRO (you didn’t say what the total is at the moment) and use that money to buy a very cheap car or a moped. 9 miles sounds quite manageable on a moped surely? It may not be a great option but you may have to choose between not great options.
Have you asked the financing company about a new lease on the current car? It should be cheaper than your current one if it is possible.
If you don’t get another car on finance, will you then have surplus income each month?
Anonymous says
Are you allowed to lease a car and still go on a dro?
Sara (Debt Camel) says
It is possible – you don’t own the car and never will so the value of the car per se isn’t going to mean you can’t have a DRO. But there are two problems – will the lender terminate the lease? and will you be allowed to make the payments? It is worth investigating and then discussing with your DRO adviser.
Anonymous says
Thank-you! Sorry for all the questions,lol..