Credit Facilities & Income Based Benefits

[joeblogs]

Can anyone tell me if you are receiving an income based benefit, are you able to have an overdraft and credit card facility as long as the credit limit is under 6K

 

Thanks

[id6052]

you can have an overdraft/credit card facility of any level

[joeblogs]

I will rephrase my question to avoid confusion.

 

Do you have to inform the DWP if you are in receipt of an income based benefit and you have an overdraft and credit card facility and the credit level is under 6K as I am confused as to whether the DWP would consider this as savings or available income.

 

Thanks

[Nystagmite]

But surely it doesn't actually belong to you? In the sense that money in your bank account is yours and is in your name.

[joeblogs]

Thats exactly my understanding Nystagmite, if you had been given a cash lump sum as a gift over 6K then of course if you are on income based benefits you have to declare it, but I wasnt sure if a credit facility/debt under 6K had to be declared.

 

JB

[id6052]

I will rephrase my question to avoid confusion.

 

Do you have to inform the DWP if you are in receipt of an income based benefit and you have an overdraft and credit card facility and the credit level is under 6K as I am confused as to whether the DWP would consider this as savings or available income.

 

Thanks

 

There was no confusion, income based benefits are calculated based upon income and capital, credit cards and overdrafts do not constitute income or capital, and therefore are irrelevant whether for £6k or £60k

[joeblogs]

There was no confusion, income based benefits are calculated based upon income and capital, credit cards and overdrafts do not constitute income or capital, and therefore are irrelevant whether for £6k or £60k

 

Thanks for that info id6052, I thought I had not made my question clear, hence your first reply. I have heard so many conflicting opinions on this subject, that I thought it was best to ask the question on this forum. Many thanks.

[joeblogs]

Also I read in our local rag that a guy was was taken to court by the dwp after he admitted failing to notify them of his change in circumstances when he received a student loan.

 

The cash affected what he should have received in Jobseekers’ Allowance and housing benefits. He was ordered to pay court costs of £100 and to complete 120 hours of unpaid work.

 

His defence was that he had thought that he did not have to tell the DWP about his loan unless it was more than £8,000 and said said he made a mistake in not telling the authorities about his student loan.

 

Now the media dont say how much the Student Loan was but it was obviously less then £8,000, so how come he was prosecuted if there is no ceiling level? Which brings me back to my original question about credit facilities or is it only ok to have credit cards and overdrafts, but not a loan?

 

Thanks, JB

[id6052]

student loans are an anomoly

 

as there are special rules for student claims in relation to the calculation of their income

 

student loans (although subject to various disregards) are treated as unearned income for income related benefits, in the same way maintenance grants were treated

 

the strangest part though is that, if a student is eligible for a student loan and does not take it, they are treated as if they had taken it and it is included as income

[Nystagmite]

Students loans are completely different to overdrafts and credit cards.

[joeblogs]

Thanks for clarifying all this id6052 and Nystagmite.

[antone]

Students loans are completely different to overdrafts and credit cards.

 

Yes, quite. Having an overdraft available or headroom on a credit card does not count as capital. It should also be noted that if you take out a bank loan, this will be counted as capital.

[joeblogs]

Thanks antone, so can you please clarify, if you have used up your overdraft and credit card to its maximum limit, but the total credit is under £6,000 do you have to declare it to the DWP?

 

Also what if you want to apply for a loan under £6,000 to clear the overdraft and credit card debt, would you have to declare that?

 

I would appreciate your advice.

[antone]

Thanks antone, so can you please clarify, if you have used up your overdraft and credit card to its maximum limit, but the total credit is under £6,000 do you have to declare it to the DWP?

 

Also what if you want to apply for a loan under £6,000 to clear the overdraft and credit card debt, would you have to declare that?

 

I would appreciate your advice.

 

OK, well, step by step:

Overdrafts

 

When you claim most means tested benefits, they will ask you to declare the balance of your bank account(s). You should do so honestly, and if your account is overdrawn, specify a negative balance. You are not required to declare your overdraft limit. This does not affect your benefits. The amount is not relevant - £6000 or £60,000, it doesn't matter.

 

Credit Cards

 

You won't be asked to declare this. It's not a question that's asked. Not an issue for benefits.

 

Bank Loans

 

If you take out a loan, it will be treated as capital from the day you receive the payment, and it could affect your benefits if it's over £6000. So yes, in these circumstances you would be required to declare it. This applies even if the loan is to pay off other debt.

Student Loans

 

Declare them. These can be subject to special rules, and are sometimes counted as income rather than capital. The rules are complex, so I'd suggest anyone who plans to study and claim a student loan while also claiming means tested benefits should seek advice.

[joeblogs]

Hi antone

 

Thanks for taking the time to respond.

 

The pittance of a bank balance was declared when the income based benefit was first claimed. The overdraft was applied later which is under £2,000 . So what you are saying is that I dont have to declare the overdraft?

 

You also state that the amount of an overdraft is not relevant - £6000 or £60,000, so if you went overdrawn by £60,000 you wouldnt have to declare it? (not that that would happen lol)

 

The credit card also came along later.

 

All together both debts are less than £6,000.

 

Am I also correct in thinking that if I apply for a loan to clear the above debts, then that will be treated as capital and must be declared, even though it is to clear these debts?

 

Sorry to be a nuisance, just want it clear in my head.

 

JB

[count orlok]

if you took out a loan of say 10k to pay off your 6k CC and 4k OD 6k would be disregarded but the 4k would not even if you paid of debts with it. The reasoning would be that need not have paid it all out; you could have carried on paying the minimum amount on the CC and kept the OD just paying the charges, or you could even write to all your creditors and tell them while you are on benefits you will be making token payments.

[abc123def]

Joeblogs.

 

The question about student loans. To qualify for student finance you must be a full time student. Full time students are not eligible for JSA.

 

Student loans/grants HAVE to be declared but are not taken into account for many benefits for many people. Same as DLA MUST be declared for many things but is not taken into account.

 

As for amalgamating debt by getting a loan to pay off other debt imo this is the downward spiral towards deeper and unaffordable debt and rarely is that a wise move. I would get advice about your debt from one of three places that provide free advice. A debt management plan may be a better option, interest is usually frozen and you can eat away at the debt at an affordable level.

 

Consumer Credit Counselling Service - Website: CCCS Telephone: 0800 138 1111

National Debtline - Website: National Debtline Telephone: 0808 808 4000

Citizens Advice Bureau - Website: Citizens Advice or visit your local CAB centre (find nearest)

[joeblogs]

Thanks for replying Count Orlok and ABC.

 

The overdraft and credit both amount to less than £6,000. The credit was taken out after the income based benefit claim.

 

Therefore, Count Orlok, if for example I applied for a loan of £5,500 to clear both these accounts, would the DWP have to be advised as the loan to clear the debt is less than £6,000?

 

Thanks for all your help.

[antone]

Hi antone

 

Thanks for taking the time to respond.

 

The pittance of a bank balance was declared when the income based benefit was first claimed. The overdraft was applied later which is under £2,000 . So what you are saying is that I dont have to declare the overdraft?

 

You also state that the amount of an overdraft is not relevant - £6000 or £60,000, so if you went overdrawn by £60,000 you wouldnt have to declare it? (not that that would happen lol)

 

The credit card also came along later.

 

All together both debts are less than £6,000.

 

Am I also correct in thinking that if I apply for a loan to clear the above debts, then that will be treated as capital and must be declared, even though it is to clear these debts?

 

Sorry to be a nuisance, just want it clear in my head.

 

JB

 

You don't have to declare your overdraft, no, in the sense that you don't actually have to call them up pre-emptively and tell them. If at any point they ask your bank balance (say, if you're asked to fill in a JSA3 form for whatever reason) you should be honest - it won't affect your benefit. This is the case even if your overdraft is £60,000.

 

From a benefit point of view, you should declare capital of £5500 or more, although your payments won't be affected until it hits £6000. A loan would count as capital but, since you're talking about less than the lower limit, you should be fine.

 

At least, fine as far as the DWP is concerned, but I agree with Count Orlok that there may be other ways to tackle the problem. That, however, is outside of my field.

[joeblogs]

You don't have to declare your overdraft, no, in the sense that you don't actually have to call them up pre-emptively and tell them. If at any point they ask your bank balance (say, if you're asked to fill in a JSA3 form for whatever reason) you should be honest - it won't affect your benefit. This is the case even if your overdraft is £60,000.

 

From a benefit point of view, you should declare capital of £5500 or more, although your payments won't be affected until it hits £6000. A loan would count as capital but, since you're talking about less than the lower limit, you should be fine.

 

At least, fine as far as the DWP is concerned, but I agree with Count Orlok that there may be other ways to tackle the problem. That, however, is outside of my field.

 

Thanks very much antone for clearing that query up, also thanks to everyone else who contributed to this thread.

 

Joe