Due to the high numbers of debtors being made bankrupt over recent years the UK Government came up with a solution which allowed debtors to become debt free without the need to file for bankruptcy. And this was how the Debt Relief Order (DRO) was born. It is thought that at the time of its introduction back in April 2009 around 10% of those being made bankrupt would have qualified for a Debt Relief Order.
A debt relief order is a form of insolvency for people who meet strict criteria. This is a fairly simple type of debt relief procedure, suitable for certain types of debts. If a debt relief order is obtained the debtor does not pay anything to his creditors, unless his circumstances alter during the 12 month period.
The Insolvency Service runs this service, in conjunction with debt advisers, called approved intermediaries. It is the approved intermediaries who will help you with your application to The Insolvency Service for a debt relief order. Debt relief orders are made by an Official Receiver.
Some of the criteria you must meet in order to apply for a Debt Relief Order are as follows:-
* Your total gross assets of the debtor should not be more than £300.
* You must owe no more than no more than £15,000.
* You must be resident in England or Wales, or at some time in the last 3 years have been living or carrying on business in England or Wales.
* Your disposable income should not be more than £50 per month (normal household expenses should be excluded).
* You must not be involved in any other formal insolvency procedures such as bankruptcy, Individual Voluntary Arrangement, or current debt relief restrictions order.
* Once applied for a debt relief order you will not be able to apply for another DRO within the next 6 years.
There is a fee to pay for a DRO, currently it is £90, and is non-refundable.
If the official receiver approves your application and grants a debt relief order, they will notify all the creditors listed in the order that a debt relief order has been made. This means that they cannot recover the debts you owe them. You must not make any further payments to the creditors who are included in the debt relief order. If the listed creditors ask you for payment during the period of the debt relief order, you should tell them that you are subject to a debt relief order.
As you can see from the above figures, a debt relief order will not be for everyone, simply because it is aimed at helping those debtors with very low incomes, virtually no assets, and owing less than £15,000. It is much easier and cheaper than going for bankruptcy, and you do not have to repay any more money to your creditors. But, it has to be said that for those who meet the criteria it is a more dignified way to cut bad debts than some other methods. Certain debts though are not included, including court fines, student debts and a few more.
You can check the UK government’s insolvency website which gives some further information about how a debt relief order works.
