If you don’t qualify for an Individual Voluntary Arrangement (IVA) or a Debt Management Plan (DMP), it may be that you do qualify for a Debt Relief Order (DRO).
Debt Relief Orders came into force on 6th April 2009.
The basis of the Debt Relief Order legislation is to find a binding alternative, recognised in law, for a small but specific group of debtors who can’t get debt relief through other means.
It is aimed at debtors who owe up to £15,000 of unsecured debt, who do not own property or have assets of £300 or less and who have a disposable income after all essential costs of £50 or less.
When a Debt Relief Order is applied for, the application is processed by one of the trusted intermediary bodies set up to administer the initial application.
The intermediary bodies will prepare and scrutinise each case to ensure that it meets the requirements of the Debt Relief Order and then submit it to the Official Receiver. He will then issue the Debt Relief Order, side stepping the expensive court costs associated with Bankruptcy.
Once granted, the debtor will not be required to make any other repayments toward their debts during the time the order is in place and, assuming their circumstances do not change during this time, their debts will be written-off when the Debt Relief Order comes to an end after 12 months.
Here are the qualifying criteria that an applicant must meet before a Debt Relief Order can be applied for.
A debtor must…
• Be unable to pay their debts;
• Have unsecured debts of less than £15,000;
• Have assets of less than £300, excluding a car upto a value of less than £1,000;
• Have surplus income of less than £50 per month;
• Be domiciled in England or Wales, or for the last three years have been resident or carrying on business there.
• Not have an existing Bankruptcy Order, Bankruptcy Restrictions Order or Individual Voluntary Arrangement or have had a Debt Relief Order in the last six years.
The Debt Relief Order is aimed at helping the very poorest members of society who are not home-owners, who have no realisable assets of more than £300, who are typically dependent on state benefits or very low incomes, who are in debt due to a crisis or a life accident, who still wish to pay their debt, but simply cannot.
When applying for a Debt Relief Order there will be a standard administration charge of £90, much cheaper than the cost of a Bankruptcy which can have a prohibitive cost of £520 per person. The Debt Relief Order takes some of its ideas from the current Bankruptcy rules but it has been adapted for simplicity and cost efficiency.
The order will be entered onto the Insolvency Register and credit agencies will be able to use the information for their records.
The order will last for 12 months and, at the end of that time, the debt owed will be discharged leaving the debtor completely debt free.
The creditors will have rights of redress similar to those for Bankruptcy, if it is found that the application was fraudulent or if the debtor receives a windfall payment.
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