Debt Relief Order

In April 2009, the Government introduced a new way of dealing with unsecured debts known as a Debt Relief Order or DRO.

This is an alternative to full bankruptcy, but with the same restrictions but at a fraction of the cost. The fee to apply for a Debt Relief Order is £90. The fee must be paid before the Debt Relief Order can be approved. You have a maximum period of 6 months in which to pay this fee.

Debt Relief Orders are available through Competent Authorities who have been authorised to undertake submission of the orders to the Insolvency Service. Each Competent Authority will have Approved Intermediaries who have been authorised to submit the Debt Relief Order application for you.

In order to consider a Debt Relief Order you have to meet certain conditions.
1. Qualifying debts of under £15000
2. Surplus income of no more than £50 per month
3. Assets totalling less than £300, including any pension fund.
4. If you have a vehicle, it should be valued at no more than £1000
5. You must not own or have an interest in a mortgaged or a property that is owned outright.
6. Live in England or Wales or have lived and or carried on a business in England or Wales within the last 3 years.
 

Qualifying debts are –

1. Personal loans, credit cards, overdrafts, store cards or catalogues
2. Utility arrears
3. Overpayment of benefits, tax credits
4. Hire Purchase and Conditional Sale agreements

Non-Qualifying debts are –

1. Student Loans
2. Court Fines
3. Child maintenance payments including debts to Child Support Agency.

A Debt Relief Order lasts for 12 months but does not clear your debts until the end of the period. During this time, no further action can be taken against you as continue to meet the Debt Relief Order criteria.

If during the 12 months your situation improves, you need to let the Official Receiver know.

You may be asked to complete a new financial statement and if your surplus income is now in excess of £50 per month, your Debt Relief Order could be revoked and you may become liable to pay the debts again.
If you come into additional funds or inherit assets you must also let the Official Receiver know. He will assess your case and advise what action is necessary.

Like bankruptcy, there are certain restrictions in a Debt Relief Order. These include not obtaining credit of more than £500 without advising the lender that you are subject to a Debt Relief Order and not carrying on any Directorship of a Ltd company without leave of the Court

If you do not adhere to the terms of the Debt Relief Order the Official Receiver can impose a Debt Relief Restriction Order on you, which would lengthen the time that you are restricted on doing certain things.