Debt Relief Orders
Debt Relief Orders were introduced to England & Wales in 2009 to provide a quicker and simpler alternative to bankruptcy for people who have limited means; that is, people who are non-homeowners, and have less than £300 worth of assets and less than £50 per month disposable income. One year after a Debt Relief Order is declared, the debts listed in the Debt Relief Order are discharged (written off).
An Alternative To Bankruptcy
The legal process of bankruptcy can be a prolonged and,paradoxically, a surprisingly expensive experience. (At the time of writing it costs around £600 to declare bankruptcy)
Relevant to anyone matching the criteria while living in England or Wales, a Debt Relief Order (DRO) is a simpler version of bankruptcy. A Debt Relief Order may be a viable possibility for debtors with assets totalling less than £300, and less than £50 per month disposable income; if this is the case, it is possible to apply without attending court, and the process costs £90, with the fee payable in instalments if necessary.
The moratorium period of a Debt Relief Order is one year; after this period the debts listed in the Debt Relief Order will be discharged, and the debtor will be free from those debts.
The qualification criteria for a Debt Relief Order are very well defined, as this type of debt solution is targeted to a very particular type of debtor.
Qualifying Criteria For A Debt Relief Order
To apply for a Debt Relief Order as opposed to bankruptcy, you must be unable to pay your debts and meet clearly defined criteria including:
- Live in England or Wales or in the last 3 years have been resident or carrying on business in England and Wales
- Total value of unsecured debt is less than £15,000
- Monthly disposable income of less than £50
- Gross value of assets less than £300
- If a car is owned then it must be worth less than £1000 (exemptions include trade vehicles or vehicles adapted for physical impairment)
- Must not have applied for a Debt Relief Order within the last 6 years
- Must not be currently involved in some other insolvency procedure(including; bankruptcy itself, an Individual Voluntary Arrangement, or another Debt Relief Order)
How Do I Apply For A Debt Relief Order?
A Debt Relief Order should be viewed as being very similar in seriousness to a bankruptcy. As with bankruptcy, Debt Relief Orders may be reported in the public media.
Debt Relief Orders can only be administered by officially-appointed “Approved Intermediaries”.
Payplan is a ‘competent authority’ who employs approved intermediaries who can administer your Debt Relief Order. We would review your situation and assess your eligibility, and then if appropriate file the application on your behalf. We do not make a charge for this service.
What Happens If I’m Eligible For A Debt Relief Order?
The Debt Relief Order remains active for one year. For this moratorium period, the applicant:
- Is obliged to work with the Official Receiver and provide any financial details as requested
- Is protected from the creditors named on the Debt Relief Order
- Is expected to inform the Official Receiver if the applicant ’s circumstances change (eg, if the applicant unexpectedly comes into money) as this could mean they no longer meet the Debt Relief Order criteria
- Will be free from those debts after the 12-month period has elapsed.
What Else Might Affect My Eligibility For A Debt Relief Order?
In addition to the criteria set as eligibility guidelines above, there are some other restrictions to bear in mind that may adversely affect a successful Debt Relief Order application:- If the debtor has given away any property or sold it for less than its true value in the last 2 years, this may affect the determination of their application.
- If the debtor has preferred any creditors over others in their payments within the last 2 years, this may affect the determination of their application.
What Kind Of Debts Are Applicable To A Debt Relief Order?
The following types of debt can be named in Debt Relief Orders:
- Rent
- Electricity
- Water rates and sewerage charges
- Gas
- Telephone
- Council tax, business rates & community charge
- Tax & National Insurance
- Credit Cards
- Overdrafts
- Loans
- Goods or services that the debtor has received
- Benefit overpayments & social fund loans
- Money owed to employees
- Hire purchase & conditional sale
- Customers who have paid for goods or services that the debtor has not supplied
- Creditors claiming their own goods are in the debtor’s possession
What Next?
If you think you may be eligible for a Debt Relief Order, or if you’d like free advice to see if another debt solution may be more beneficial to your circumstances, then please call us any time on 0800 280 2816 for free, impartial and confidential advice.
