Debt Relief Orders a New Form of Bankruptcy
New Debt Help for Those with less Than £15,000 of Personal Debts
Jul 20, 2009
The overall aim of a Debt Relief Order, a less formal type of bankruptcy, is: “To release an individual from overwhelming debts.” says the Consumer Credit Counseling Service (CCCS).
Some of the qualifying conditions for Debt Relief Orders are:
- No more than £15,000 of personal debt
- Debts excluded are: student loans, CSA arrears, criminal court fines (sample only)
- No more than £50.00 per calendar month surplus income, after household priority bills have been paid
- No more than £300 worth of assets, which will include savings or items of value: shares, cars and antiques
- Homeowners are excluded
- The debtor must live in England and Wales (the independent debt advice agencies listed at the end of this article can advise of the position in Scotland)
A Debt Relief order can be applied for online with what the Insolvency Service call an “approved intermediary”, in essence a trained debt adviser. The application with a fee of £90 is sent to an official receiver who is able to grant the order without the involvement of the court. However an official receiver is able to delay proceedings if further information is required.
Effects of a Debt Relief Order
During the period that the order is in place, the debtor will:
- Be protected from enforcement action by the creditors included in the application
- Be free from the debts included in the Debt Relief Order, normally after one year
- Be expected to repay their creditors should their financial circumstances improve
It’s important for anybody considering this course of action to remember that not all debts can be included in the order and creditors who wish to be excluded from the order can apply to the court for leave to pursue the outstanding debt.
Similar to a Bankruptcy Restrictions Order
A Debt Relief Order comes with a warning to those who believe it is the way forward for them. An official receiver has the authority to apply for a Debt Relief Restrictions Order, similar to a Bankruptcy Restrictions Order which will” “Extend the period of restriction for up to 15 years for debtors who are dishonest or culpable.”
Insolvency – a Matter of Public Record
Answering some of the critics who said that a Debt Relief Orders is the soft option, UK Consumer Minister Gareth Thomas stressed that the orders are not an easy option for people in debt, as the insolvency will be a matter of public record.
The organisations listed below can help those looking for free and independent budgeting, financial planning or insolvency advice. They can also advise on an appropriate, approved intermediary.
- Consumer Credit Counseling Service (CCCS)
- Credit Action
- Citizens Advice Bureau
The information in this short article is not exhaustive and does not constitute financial advice.
Sources:
Directgov (UK government consumer help), Debt Relief Orders,
Consumer Credit Counselling Service (CCCS), Debt Relief Orders
The Insolvency Service, Debt Relief Orders
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