The Debt Relief Order couldn't have come at a better time. A Citizens Advice Bureau (CAB) report revealed that 58% of clients had no spare income to pay off debt. The CAB are dealing with 7,241 new debt problems each day. With unemployment continuing to go up, financial problems are set to worsen.
What is a Debt Relief Order (DRO)?
A DRO is a viable alternative to an Individual Voluntary Arrangement (IVA) or going bankrupt. This debt solution is handled by an intermediary, an experienced debt advisor. The intermediary will provide general advice and make sure that the debtor has complied with the eligibility criteria.
It is aimed at assisting people on low incomes that also have minimal assets. For the outlay of just £100, it gives them the chance to become debt free in just 12 months. Once a DRO is in place, no form of creditor harassment in relation to personal debt is permitted.
It is a form of insolvency so will result in a bad credit rating for those opting for this debt solution. However, this is unlikely to affect most people with financial difficulties as the majority already have a poor credit history. The matter will appear on a centralised government Insolvency Register.
Eligibility for a Debt Relief Order
- The debtor is unable to make payments on outstanding personal debts.
- The debtor’s total unsecured debts must not exceed £15,000.
- The debtor’s total gross assets must not exceed £300.
- The debtor’s disposable income, after household expenses, mustn't exceed £50 per month.
- The debtor shouldn't be: an undischarged bankrupt, subject to a Bankruptcy Restriction Order (BRO) or already in an Individual Voluntary Arrangement (IVA).
Restrictions once the Debt Relief Order is in Place
- The debtor must not obtain credit in excess of £500 without disclosing that they are in a DRO.
- The debtor cannot carry on business in a name different to that when the DRO was granted without informing the affected parties.
- The debtor may not be involved with the management or formation of a limited company.
- The debtor may not act as a company director without permission from the court.
- The debtor is only allowed to enter one DRO every six years.
Write-off Debt Without Going Bankrupt
A DRO is an effective debt free solution for those who meet the eligibility criteria. As the debtor doesn't have any disposable income or assets, no repayment plan needs to be drawn-up.The debtor will normally be discharged from a DRO after just 12 months.
Sources
"Debt relief order UK information site." Debt Relief Order UK.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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