The Government is to increase the maximum amount of debt covered by Debt Relief Orders (DROs) in October 2015 to £20,000.
Often called “bankruptcy light”, Debt Relief Orders offer a cheap alternative to bankruptcy for people with lower levels of debt.
The upward increase in the maximum debt level for DROs will be welcomed by indebted individuals, debt charities and professional debt and insolvency organisations across England and Wales and opens up the opportunity to resolve debt problems cheaply and simply for many more people. In fact the Government’s own figures suggest that an extra 3,600 people per year will be eligible for a Debt Relief Order under the new rules.
Introduced in 2009, Debt Relief Orders have proved a popular choice for debtors and statistics released just last week by the Insolvency Service show that 26,688 DROs were granted in 2014. Indeed, since 2013 the number of DROs issued in England and Wales has exceeded the number of Bankruptcy Orders granted by the Courts.
With the costs of filing a debtor’s bankruptcy petition currently £705 for most people, Debt Relief Orders are a much cheaper debt solution costing a fixed fee of £90 to set up.
A common complaint in recent years, particularly amongst debt charities, is that there has been an inadequate range of personal debt solutions in this country and with bankruptcy being so expensive, many people have not had access to the right means of sorting their debts out. The increase in the debt levels for DROs, coupled with an increase in the minimum amount for which somebody can be made bankrupt to £5,000, indicates the Government’s intentions to bring some much needed reform to personal insolvency legislation.
In addition to the increase in the level of debt covered, the Government also announced that the amount of assets you can own when applying for a Debt Relief Order will increase to £1,000. Presently the figure is just £300. Furthermore, the figure excludes a motor vehicle for which another £1,000 value is permitted.
Other criteria that indebted individuals must meet to apply for a DRO remain unchanged and are highlighted here.
Call us now if you think a Debt Relief Order is right for you.