The insolvency service has recently announced changes to the eligibility criteria for a Debt Relief Order. These changes are to take effect from the 29th of June 2021.
What is a Debt Relief Order?
A DRO is designed to help those individuals with low income and few assets freeze their debt for 12 months and then, if their circumstances have not changed, write it off completely.
What Debt is qualified for a Debt Relief Order?
As a DRO is used to relieve the financial burden on lower income individuals, the debts qualifying for relief are broad, they include:
- Loans, Overdrafts, Catalogues, Credit Cards, Rent, Council Tax, Utility and phone bills, Benefit overpayments, In-store credit agreements, Money owed to HM Revenue & Customs, like Income Tax or National Insurance Contributions.
But do not include:
- Student loans, Social Fund loans, Confiscation orders, Magistrates court fines, Child support and maintenance arrears
Who is eligible for a Debt Relief Order?
Eligibility for a DRO is determined based on several factors, an individual might be eligible if you:
- Have lived in England and Wales or have, in the last three years, lived or carried on business in England and Wales,
- Are not subject to any other formal insolvency procedure,
- Have not had the benefit of a DRO in the six years,
- Are unable to pay their debts,
- Have total debts of less than £20,000, increasing to £30,000 from the 29th of June 2021,
- Have total assets of less than £1000, increasing to £2000 from the 29th of June 2021,
- Have a disposable monthly income of less than £50, increasing to £75 from 29th of June 2021,
What makes an individual ineligible for a Debt Relief Order?
As well as not meeting the above criteria, there are several other reasons which could mean you are ineligible. These include if:
- Your creditors have applied to make you bankrupt but the hearing has not yet taken place,
- You have petitioned for bankruptcy, but your petition has not yet been dealt with. Please note this does not apply if you have petitioned for bankruptcy and the judge has referred you for a DRO instead,
- You are currently bankrupt,
- You have an Individual Voluntary Arrangement or are applying for one,
- You have had a DRO in the last six years,
- You have been given a Bankruptcy Restrictions Order, a DRO or Undertaking.
How can I apply for a debt relief order?
You must appoint an approved debt advisor to administer a DRO. A list of approved intermediaries can be found here.Contact us