what is a debt relief order?

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  • Hi could anyone tell me that with a debt relief order the surplus amount you would have left has to be under £50, is that after you have payed all your debts repayments off every month or after?
  • i mean before you have payed towards your debts every month or after?
  • fatbelly
    fatbelly Posts: 20,380
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    i mean before you have payed towards your debts every month or after?

    You won't be repaying your debts if on a DRO. It's income surplus after essential household expenses.
  • SouthCoast
    SouthCoast Posts: 1,985 Forumite
    Update:

    National charity Citizens Advice today warmly welcomed the promise in the Queen’s Speech to introduce a new low cost, out of court insolvency remedy to help people in debt who are too poor to go bankrupt.
    But the charity added that it was deeply disappointed that proposals to regulate bailiffs had been ditched.

    http://www.citizensadvice.org.uk/index/pressoffice/press_index/press_20061117.htm
  • fatbelly
    fatbelly Posts: 20,380
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    SouthCoast wrote: »
    Update:

    National charity Citizens Advice today warmly welcomed the promise in the Queen’s Speech to introduce a new low cost, out of court insolvency remedy to help people in debt who are too poor to go bankrupt.
    But the charity added that it was deeply disappointed that proposals to regulate bailiffs had been ditched.

    http://www.citizensadvice.org.uk/index/pressoffice/press_index/press_20061117.htm

    Press release dated 17 November 2006 :eek:

    More recent info:
    DROs the official estimate of expected applicants

    Letter sent to CitA Specialist Support from the Insolvency Service 4/12/08
    The Insolvency Service, which is a Government agency and executive branch of The Department for Business, Enterprise and Regulatory Reform, often contacts organisations such as yours in relation to matters that may affect how you and your members operate. As such, I would like to take this opportunity to make you aware of a new form of debt relief.

    As a result of a consultation by the Department of Constitutional Affairs in 2004, it was determined that for some people who get into debt, the solutions that are available are not appropriate. As a result of this The Insolvency Service under took a consultation exercise in 2005 to deal with the perceived need to offer a remedy for such people. A proposal was put forward for a non-court based scheme of debt relief aimed at people who have no assets, a relatively low level of liabilities and no surplus income with which to come to an arrangement with creditors.

    The existing debt relief remedies either require the debtor to have assets or funds available to distribute to their creditors on a regular basis (for example Individual Voluntary Arrangements, County Court Administration Orders or a non statutory debt management plan) or have financial barriers that make them inaccessible.

    Therefore, in order to provide debtors with better access to debt relief, one of the measures introduced by the Tribunals, Courts and Enforcement Act 2007 was a new form of debt relief called a Debt Relief Order (DRO).

    DROs are expected to come into force on 6th April 2009. In contrast to other forms of debt relief, DROs are delivered in partnership with debt advisors, primarily from the advice sector. Representatives from the advice sector act as ‘intermediaries’ and assist debtors in making their application for a DRO to The Insolvency Service.

    DROs will not be available through the court system. Instead the orders will be made by an Official Receiver, and a separate unit for this purpose is being set up at the Official Receiver’s office in Plymouth. An application for a DRO will be made online, through an authorised intermediary who is a skilled debt advisor.

    In order to be eligible for a DRO a debtor must satisfy stringent qualifying conditions, including full disclosure of his income and expenditure. The principle parameters for a DRO are liabilities of less then £15,000, assets under £300 and a disposable income of less then £50 per month. The OR will then carry out certain checks to verify information provided.

    The proposed fee for a DRO will be £90.00; this covers the cost of the Official Receiver’s work in administering the application and making the order, and has been set to cover the cost of the actual work involved.

    Creditors who are included in the DRO will then be prevented from taking any action to recover or enforce their debts against the debtor. Generally those debts will be discharged at the end of one year.

    The Insolvency Service anticipates that there will be within the first year of DRO availability up to 21,000 DRO applications, with a middle estimate of 14,000. It is projected that this will rise to up to a maximum of 43,000 in the second year of operation, with a middle estimate of 26,000.

    I enclose for your information a brief ‘DRO background’ sheet. Further information on DROs including FAQ and a link to the primary and draft secondary legislation is available on: http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/DebtRelief.htm.
  • fatbelly
    fatbelly Posts: 20,380
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    Received today - this gives more detail and confirms the 'rumour' I had heard - that vehicles valued under £1000 (on Parkers Guide I believe) will be exempt. Government estimates of take-up are 14000 in the first year, rising to 43000. I believe this is an underestimate and that 60000 would be a better ballpark figure, perhaps even in the first year. And the major creditors are not going to like this!
    The Official Receiver will not routinely investigate the affairs of debtors subject to a DRO. However the Official Receiver retains significant powers of enquiry and enforcement (ranging from revocation of the DRO to criminal and civil sanction). This may be relevant where, for example, creditors advise the Official Receiver of substantial assets or liabilities not disclosed in the DRO application, but equally investigation may be arbitrary.

    Eligibility for a DRO
    In order to be eligible for a DRO a debtor must satisfy stringent qualifying conditions, including full disclosure of his income and expenditure. The principle (sic) parameters for a DRO are liabilities of less then £15,000, assets under £300 and a disposable income of less than £50 per month. The Official Receiver will then carry out certain checks to verify information provided. Applicants will be allowed to have a vehicle with a value of less than £1,000.

    Payment
    The fee for a DRO will be £90.00; this covers the cost of the Official Receiver’s work in administering the application and making the order, and has been set to cover the cost of the actual work involved. The DRO payment can be made by the client via ‘Pay Points’, will be made directly to the Insolvency Service and not to the adviser or their agency. The DRO application can only be finally submitted when full payment has been received by the Insolvency Service. Any money paid can be returned if the applicant does not wish to complete.

    In Perspective
    Although DRO’s are aimed at providing a cheaper method of seeking debt relief, they are not an easy option to resolving indebtedness. Debtors subject to DRO’s will still be subject to the same restrictions as bankrupts and will only be able to access a DRO once every six years. There will be a lasting impact on the debtor’s credit rating and the DRO will be displayed on the Individual Insolvency Register as currently happens in bankruptcies.

    One major difference between bankruptcy and DRO’s is that there is no debtor’s estate when a DRO is made, hence the Official Receiver will have no legal claim over the debtor’s property and will not be seeking to realise assets and pay dividends to creditors. It is a basic requirement of the DRO process that debtors do not have sufficient assets or surplus income to make any realistic payment towards their debts.

    Currently 11% of all bankruptcies would have qualified for a Debt Relief Order. The Insolvency Service anticipates that there will be within the first year of DRO availability up to 21,000 DRO applications, with a middle estimate of 14,000. It is projected that this will rise to up to a maximum of 43,000 in the second year of operation, with a middle estimate of 26,000.

    From April 09 Debt Relief Orders will be an option for clients to consider and organisations will therefore need to ensure that they are able to provide this service or have suitable referral systems in place to organisations which do.

    Further information on DRO’s including FAQ and a link to the primary and draft secondary legislation is available on:
    https://www.insolvency.gov.uk/insolvencyprofessionandlegislation/DebtRelief.htm.

    Competent Authorities
    The indication is that Competent Authorities will be announced in the New Year. Skilled debt advisers will have to apply to a Competent Authority to be an approved Intermediary. A Competent Authority will have the power to approve or decline the applicant and to continue to assess their suitability as Intermediaries.

    Intermediaries
    There are statutory conditions attached to becoming an intermediary, for example Intermediaries will need to be:

    • Not subject to a bankruptcy or a Bankruptcy Restriction Order
    • Able to prove their identity
    • Covered by an OFT Consumer Credit Licence (or exempt) and by suitable indemnity insurance
    • Suitably trained and experienced
  • fatbelly
    fatbelly Posts: 20,380
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    We now know the 'competent authorities' and some training (not enough places!!) is in place for the 'approved intermediaries', heading for a 6th April launch for DROs

    The 'competent authorities' are

    The National Association of Citizens’ Advice Bureaux (CAB)

    The Foundation of Credit Counselling (Consumer Credit Counselling Service)

    Institution of Money Advisers (IMA)

    Money Advice Trust trading as National Debtline

    Totemic Ltd trading as Payplan

    and (wait for it):

    Baines & Ernst Ltd :eek:

    I have the utmost respect for five of those six organisations!!
  • cabvol
    cabvol Posts: 39 Forumite
    fatbelly wrote: »
    We now know the 'competent authorities' and some training (not enough places!!) is in place for the 'approved intermediaries', heading for a 6th April launch for DROs

    The 'competent authorities' are

    The National Association of Citizens’ Advice Bureaux (CAB)

    The Foundation of Credit Counselling (Consumer Credit Counselling Service)

    Institution of Money Advisers (IMA)

    Money Advice Trust trading as National Debtline

    Totemic Ltd trading as Payplan

    and (wait for it):

    Baines & Ernst Ltd :eek:

    I have the utmost respect for five of those six organisations!!

    Oh really and which one do you not respect?
    I have little respect for one of them as well bet it is not the same as you.
  • This one maybe ....:D

    http://www.oft.gov.uk/advice_and_resources/resource_base/consumer-regulations/traders/447/1/
    cabvol wrote: »
    Oh really and which one do you not respect?
    I have little respect for one of them as well bet it is not the same as you.
  • LilacPixie
    LilacPixie Posts: 8,052 Forumite
    I personally think Bains and Ernst will use this as some free publicity plus they will use it to add some sort of implication of trust and honesty to their other areas of business.

    I have some very specific dealings with bains and ernst that leads me to believe they are not the correct company to be dealing with this.
    MF aim 10th December 2020 :j:eek:
    MFW 2012 no86 OP 0/2000 :D
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