Debt Relief Orders (DRO) - Information & help thread

Insolvency Service reforms helps more vulnerable people trapped in debt

28 March 2011 16:30

Insolvency Service (National)




Edward Davey, Business Minister with responsibility for the insolvency regime today welcomed that an amendment to the Insolvency Rules 1986 from 6 April 2011 will allow debtors with an approved pension access to the Debt Relief Order (DRO) regime.

Drawing attention to the change, Edward Davey, said:

“The insolvency regime exists to free people from unmanageable debt and support them in making a fresh financial start, subject to some conditions. This common sense change will allow those who were previously unable to access a Debt Relief Order, because they had accrued some rights to a pension, fair use of the insolvency regime.”

DRO’s are an alternative to bankruptcy for people struggling with unmanageable debts of under £15,000, but with few assets and little income. The legislative change will bring the arrangements for accessing DRO’s into line with those for bankruptcy and follow on from a consultation prompted by debt advice agencies. They raised concerns that some people were excluded from this debt relief arrangement because of future pension rights.

Commenting on the changes Una Farrell from the Consumer Credit Counselling Service said;

“Since they were introduced two years ago, debt relief orders have been an important source of debt relief for many who, for whatever reason, are unable to repay their debts. We welcome the government’s removal of this anomaly today. The change will allow thousands more to access the debt relief they need and the chance of financial rehabilitation.”

Citizens Advice Chief Executive Gillian Guy said:

“This change will address an issue that has been of great concern to us. Bureaux reported seeing numerous people on very low incomes have their applications rejected because of very small pension funds, despite meeting the rest of the criteria for a Debt Relief Order. It will offer some light at the end of the tunnel to people for whom insolvency is the most appropriate option.”

DROs were introduced in April 2009 following research that identified that there were people in long term debt difficulties who had nothing to offer their creditors and who could not afford to make themselves bankrupt. Delivered in partnership with the professional debt advice sector, DROs provide low cost, easy access to debt relief for those overwhelmed by relatively low levels of unmanageable debt.

To use the DRO procedure individuals must meet a strict eligibility criteria of having assets valued at less than £300, debts of no more than £15,000 and surplus income of less than £50 per month. Currently, if someone has a pension that is worth over £300, they are not eligible to apply, even if the pension is small and not receivable for many years.

For more details on the changes please see http://www.legislation.gov.uk/uksi/2011/785/contents/made