Uptake on the UK governments new Debt Release Orders has been much lower than was expected by the major debt management providers. A number of reasons have been suggested for this, and one of the most popular amongst industry insiders has been pensions.
Debt Release Order are debt management solutions which became available this April, created for people with lower levels of debt and assets than those who are eligible for IVA’s . To qualify for a DRO a person needs have debt of less than 15,000, be unable to meet their debt commitment and own assets of value of no more than 300.
Pensions became an issue because with DRO’s as unlike other forms of debt management, pensions are seen as asset. Virtually all pensions have a value far in excess of 300, therefore any kind of viable pension will disqualify a person from applying for a Debt relief Order.
Debt Industry insiders see this as an oversight on made by the UK government, as both bankruptcy and IVA’s do not usually consider a person’s pension in any way shape or form. Many experts within the debt industry are blaming the inclusion of pensions as a major reason why DROs have underachieved so significantly.
Other reasons mooted for the poor performance of debt relief orders have been the low fees which can be charged for DRO’s by insolvency practitioners ,and the low numbers of companies who have be accredited to perform DRO’s. Perhaps in the current economic climate, creditors are just more likely to agree to an informal arrangement such as a Debt Management Plan.
Whatever the reasons or group or reasons really is, the under performance on debt relief orders against predictions has been substantial. Mark Sands from KPMG has said that they expect the uptake of Debt Relief Orders to come nowhere near their initial estimate of 150,000 before the end of the year.
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