In March 2009 debt relief orders were introduced on the back of 2007 Parliament legislation as new form of bankruptcy to the UK. They were designed as simpler forms of insolvency for those with few assets, and relatively low debt levels. Some have questioned whether the qualifications for Debt Release Orders would mean that only a limited number of people struggling with debt issues will qualify for DROs.
It was set up to be an alternative to Individual Voluntary Arrangements, a debt management plan or a bankruptcy. The aim is to create a debt solution which is easier quicker, and cheaper to implement than existing arrangements.
To qualify for a DRO you must have a limited disposable income of less than 50 per month ,less than 300 of assets (including houses), debts which you cannot pay, and no more than 15,000 of debt.
DROs can only be completed by an appointed government bodies, these are limited to 5 registered charitable agencies and a commercial debt Management Company. Currently there are no plans to for government to appoint anyone else.
A person must pay 90 to undergo a DRO, and then the official receiver will process this usually without reference to the courts.
In this process a person is free from charges and interest from the creditors and will be free from all their debt at the end of term of the DRO which is usually 12 months. However they are expected to follow all legitimate instructions from the official receiver, and would be expected to make payment to their creditors if their financial situation improves within the life of the DRO.
A DRO will be noted on the insolvency service website, and will have an adverse effect on a person’s credit status for a protracted period of time after the debt relief order has been completed.
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