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Monday, 16th March 2009
Debt Relief Orders (DROs) became available on the 6th April 2009 and is a form of insolvency for people that have a certain amount of debt, little disposable income and few assets.
The DRO will help to place the least complicated debt discharge cases on a fast-track through the court system with no personal appearance at court required.
Who might DROs be suitable for?
People with relatively low liabilities, little surplus income and few assets and who are currently unable to access other forms of debt relief can apply. Those living with parents or in rented accommodation may also apply. Those that have a mortgage and are in negative equity will not be able to apply. So if you are a house owner you are not eligible.
How much will it cost me to get a DRO?
You will have to pay £90, however if you cannot raise the full amount when you apply for the DRO and you are on Job Seekers Allowance, then you will be offered six months to pay the £90 fee.
How can I get a DRO?
By seeking financial advice from a debt advisor and if a DRO appears to be appropriate, an approved intermediary, like Citizens Advice, will be able to help you complete an application. The intermediary may be the same person from whom advice was originally sought, or may be a further advisor that you are referred to once it is considered that a DRO is appropriate.
What are the requirements for a Debt Relief Order?
Will my car count towards an asset?
A car up to the value (using parkers guide) of £1,000 will be allowed and if it’s one that’s been specially adapted because you have a disability then that will be exempt.
I have a pension will this prevent me from proposing a DRO?
Most approved pensions will no longer count against the debtor/borrower and prevent a DRO.
How will a DRO be made?
DROs are applied for online, with an approved intermediary helping to complete an application.
Upon receipt of the application and payment of the fee, an Official Receiver is able to make the order, administratively, without the involvement of the court if it appears that the applicant meets the requirements.
The Official Receiver is able to refuse to make an Order or can choose to delay the decision pending further information from the applicant.
What are the effects of a DRO?
During the period that an order is in force, the debtor will:
As with other forms of personal insolvency, a DRO debtor's credit rating will be affected and there will be civil and criminal penalties for those who abuse the system.
The Official Receiver is able to investigate, either on his own account or as the result of an objection from creditors, and is able to revoke the order if the debtor is found to have failed to provide a full and accurate account of their financial affairs (for example, an understatement in their assets or income). Failure to provide such an account may result in civil and criminal sanctions.
What restrictions will be placed upon a person who has a DRO?
For the duration of the Order, the debtor will be subject to similar restrictions as in bankruptcy, and their details will be on the Individual Insolvency Register.
These restrictions include the following:
Furthermore the Official Receiver will be able to apply for a Debt Relief Restrictions Order, similar to the bankruptcy restriction order, which will extend the period of restriction for up to fifteen years for debtors who are dishonest or culpable.
I am a creditor and have information to indicate that the debtor does not meet the criteria, what should I do?
Provide that information to the Official Receiver who will consider every valid objection and is able to revoke a DRO if appropriate.
Aren't DROs just an easy way for people to run up debts then get them written off?
DROs are aimed at people with no assets and a low income with no other access to debt relief and no prospect of the situation improving. If people do have assets or there is a possibility of an improvement in financial circumstances, a DRO is not an appropriate solution and other debt remedies are available.
Whilst the official receiver will not automatically investigate cases, he or she is able to do so. Investigations may lead for example to a revocation of the order or an application to court for a restrictions order, the effect of which is to extend the restrictions placed upon a person under a DRO for a period up to 15 years.
What is an intermediary?
A trained debt advisor who has been approved to act as an intermediary by a 'competent authority.' This will be the Citizens Advice Bureau, CAB.
It is anticipated that the intermediary will have completed basic checks on the information provided by the debtor, such as considering paperwork and evidence of income, liabilities. If it is considered that a DRO is suitable in the circumstances detailed by a debtor, the intermediary will help to complete the online application upon the debtor's request.
What is a competent authority?
A body designated by the Secretary of State as being able to authorise intermediaries. It will be a matter for the competent authority to determine the suitability of each intermediary that they authorise and to ensure those intermediaries have, for example, appropriate training, experience, complaints procedures, equal opportunities procedures.
Where can I get more information and an application form?
It might be a good idea to see if you qualify for a DRO, or see if there are alternative debt solutions that you could use instead.
To find out all your debt options call 03339 870 180 (Mon to Thu 9.00am - 8.00pm, Friday 9.00am - 6.00pm)