Debt Relief Orders introduced in the U.K.

May 8, 2009 – 11:56 am – No Comment

Last month, Debt Relief Orders were introduced in the United Kingdom. A debt relief order is a form of bankruptcy where the party filing does not have to go to court and pays a small (90 pound) fee to file. The fee to file for a DRO is much less than the fee to file for full bankruptcy.

The requirements for filing for a DRO are from Think Money:

• The person filing can’t pay their debts.
• He/She must owe less than 15,000 pounds.
• He/She must have 50 pounds or less disposable income a month.
• He/She doesn’t own assets worth more than a total of 300 pounds excluding an automobile, under some special circumstances. Homeowners are not eligible.
• He/She isn’t currently involved in another formal insolvency procedure.
• He/She hasn’t been the subject of a DRO in the past 6 years.

In the year that the DRO is active, the person who filed for the order will be protected from enforcement action by the creditors listed in the application, be free from the debts at the end of the DRO, must cooperate with the Official Receiver, and will be expected to make arrangements and repay all creditors once their financial circumstances improve.

There are also certain circumstances, such as fraud when applying for the DRO that can result in prosecution, so if you know someone who is thinking about filing for a DRO, they must not put any fraudulent information on the application or fail to cooperate with the Original Register.

Even with the negatives to this, if someone is qualified to apply for a debt relief order and their income situation isn’t going to be getting better, that they can see, in the short term then it may be the best option for them.