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Debt Relief Order (DRO) eligibility criteria change announced article
Debt Relief Order (DRO) eligibility criteria change announced article

The Government has announced key changes to the eligibility criteria for Brits seeking to enter a debt relief order (DRO).

Reforms come following the Debt Relief Orders: Consultation on changes to the monetary eligibility criteria study, which invited industry leaders to share their thoughts on who should qualify for the solution.

Debt relief orders have long been considered a low-cost and simple way for people to access debt relief – particularly those with low levels of unmanageable debt and little way of repaying what they owe.

It’s hoped the amendments to the legislation following the consultation with key players in the debt advice and creditor community will support more people to manage problem debt in the wake of the COVID-19 pandemic.

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What is a debt relief order (DRO)?

A DRO is a debt solution available to people living in England, Wales and Northern Ireland who are unable to cover the cost of problem debt.

It may be a solution for people struggling with unsecured debts such as credit cards, rent arrears, utility bills or overdrafts.

It’s set up by a specialist adviser and the Insolvency Service with applicants required to pay a £90 set-up fee. This fee doesn’t need to be paid in one lump sum, but the application won’t progress until it’s been paid in full.

People who enter the DRO don’t have to make payments towards the debts included in the arrangement and can’t be forced by the people and companies they owe money to repay what they can’t.

Typically lasting for 12 months, most debts are written off at the end of a DRO.

 

How has the DRO criteria changed?

The consultation posed the question of eligibility of the debt relief order – particularly for those with low levels of assets and income who are in problem debt.

As the Money and Pensions Service suggests that significantly more people will require debt advice in 2021 than before the pandemic, the consultation hoped to secure greater debt relief options for those in need.

Following the consultation with industry leaders, the following changes are set to be implemented as soon as possible.

  •   Increase the threshold on the value of assets that a debtor can hold and be eligible to enter into a DRO from £1,000 to £2,000.
  •   Increase the value of a single motor vehicle that can be disregarded from the total value of assets from £1,000 to £2,000.
  •   Increase the level of surplus income received by the debtor before payments should be made to creditors from £50 to £75 per month.
  •   Increase the total debt allowable for a DRO from £20,000 to £30,000.

It’s expected that more than 13,000 additional people may be able to use DROs in the next 12 months compared to 2019 – that’s an increase of almost 50% on current numbers.

Speaking of the changes, Minister for Corporate Responsibility Lord Callanan said: “Debt relief orders help those with problem debt get to grips with their finances, these changes will enable more people experiencing problem debt to get a fresh start.”

The announcement of the DRO eligibility criteria changes come just a week after the latest government Breathing Space scheme was introduced to offer even further support to those living with debt.

 

Dealing with problem debt

If you’re struggling with problem debt and aren’t sure what support is available, talk to Creditfix. Creditfix is one of the UK’s largest debt help companies and has helped more than 182,000 manage what they owe.

Experienced advisers are on hand to offer guidance and support to help you find a debt solution tailored to your needs.

We understand that talking about debt can’t be hard. That’s why our advice is confidential and tailored to your circumstances.

We have a wide range of debt management solutions that could help you write off up to 81% of your debts

Check if you qualify

Maxine McCreadie

Maxine is an experienced writer, specialising in personal insolvency. With a wealth of experience in the finance industry, she has written extensively on the subject of Individual Voluntary Arrangements, Protected Trust Deed’s, and various other debt solutions.

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HISTORY

Our debt experts, and insolvency practitioners continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

May 13 2021

Written by
Maxine McCreadie

Edited by
Maxine McCreadie