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Debt Relief Orders

Published Monday, December 16, 2019

This briefing paper summarises the main features of Debt Relief Orders with emphasis on the eligibility criteria.

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Introduced under the Tribunals, Courts and Enforcement Act 2007, Debt Relief Orders (DROs) came into force on 6 April 2009. In a nutshell, a DRO is a way for a debtor to have his/her debts written off if they have a relatively low level of debt and few assets. To apply for a DRO, the applicant must satisfy strict eligibility criteria.

Assuming a debtor qualifies for a DRO, the order will freeze his/her debt repayments and interest for 12 months. During this time creditors cannot take debt recovery action without the court’s permission (i.e. there is a moratorium). At the end of the year, the debtor will be free of all the debts listed in the order provided his/her circumstances have not changed. In effect, debts are written-off (i.e. “discharged”); the debtor won’t have to pay them.

DROs are a cheaper option than going bankrupt. Another important benefit is that DROs are administrative rather than court-based; they are made by Official Receivers working in partnership with the professional debt advice sector. In a nutshell, the aim of a DRO is to provide:

  • a low-cost debt remedy aimed at the financially excluded who have relatively low liabilities, little surplus income and few assets;
  • a workable debt relief remedy for those who cannot take advantage of other debt remedies, such as Individual Voluntary Arrangements (IVAs), and where bankruptcy would be disproportionate;
  • a fresh start for vulnerable people trapped in debt.

It should be noted that a DRO is only available if the debtor lives in England, Wales or Northern Ireland. DROs are not available in Scotland. However, a "Minimal Assets Process" bankruptcy offers a similar solution to Scottish debtors, but has different benefits, risks and fees associated with it.

This briefing paper summarises the main features of DROs with emphasis on the eligibility criteria.

 

 

 

Commons Briefing papers SN04982

Author: Lorraine Conway

Topic: Insolvency

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