The truth about bankruptcy
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What you need to know about the changes to DRO and bankruptcy.
Debt relief orders used to be quite tightly restricted to people who had less than a certain amount of debt and only a few assets, which meant that lots of people missed out on what is a very useful debt solution.
However, from today, 1st October 2015, the entry criteria have been changed. So, you’ll now be able to consider entering into a DRO if you have up to £20,000 of debt, that’s an increase of £5,000 from the old limit of £15,000. The value of assets you can have will also increase - from just £300 to £1,000, plus a vehicle worth up to £1,000 too. The maximum surplus amount of income you can have per month, while on DRO, will remain at under £50. Surplus income is simply a fancy way of saying the money you have left over, after you’ve paid for your essential bills – like your rent, food, council tax and so on.
Whilst the DRO criteria are being loosened, the rules on bankruptcyre being made tighter, which should help reduce the number of people forced into bankruptcy by one of their lenders. The government is increasing the creditor petition level, from £750 up to £5,000: this is the amount of debt you have to have with a lender for them to force you into bankruptcy. The increase will prevent people who only owe small amounts from being forced into bankruptcy, which can affect your financial life for many years into the future.
Both these changes are great news, because they make thousands more people eligible for DRO than before and they’ll keep people out of bankruptcy, who may have been forced into it by a lender in the past. According to the government, the new changes will allow approximately 3,600 more people to enter into DROs – that’s 3,600 people relieved of the stress of debt.
What’s prompted the changes?
Apparently, the changes were prompted by a survey that showed 96% of people on DROs would not have been able to cope without it. You may ask yourself why the government would be bothered about providing protection for people who have accumulated so much debt it’s become unmanageable. Well, there’s good reason for the government wanting to reduce the numbers of people in unmanageable debt – mental wellbeing! In fact, the survey showed that 79% of people said the relief a DRO had a positive impact on their health, which is great!
The facts about DROs
So, that’s all the big news about DROs and bankruptcy, now here are some facts and figures about DROs to finish off.
Since their introduction in England and Wales in 2009, there have been 140,861 DRO orders made. Just 310 orders were revoked – the fancy name for cancelled – in 2013/14 and most of these were due to people having more assets than they are allowed under the DRO rules. Remember that to enter a DRO you pay a single £90 fee to the Insolvency Service, there are no other charges.
And that’s it, apart from to say if you have unmanageable debt and you’d like to find out whether you are eligible for bankruptcy or a DRO, call us and have a chat, or if you‘re the shy type, you can chat live with our expert advisors, or send us an email.
Remember, all debt solutions come with up and down sides. You can find out more about the ones related to DROs here.
by Shelley BowersBack to blog home