Tackling your debts

New changes mean that more people can now get a Debt Relief Order and avoid bankruptcy

Posted 16 January 2015

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If you’re struggling with unmanageable debts, you may now be able to qualify for a debt relief order, as the maximum amount of debt that can be covered has now been raised, starting from October 2015.


The Insolvency Service has announced changes to Debt Relief Orders, a low-cost way for some people to have their debts written off, meaning that thousands more people each year will be able to enter insolvency in this way and avoid the much more drastic and costly process of bankruptcy. Debt Relief Orders are available to borrowers in England, Wales and Northern Ireland … different debt solutions apply in Scotland.


The maximum amount of debt a person can have to enter a debt relief order has been increased from £15,000 to £20,000, as of October 2015. The government said that this will allow 3,600 extra people with problem debt to be able to use the orders every year, a move that has been welcomed by debt experts. The rules for bankruptcy have also been changed, as the minimum debt level at which a person could be forced into bankruptcy has been raised from £750 to £5,000.

The difference between bankruptcy and Debt Relief Orders

If you’re struggling to repay your unsecured debts and don’t think you’ll be able to pay them off, you may have looked into bankruptcy. This means that all of your unsecured debts will be written off, and your assets may be sold so that your lenders can recoup some of the money you owe, which could include your home if you’re a homeowner. However, bankruptcy is expensive … you have to pay a total of £705 in bankruptcy fees, including a £180 fee to the court and a £525 fee to the Official Receiver. If you can’t afford this, you may be eligible for a Debt Relief Order (DRO).


A Debt Relief Order is similar to bankruptcy but a lot cheaper … you only have to pay £90 to the Insolvency Service and this can be covered in instalments over a six month period. However, you have to have a low income and few assets to qualify for a DRO. Your monthly disposable income or benefits has to be less than £50 after living costs have been deducted, and your assets must total £300 or less, as well as a car worth up to £1,000.


The maximum amount of unsecured debts you could have to apply for insolvency this way used to be £15,000 but this will rise to £20,000 under the new rules. If you were considering a DRO before but owed over £15,000, the change could mean that you’re now under the threshold.


Taking out any form of insolvency is a serious decision, and should only be taken if you can’t see any other alternative. Getting help early is the best way to tackle problem debts, so you could consider talking to an expert, like the ones at the Debt Advisory Centre. You don’t have to struggle alone - they will be able to advise you on the types of debt solutions … some of which fees are payable for. The important thing to remember is that there are always options open to you, so don’t suffer in silence. Talking to someone is the first step, and you could start to find a way to get back in control of your finances.

by Emily Bancroft

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.