Debt Relief Orders were introduced in the UK as a new form of bankruptcy. A debt relief order is quicker and cheaper than bankruptcy and is suitable for debtors who have little or no assets or disposable income. A Debt Relief Order is a form of insolvency and will be subject to a public listing.

The number of personal insolvencies in the UK rose to 134,053 by the end of 2009. There has also been an increase in the number of people seeking debt solutions.  There are debt solutions such as, Debt Management Plans, Debt Relief Orders, Trust Deeds (Scotland only) and Bankruptcy.

A DRO is designed to help those who have no chance of ever being able to repay their debts and is stil a form of insolvency.  One major difference between bankruptcy and DRO’s is that the Official Receiver will have no legal claim over the debtor’s property.

Debt Relief Orders came into forcedebt-relief uk in England and Wales on 6th April 2009 and are intended to provide debt relief for people if:

* The debtor’s disposable income, must not exceed £50 per month.
* The debtor must be located in England or Wales.
* The debtor is unable to pay their debts;
* The debtor’s total unsecured liabilities must not exceed the sum of £15,000.
* The debtor’s total gross assets must not exceed £300.
* The debtor must not have previously been subject to a DRO within the last 6 years.
* The debtor must not be involved in another insolvency procedure

The only way that you can apply for a DRO is via organizations such as the Citizens Advice Bureau. They will decide if you do qualify for a Debt Relief Order using the information on your application form.  If it is agreed that your application meets all of the requirements it will be approved without any involvement of a court.

During the period that an order is in force, the debtor will be protected from enforcement action by their creditors.  A persons credit rating will be affected when in a debt relief order.

For the duration of the Order, the debtor will be subject to similar restrictions as in bankruptcy.  When in a DRO, The debtor must not obtain credit of £500 or more, without disclosing that they are subject to a DRO to the lender.  The debtor may not be involved with the promotion or the management of a limited company, without the court’s permission. The debtor may not carry on a business in a name that is different from the name under which the DRO was granted under, without telling the people that the debtor does business with, the name which they were granted the debt relief order.

Although DRO’s are aimed at providing a cheaper method of seeking debt relief, they are not an easy option to get rid of debt and should only be considered when other options, such as debt management are not viable.


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