Debt Relief Orders UK - New Bankruptcy Alternative

You must seek financial advice from a debt advisor who will assess your personal circumstances and determine whether or not a Debt Relief Order is appropriate for you.

An approved intermediary* acts as an intermediary between the person wishing to make an application for a debt relief order and the Official Receiver. The intermediary will be able to help you complete the online application.

The intermediary may be the same person from whom advice was originally sought, or may be a further advisor whom you are referred to once it is considered that a DRO is appropriate.

You cannot apply for a DRO without the assistance of an approved intermediary.*

To apply for a DRO involves payment of a fee which will be less than £100 (normally £90).

*An approved intermediary is an individual who has been approved by a competent authority for the purposes of The The Debt Relief Orders (Designation of Competent Authorities) Regulations 2009.

What are the requirements for a Debt Relief Order?

The requirements for a Debt Relief Order are as follows:

* The debtor is unable to pay his/her debts;

* The debtor's total unsecured liabilities must not exceed £15,000;

* The debtor's total gross assets must not exceed £300;

* The debtor's disposable income, following deduction of normal household expenses, must not exceed £50 per month.

* The debtor must be domiciled in England or Wales, or in the last 3 years have been resident or carrying on business in England or Wales.

* The debtor must not have previously been subject to a DRO within the last 6 years.

* The debtor must not be involved in another formal insolvency procedure at the time of application for a DRO, such as:

a) An undischarged bankrupt;

b) A current Individual Voluntary Arrangement;

c) A current Bankruptcy Restrictions Order or Undertaking;

d) A current Debt Relief Restrictions Order or Undertaking;

e) An interim order

f) A current pending debtor's bankruptcy petition in relation to the debtor but the debtor has not been referred to the DRO procedure by the court as a more suitable method of debt relief;

g) A current pending creditor's bankruptcy petition against the debtor but the debtor has not obtained the creditor's permission for entry into the DRO process.

Upon receipt of the application and payment of the fee, an Official Receiver is able to make the order, administratively, without the involvement of the court if it appears that the applicant meets the requirements.

The Official Receiver is able to refuse to make a Debt Relief Order or can choose to delay the decision pending further information from the applicant.

Whilst the Debt Relief Order is in force, the debtor will:

* Be protected from enforcement action by the creditors included in the application (bar certain creditors whose debts cannot be scheduled in the DRO and those creditors whose debts are included in the DRO but who have successfully obtained leave from the court to pursue their debts).

* Be free from those debts at the end of the period (normally 12 months from the order).

* Be obliged to provide information to and co-operate with the official receiver.

* Be expected to make arrangements to repay their creditors should their financial circumstances improve.

* As with other forms of personal insolvency, a DRO debtor's credit rating will be affected and there will be civil and criminal penalties for those who abuse the system.

The official receiver is able to investigate, either on his own account or as the result of an objection from creditors, and is able to revoke the order if the debtor is found to have failed to provide a full and accurate account of their financial affairs (for example, an understatement in their assets or income). Failure to provide such an account may result in civil and criminal sanctions.

Please note that the debtors details will be included on the Individual Insolvency Register, which is available to the public.

Furthermore the official receiver will be able to apply for a Debt Relief Restrictions Order, similar to the bankruptcy restriction order, which will extend the period of restriction for up to fifteen years for debtors who are dishonest or culpable.

For the duration of the Debt Relief Order, the debtor is subject to similar restrictions as in bankruptcy.

These restrictions include the following:

* The debtor must not obtain credit of £500 or more, either alone or jointly with another person, without disclosing that they are subject to a DRO to the lender.

* The debtor may not carry on a business (directly or indirectly) in a name that is different from the name under which they were granted a Debt Relief Order, without telling all those with whom the debtor does business the name under which they were granted a DRO.

* The debtor may not be involved (directly or indirectly) with the promotion, management or formation of a limited company, and may not act as a company director, without the court's permission.

* The debtor will only be able to obtain a Debt Relief Order once every six years.

As explained in the introduction, Debt Relief Orders are aimed at those individuals who have nothing to offer their creditors in terms of income or assets.

Whilst any improvements to providing debt relief are welcome, the effectiveness and success of the DRO remains to be seen.

Whilst falling house prices in the UK has left many with little or even negative equity in their properities, homeowners will NOT be eligible to apply for a Debt Relief Order.

So, as a nation of homeowners, this new legislation is probably not worth the paper it's written on, for a significant majority!!