The biggest changes to Debt Relief Orders (DRO) for over 6 years have come in to force from 29 June.
With the Money and Pensions Service predicting an additional 3 million people needing debt advice because of the pandemic, the changes to the Debt Relief Order monetary limits will be welcome help to a number of vulnerable people.
It is predicted that the changes will mean that some 13,000 more people could benefit from a solution designed to help them deal with problem debt.
The changes announced by the Insolvency Service are
- Increase the threshold on the value of assets that a debtor can hold and be eligible to enter into a DRO from £1,000 to £2,000.
- Increase the value of a single motor vehicle that can be disregarded from the total value of assets from £1,000 to £2,000.
- Increase the level of surplus income received by the debtor before payments should be made to creditors from £50 to £75 per month.
- Increase the total debt allowable for a DRO from £20,000 to £30,000.
The changes came following a period of consultation with the sector by the Insolvency Service and are widely welcomed by Debt Free South West.
The application still comes with the £90 administration fee payable to the Insolvency Service which, despite the a review by the regulators, is 'a significant barrier to uptake'. On the whole the changes above do make DROs more accessible.
DROs are intended for those with problem debts which they cannot repay. For a period of 12 months, the debts are frozen and creditors cannot take action against a debtor. Debts that can be included in a DRO range from Council Tax and Utility Debts to credit cards and overdrafts.
A DRO must be set up by a "competent authority" with the partners that make up Debt Free South West able to advise a debtor and submit a DRO for them if suitable. This is a free service to the debtor, funded by the Money & Pensions Service and so there is never a need to pay a company to set a DRO.
If you want more information about DROs or our services, contact Debt Free South West on 0800 138 3422.