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Feb 17

Bankruptcy and DRO changes to help people struggling with debt

Posted on Tuesday 17th February 2015

Business Minister Jo Swinson recently announced plans to enable easier access to debt relief for financially vulnerable people.

But what do the changes involve and who are they going to help?

What are the changes?

Under the new changes, approximately 3,600 more people a year will be able to enter into a Debt Relief Order (DRO) – a low cost alternative to bankruptcy, designed for those with very low assets and income who are unable to pay off their debts.

The maximum amount of debt that can be covered by the plans will also change, increasing from £15,000 to £20,000. DRO asset limits will also be raised to £1,000, plus a vehicle (worth not more than £1,000).

Perhaps most significantly, the government is increasing the minimum level of debt for which someone owed money can force someone into bankruptcy from just £750 to £5000.

Empty wallet

Image by Kevin Cortopassi

Who will they help?

Evidence has shown that DROs help some of the poorest and most vulnerable people in society get back on their feet. A survey of DRO users found that 96% would have been unable to deal with their debts without a DRO, whilst 79% said the process had a positive impact on their mental health.

The new changes will significantly increase the number of people in debt who can get the help they need, without having to resort to bankruptcy, which has more serious consequences.

However, the changes won’t disadvantage those who are owed money, as eligibility for a DRO will still be limited to those with very low realisable assets and consequently no realistic ability to repay their debts.

Gillian Guy, Chief Executive of Citizens Advice said:

“Today’s changes will help people who are in serious, unmanageable debt to find a way out. Raising the bankruptcy debt threshold and the debt relief order limit will increase options for people who would previously have had no choice but to declare themselves bankrupt.

“Citizens Advice has called for both of these changes in order to protect people who might otherwise have been forced into losing their home, car, business or job over debts worth as little as £750. Under the new rules, creditors cannot begin bankruptcy proceedings until the amounts owed are much higher. More people will be able to make a fresh start by getting a DRO instead of having to file for bankruptcy, which is often more expensive way of dealing with debt.”

If you want to know if someone has a Debt Relief Order, our Debt Relief Order search will provide you with the information you need, including the DRO start date and their address.