What is a Debt Relief Order?

Published by Thomas Herold in Economics, Laws & Regulations

'Debt Relief Order' is explained in detail and with examples in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

A Debt Relief Order (also known by their acronym DRO) refers to a British legal system type of insolvency method which is relatively new. It was Chapter 4 from the Tribunals, Courts, and Enforcement Act 2007 that actually created these new orders. The advantage that such DROs offer is a less expensive, faster, and simpler means of receiving bankruptcy styled relief in Great Britain.

The DRO works well for those indebted individuals who possess no or very few assets (under 1,000 British pounds without owning a home), and who count tiny disposable income levels (which have to be under 50 pounds sterling each month). Individuals who meet these criteria and several others may pay only a 90 pounds one time fee and then make application for the Debt Relief Order without a court appearance. Participants can even pay this fairly reasonable fee in a period of installments before they file the application for the order. Such DROs took the full force of law for both England and Wales on April 6th of 2009.

There are a range of specific requirements that individuals must meet in order to qualify for such a Debt Relief Order. It must be clear the persons can not pay their debts. They must not owe more than 20,000 pounds in total unsecured bills. Homeowners do not qualify, nor do those who have over 1,000 pounds in total gross assets. They can only keep their car if its value is under 1,000 pounds. The debt holder has to live in Wales or England or at least have been resident or engaged in business in either place within the past three years. They also may not have been issued a DRO in the prior six years.

Besides this the indebted individuals may not be part of any other kind of insolvency proceedings. These include bankruptcies which are not yet discharged, voluntary individual arrangements, present debt relief restrictions, present bankruptcy restrictions, a bankruptcy petition, or an interim order. It is true that these Debt Relief Orders are still insolvency forms that will be publicly listed in the insolvency services website.

In order for Debt Relief Orders to be successfully implemented, there must be a government approved intermediary who handles the event with the relevant authorities. For intermediaries to be approved, they generally have to be debt advice organization personnel which have experience as debt advisors. Some of these approved organizations include the Consumer Credit Counseling Service, one of the Citizens Advice Bureaus, Baines and Ernst National Debtline, Think Money, Payplan, the Institute of Money Advisers, and members of the entity Advice UK. Any of these approved intermediaries are able to consider the information of the persons applying, discern if they are DRO eligible, and finally make an online application on their behalf. These intermediaries who are approved do not charge fees to submit such applications.

The Official Receivers are able to issue the Debt Relief Orders after they obtain both the fee and the application. No court involvement is necessary if the applicant is eligible. Otherwise they will reject the application out of hand. These Official Receivers also have the authority to rescind these DROs if more relevant information on the debtors’ financial conditions appears after the order has been granted. There are also criminal charges and penalties allowed by the British law if the applicants knowingly perjure themselves or provide deliberately misleading information on their financial conditions, assets, debts, and other personal financial costs.

Back in November of 2014, the New Policy Institute released data (research funded by the Trust for London) on the quantities of debt relief orders throughout different parts of the United Kingdom. Unsurprisingly, the total numbers of these DROs for London in the years of 2009 to 2013 proved to be vastly less than the rest of England’s average.

Free Download (No Signup Required) - The 100 Most Important Financial Terms You Should Know!
This practical financial dictionary helps you understand and comprehend the 100 most important financial terms.

The term 'Debt Relief Order' is included in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.