• There is life after debt

    Do Not Panic

    There is life after debt

Debt Relief Orders (DRO)

In April 2009 a new process, Debt Relief Orders, became available for those persons who owe less than £15,000 and have no significant assets and nominal surplus income.

Similar to bankruptcy (known in the industry as “bankruptcy lite”), DROs will bring much needed relief to those on low incomes struggling to repay their debts.

A DRO applies similar restrictions to bankruptcy and is administered by the Insolvency Service (Official Receivers). However, no Court application or appearance is required and the process is commenced online.

The individual must apply via an approved intermediary and the cost is currently £90. No other fee should be charged to the individual.

For further information:

  • Download IPA “Dealing with Debt – A Basic Guide to Alternative Ways of Resolving Debt Problems”

Non-statutory Options

In addition to the new statutory DRO scheme, there are various non-statutory options available.

Informal arrangements, (i.e. negotiating with your creditors) can be conducted directly by the individual, or with the assistance of a professional money adviser (such as PCR), or via your local Citizens Advice Bureau (CAB).

There are also companies that broker “Debt Management Plans” (“DMP”). A DMP could be viewed as akin to an informal IVA. The individual pays in a monthly amount, which is shared out pro-rata between their creditors.

DMP providers generally charge an agreed percentage of the money you pay in. These charges are sometimes paid out of what the creditors receive and in other cases are payable by you in addition to what the creditors receive. Some providers have charitable status whilst others are profit-making organisations. We recommend that you clarify the structure and charges with any provider you are considering using prior to agreeing to a DMP with them.

DMPs can provide relief for those struggling to make monthly payments by reducing the amount they pay to one affordable amount. However, unlike IVAs, DMPs are not currently subject to statutory regulation, nor do they provide any element of “debt forgiveness” (i.e. you generally have to keep paying in until all your debts are paid off, which could be many years hence). There is also no automatic stop on the interest charged by creditors, so it is possible to pay in for a number of years only to find that your debts have not significantly reduced, or in some cases, have increased!

For these reasons, we do not conduct DMPs at PCR. We consider that they bring no greater protection than direct negotiation with the creditors and often need to be periodically re-negotiated.

We are, however, happy to assist in negotiating informal arrangements with creditors on a “time spent” basis. Alternatively, your local CAB may be able to assist you to do this, free of charge.

 

DOWNLOADS FOR FOR PERSONAL INSOLVENCY 

PERSONAL BANKRUPTCY
The Insolvency Service 'Guide To Bankruptcy' 
This guide tells you what happens if you are made bankrupt in England and Wales.
Link to www.gov.uk ››

 

INDIVIDUAL VOLUNTARY ARRANGEMENT (IVA)
The Insolvency Service 'Options for paying off your debts'
Guidance on possible alternatives for those that find themselves in debt.
Link to www.gov.uk ››

 


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