Debt Relief Orders
Debt Relief Orders (DROs) provide debt relief for individuals who do not own their own home, have little surplus income, minimal assets and their debts are less than £15,000.
Individuals who qualify for a DRO must apply through an authorised intermediary and the cost is £90. The application is made to the Insolvency Service who will have discretion as to whether to make the DRO or not. The Court is not involved in the application.
Any individual subject to a DRO will be subject to certain restrictions which are similar to those restrictions placed on bankrupts, for example, on their ability to obtain credit. Their credit rating will also be affected.
A DRO provides an individual with protection from their creditors for a period of 12 months and if within that time the individual’s circumstances are unchanged the individual will be free from those debts.
The DRO will be overseen by The Insolvency Service/Official Receiver and they will have discretion to impose further restrictions on an individual if there is reason to do so and can refuse to make a DRO or revoke one, for example if someone has intentionally understated their creditors to obtain a DRO.
The DROs are subject to specific conditions and may not cover all debts so it is important for the individual to obtain advice from an authorised intermediary.
When this new procedure comes into force it will be one of several statutory procedures for individuals to obtain relief from debts which they are unable to manage and the DRO procedure represents a simple, effective procedure at minimal cost which will help those individuals with smaller but unmanageable debts and minimal assets.
If you are owed money by someone subject to a DRO you will not be able to enforce your debt, once the DRO is made, without the permission of the Court.
As ever, the most appropriate solution for an individual will depend upon individual circumstances and therefore an individual should always seek professional advice first.
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