DROs open to more people in debt

The DRO (Debt Relief Order) was introduced in 2009 to help people who need to be declared insolvent – but for whom neither an IVA nor bankruptcy would be appropriate.

It’s only available to people who fit very strict criteria:

*They must be unable to repay their debts.

*They must owe less than £15,000.

*Their disposable income (after tax, national insurance contributions and normal household expenses) must be £50 a month or less.

*They must live in England or Wales (or have lived / carried out business there at some time in the last 3 years).

*They must not have been subject to another DRO in the last 6 years.

*They must not be involved in another formal insolvency procedure (IVA or bankruptcy) when they apply for a DRO.

*The total value of their assets (apart from their car) must not exceed £300 – they can own a car to the value of £1,000.

It’s the question of ‘assets’ which has caused problems for many people thinking of entering a DRO. At the moment, someone with a pension worth over £300 wouldn’t be eligible for a DRO, even if they wouldn’t receive that pension until many years in the future.

As of 6^th April 2011, that will change. An amendment to the Insolvency Rules 1986 will give people ‘access to the Debt Relief Order regime’ even if they have an approved pension.