Debt Relief Orders (DROs) are one way to deal with your debts if you owe less than £30,000, don’t have much spare income and don’t own your home.
If you get one:
your creditors can’t recover their money without the court’s permission
you’re usually freed (‘discharged’) from your debts after 12 months
You get a DRO from the official receiver, an officer of the bankruptcy court, but you must apply through an authorised debt adviser. They’ll help you fill in the paperwork.
Costs
The official receiver’s fee is £90. Your debt adviser can tell you how and when to pay it. In some cases a charity may be able to help you with the cost – ask your debt adviser.
Eligibility
You’re generally eligible if you meet all of these criteria:
you owe £30,000 or less
you have less than £75 to spend each month, after paying tax, national insurance and normal household expenses
your assets aren’t worth more than £2,000 in total
you’ve lived or worked in England or Wales in the last 3 years
you’ve not had a DRO in the last 6 years
Restrictions
You must follow rules called ‘restrictions’ if you get a DRO.
This means you can’t:
borrow more than £500 without telling the lender about your
act as the director of a company
create, manage or promote a company without the court’s permission
manage a business without telling those you do business with about your DRO
Bankruptcy is a form of insolvency. If you’re made bankrupt:
You don’t have to deal with the people you owe money to yourself – a public official called the official
receiver takes control of your money and property, and deals with your creditors.
The things you own may be sold and used towards paying your debts, such as your house or car.
Most types of debt are written off when you’re discharged from bankruptcy, normally after a year.
Going bankrupt involves going to court. It could cost you up to £680, or more if you use a solicitor, although using a solicitor isn’t necessary.
Your name and bankruptcy details will be published on the national register of bankruptcies, called the Individual Insolvency Register.
Can I Go Bankrupt?
There’s no minimum amount of debt required to go bankrupt. If the value of your unsecured debt is greater than the value of the belongings you own, such as property or vehicles, it may be an option for you. Unsecured debts include things like credit cards, personal loans and store cards.
If you have belongings like a house, car, savings, antiques or electrical goods, that you could sell to clear all your debts, but choose not to, bankruptcy could be refused. Belongings are known as assets.
If you don’t have a large amount of debt, there may be other options that are better for you.
As well as applying for bankruptcy yourself, someone else you owe money to can also apply to make you
bankrupt, even if you don’t want them to do so. For a creditor to make you bankrupt, you must owe at least £5,000.
What happens at the end of bankruptcy?
When the bankruptcy order is over, you can make a fresh start and the money you owe is usually written off. In most cases, this can be after only one year. Most types of creditor have to stop action to get their money back following a bankruptcy order.
One of the most unsettling aspects of being in debt is dealing with the demands and threats from your creditors – the people you owe money to. By taking advantage of a Debt Management Plan we can help REDUCE THE WORRY by dealing with your creditors for you. Enabling you to concentrate on repaying your debt at a realistic, affordable rate.
A Debt Management Plan (DMP) is an informal agreement between you and your creditors whereby you agree to repay your debt in reduced payments that are more affordable for you.
It could be the right solution for you if you have unsecured debts and if you are struggling to make the repayments. All debt will be repaid and there is no obligation to release equitable interest or other assets to your creditors.
Although your regular repayments may be lower, your repayment period could be longer and the total amount payable.
Like the majority of debt solutions, entering into a Debt Management Plan will affect your credit rating and as they are not legally binding agreements, your creditors do not have to accept the proposal.
It might not be the right solution for you if you have an unsecured debt of £5,000 or more in which case an IVA (Individual Voluntary Arrangement) is an alternative solution.
An IVA is a formal agreement between you and your creditors whereby you repay a percentage of your debt in affordable monthly repayments, and they agree to write off any outstanding debt once your final payment is made.
For many people, an IVA is the preferred solution as it enables them to avoid bankruptcy and all the unsettling consequences that come with it.
So what’s the best option for you? The simple answer is that there is no definitive hard and fast rule. There are several factors and criteria for both and your personal circumstances and preferences will affect what is best for you.
If we find that an IVA is not a viable option for you, and you wish to seek further advice and help regarding a DMP, then we can pass you over to one of our debt management partners, who can help you further.
