DRO changes coming tomorrow

Following a consultation conducted by The Insolvency Service at the start of the year, the criteria for a Debt Relief Order (DRO) will change with effect from tomorrow.

DROs were first introduced in April 2009 as an insolvency measure designed for people in long term debt difficulty with low income and few assets.   Bankruptcy would be a disproportionate solution for such individuals.  Administered by approved debt advisers, with a low fee (£90) and with no contributions required, all debts included in the DRO are written off after a twelve month period.  

DROs allow for the customer to own assets of low value; the maximum is being increased from £1,000 to £2,000.  In addition, they are allowed a single motor vehicle, the value of which must be no more than £2,000, increased from £1,000.  The total debt allowable in a DRO has been increased from £20,000 to £30,000.  The level of allowable surplus income after essential outgoings is being increased from £50 to £75 per month.

The changes are expected to mean that a further 1,000 or so people a month will be eligible for a DRO, rather than having to go through more expensive options such as bankruptcy, an Individual Voluntary Arrangement (IVA) or an informal Debt Management Plan (DMP).   As customers currently in low value IVAs and DMPs have their annual reviews over the next year, it is expected that many should be advised to ‘switch’ to a DRO.

If you need advice regarding a customer who is in or says they are considering a DRO, please do not hesitate to contact us.

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