A new way out for the over-borrowed

Posted in 'Dealing with Debt' by Barry Stamp

26 February 2009

On 6 April, a new type of bankruptcy comes into place.

Debt Relief Orders are aimed at people with less than £15,000 of unsecured debt, less than £300 in assets and monthly income of less than £50 per month, after essential living expenditure has been taken into account.

Just like bankruptcy, people with Debt Relief Orders will be discharged after a year and remaining debts will then be written off, with the exception of a few indelible debts such as Student Loans.

The £90 application fee for a Debt Relief Order is significantly more affordable than the £495 it costs someone to petition for their own bankruptcy and, unusually, the fee can be paid by instalments.

To reduce costs, applications will be made online with the assistance of an approved intermediary, such as a local Citizen’s Advice Bureau.

There were 106,544 insolvencies in 2008 and it is estimated that 11% of these would have qualified for the Debt Relief Order option. In 2009, the middle estimate of the number of people expected to apply for the new form of bankruptcy is 14,000.

Debt Relief Orders will be recorded on credit reports for 6 years, and will also be recorded on the Government’s Individual Insolvency Register.

If you are having trouble with managing money – whether a temporary blip or a serious problem, why not use our Debt Advice Centre. This gives advice in plain English of what to do to help sort out your finances.