Debt Relief Orders set to outnumber bankruptcies

Posted in 'Dealing with Debt' by Barry Stamp

16 November 2011

The way things are going, Debt Relief Orders (DROs)will outnumber Bankruptcy Orders in just a year or so. The number of new DROs has climbed from zero in 2008 to around 7,500 per quarter now. In the same timescale, bankruptcy orders have fallen from over 20,000 per quarter to around 12,000 now.

To some extent, this is simply the re-naming of different routes to insolvency, with DROs aimed at those with debt of less than £15,000, surplus income after living expenses being not more than £50. and gross assets not exceeding £300. In contrast, Bankruptcy Orders are aimed at those with higher debts and/or more assets.

Everyone knows what a bankruptcy is, and many know what an Individual Voluntary Arrangement (IVA) is, but few know of DROs. The statistics indicate that more and more people are becoming aware of DROs and this is partly because the cost of a DRO is a mere £90 (which can be paid in instalments) against a whacking £525 deposit and a £175 court fee, in total £700 – paid in one foul swoop – for a Bankruptcy Order. Realistically, what person in financial difficulties can afford that huge sum?

To explain the differences between the various types of insolvency that are available, and in particular to highlight the alternatives to bankruptcy, the Insolvency Service has published a useful guide written in Plain English. One thing it doesn't tell you is that the average time for a bankrupt to be discharged is a very short 7 and bit months, for DROs the period is 12 months.Whatever route to insolvency is taken, it will remain on your credit report for six years, whether discharged or not.

Our very own Debt Advice Centre is another place to find action plans to help reduce debt stress, depending on how bad your financial fortunes are. Certainly there are many stages before the crunch time comes to think about insolvency as an option, and many who follow our guidance are able to put themselves back on the road to recovery by following our tips and general advice.