Debt Relief Order Rules to Change

The legislations surrounding Debt Relief Orders are set to change for individuals with a small pension funds, according to Labour.

Debt Relief Orders (DROs) are a lesser alternative to Bankruptcy or an Individual Voluntary Arrangement in wiping out personal debt.

DROs are used to wipe off individual debt of less than £15000 if there is basically no way in which the person can realistically pay the debt in a timely manner.  However, there are very specific criteria in which the person must adhere to.

One of these criteria surrounds a person assets, if an individual has more than £300 worth of assets, then they do not qualify for a DRO.  This has been affecting people with a small pension fund as that fund has been pushing people above the threshold despite adhering to every other condition.

This is where the change has been proposed by Business Minister Ian Lucas, he wants to implement a common sense change that will allow the more vulnerable people with a very small pension pot the chance to gain a DRO without necessarily satisfying all of the needs.

Since they were introduced back in April last year, over 12000 people used a DRO in the first 9 months of its existence.  The main issue in implement this change is how large a person’s pension fund can be before they are no longer considered.  The government are currently consulting over this issue.

The Citizens Advice conducted a survey of people to have had DROs rejected to highlight the potential flaw in the rules.  Of the rejected individual surveyed, a huge 96.3% of people were rejected purely because of their pension fund.  Of those people, a substantial 78% had a pension fund that was smaller than £5000. 

Posted at 03:30PM Feb 24, 2010 by Marc Stenton in Insolvency  |  Comments[0]