THE NEW DEBT RELIEF ORDER (DRO)
Charity begins at home….but only if you “qualify”
Donations to national charities are plummeting as the nation bends to the credit crunch and saves their pennies, deciding that charity begins at home.Â
Rightly or wrongly, those with this viewpoint will be pleased to hear they’re not alone. Â
This week sees the introduction of the Debt Relief Order (DRO) a new tool to help those who can’t afford to help themselves and genuinely see no way out. Helping the poorest within our communities, this legislation could be a remedy that might lift the burden of debt worry on many UK households.
On paper, the Debt Relief Order appears to be the perfect answer to what, for many, has been the headache of a lifetime. Costing only £90, and without the stigma of bankruptcy, this Order offers to write off all remaining debt after 12 months. The only consequence of entering into this option is being placed on the Insolvency Register, which would happen to you anyway even if you entered into an IVA, or became bankrupt.
But, investigated further, it seems not everyone will qualify for this new debt medicine.
To be eligible for a Debt Relief Order, in addition to being a UK resident for a minimum of 3 years (or have lived in the UK within the last 3 years if currently living abroad), you must have liabilities no higher than £15,000; not own a house or have total assets exceeding £300; and disposable income after bills must be no more than £50.00 per month. According to statistics from Credit Action, the average UK household is £9,500 in debt. So the average UK household, if not a house owner will actually qualify for this form of debt relief. And, R3 (the Insolvency Practitioners Trade Association) claims that over the period of the next 12 months, 1 person every 3.3 minutes will either become bankrupt or enter into an IVA. So clearly, there is demand for such a service. However, despite the need for a DRO, and despite many of us having the right amount of debt to qualify, I ask, how many of us really have assets less than £300? How many of us could honestly say we have an income (after bills are paid of £50 a month and not a penny more? And, therefore, how many of us could benefit from a DRO at all?
I was at a seminar the other week in London on the Reform of the Debtor Bankruptcy Petition Process and I was advised that this DRO initiative would help 11% of all current bankruptcies – this would therefore amount to around 5,000 per year!
I admit, wholeheartedly that there are people out there that will qualify for a DRO and will be in desperate need of this. But for many in this country, for various reasons, this remedy is completely inadequate and they will need to look at DMP’s, IVA’s or Bankruptcies as options to undertake. I ask the government, what is their next? Or do we all have to wait until we are so far in debt, and so penniless then only then, will help come?