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Debt Relief OrdersDEBT RELIEF ORDERS The following is correct as of January 2009, but please note that the processes and legislation are in the final stages of development and the details below may change. 1. General Information – of interest to all 1. General Information When will debt relief orders (DROs) become available? It is anticipated that debt relief orders will come into force on 6 April 2009. Who might DROs be suitable for? People with relatively low liabilities, little surplus income and few assets and who are unable to pay off their debts in a reasonable time. What are the requirements for a debt relief order? The requirements will be detailed in secondary legislation which is not yet in force, but it is anticipated that the following will apply: • The debtor is unable to pay his/her debts; • The debtor’s total unsecured liabilities must not exceed £15,000; • The debtor’s total gross assets must not exceed £300; • The debtor’s disposable income, following deduction of normal household expenses, must not exceed £50 per month. • The debtor must be domiciled in England or Wales, or in the last 3 years have been resident or carrying on business in England or Wales. • The debtor must not have previously been subject to a DRO within the last 6 years. • The debtor must not be involved in another formal insolvency procedure at the time of application for a DRO, such as: a) An undischarged bankrupt; How will a DRO be made? DROs are applied for online, with an approved intermediary helping to complete an application. Upon receipt of the application and payment of the fee, an Official Receiver is able to make the order, administratively, without the involvement of the court if it appears that the applicant meets the requirements. The Official Receiver is able to refuse to make an Order or can choose to delay the decision pending further information from the applicant. What are the effects of a DRO? During the period that an order is in force, the debtor will: • Be protected from enforcement action by the creditors included in the application (bar certain creditors whose debts cannot be scheduled in the DRO and those creditors whose debts are included in the DRO but who have successfully obtained leave from the court to pursue their debts). • Be free from those debts at the end of the period (normally12 months from Order). • Be obliged to provide information to and co-operate with the Official Receiver. • Be expected to make arrangements to repay their creditors should their financial circumstances improve. As with other forms of personal insolvency, a DRO debtor’s credit rating will be affected and there will be civil and criminal penalties for those who abuse the system. The Official Receiver is able to investigate, either on his own account or as the result of an objection from creditors, and is able to revoke the order if the debtor is found to have failed to provide a full and accurate account of their financial affairs (for example, an understatement in their assets or income). Failure to provide such an account may result in civil and criminal sanctions. What restrictions will be placed upon a person who has a DRO? For the duration of the Order, the debtor will be subject to similar restrictions as in bankruptcy, and their details will be on the publically available Individual Insolvency Register (available at www.insolvency.gov.uk) These restrictions include the following: • The debtor must not obtain credit of £500 or more, either alone or jointly with another person, without disclosing that they are subject to a DRO to the lender. • The debtor may not carry on a business (directly or indirectly) in a name that is different from the name under which they were granted a DRO, without telling all those with whom the debtor does business the name under which they were granted a DRO. • The debtor may not be involved (directly or indirectly) with the promotion, management or formation of a limited company, and may not act as a company director, without the court’s permission. • The debtor will only be able to obtain a DRO once every six years. Furthermore the Official Receiver will be able to apply for a Debt Relief Restrictions Order, similar to the bankruptcy restriction order, which will extend the period of restriction for up to fifteen years for debtors who are dishonest or culpable. 2. Information for Debtors How can I get a DRO? By seeking financial advice from a debt advisor and if a DRO appears to be appropriate, an approved intermediary will be able to help you complete the online application. The intermediary may be the same person from whom advice was originally sought, or may be a further advisor that you are referred to once it is considered that a DRO is appropriate. You cannot apply for a DRO without the assistance of an intermediary. To apply for a DRO involves payment of a fee which will be less than £100. 3. Information for creditors If I have information to indicate that the debtor does not meet the criteria, what should I do? Provide that information to the Official Receiver who will consider every valid objection and is able to revoke a DRO if appropriate. Are DROs just an easy way for people to run up debts then get them written off? DROs are aimed at people with no assets and a low income with no other access to debt relief and no prospect of the situation improving. If people do have assets or there is a possibility of an improvement in financial circumstances, a DRO is not an appropriate solution and other debt remedies are available. Whilst the official receiver will not automatically investigate cases, he or she is able to do so. Investigations may lead for example to a revocation of the order or an application to court for a restrictions order, the effect of which is to extend the restrictions placed upon a person under a DRO for a period up to 15 years. 4. Information for advisers What is an intermediary? A trained debt advisor who has been approved to act as an intermediary by a ‘competent authority.’ What is the role of the intermediary? An intermediary is an experienced debt adviser. It is only an intermediary that can assist a debtor to complete an application for a DRO. The intermediary may have provided the initial advice to the debtor but otherwise needs to be satisfied that the debtor has received such advice and that a DRO is the appropriate solution. It is anticipated that the intermediary will have completed basic checks on the information provided by the debtor, such as considering paperwork and evidence of income, liabilities. If it is considered that a DRO is suitable in the circumstances detailed by a debtor, the intermediary will help to complete the online application upon the debtor’s request. How can I become an intermediary? By application to a competent authority. A list of the competent authorities will be made available on our website very shortly. You will need to contact the relevant competent authority, not The Insolvency Service. The application will include demonstration that the legislative criteria have been met, as detailed in Part 2 of The Debt Relief Orders (Designation of Competent Authorities) Regulations 2009 ie ‘the draft regulations’ on the Debt Relief Order page of our website. Will I need training? It is for the competent authority to be satisfied that its intermediaries are appropriately trained and that body will provide relevant details of its requirements. What is a competent authority? A body designated by the Secretary of State as being able to authorise intermediaries. It will be a matter for the competent authority to determine the suitability of each intermediary that they authorise and to ensure those intermediaries have, for example, appropriate training, experience, complaints procedures, equal opportunities procedures. 5. Further information Where can I get more information? Information leaflets are being developed and will appear on the publications section of our website in due course. The primary legislation, the Tribunals, Courts and Enforcement Act 2007 is available at www.opsi.gov.uk (http://www.opsi.gov.uk The original consultation document entitled ‘Relief for the Indebted – An Alternative to Bankruptcy’ is available from www.insolvency.gov.uk under the section entitled ‘I am interested in insolvency law, policy changes and evaluation and consultation,’ then follow the link to the consultation register. A summary of the work of the Intermediaries Working Group is available from www.insolvency.gov.uk under the section entitled ‘I am interested in insolvency law, policy changes and evaluation and consultation.’ Further questions about the legislation or policy of Debt Relief Orders should be addressed to Sarah O’Sullivan, Senior Policy Advisor, The Insolvency Service, telephone 0207 291 6766 or email to sarah.o’sullivan@insolvency.gsi.gov.uk Questions concerning the Official Receiver’s role and the DRO process should in the first instance be addressed to The DRO Unit, The Insolvency Service, telephone 01752 635200 or email to DRO.Unit@insolvency.gsi.gov.uk Copyright Notice © Crown copyright 2006 The material featured on this site is subject to Crown copyright protection unless otherwise indicated. The Crown copyright protected material (other than the Royal Arms and departmental or agency logos) may be reproduced free of charge in any format or medium provided it is reproduced accurately and not used in a misleading context. Where any of the Crown copyright items on this site are being republished or copied to others, the source of the material must be identified and the copyright status acknowledged. The permission to reproduce Crown protected material does not extend to any material on this site that is identified as being the copyright of a third party. Authorisation to reproduce such material must be obtained from the copyright holders concerned. The Insolvency Service encourages users to establish hypertext links to this site. For further information on Crown copyright policy and licensing arrangements, see the guidance featured on the Office of Public Sector Information' website at http://www.opsi.gov.uk/advice/crown-copyright/copyright-guidance/index.htm |
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