From:The Insolvency Service
The government announced changes to Debt Relief Orders, in
the Spring Budget, to offer more support for people struggling
with debt.
We talk to Andrew Shore, Assistant Director of Policy at the
Insolvency Service, about DROs and how the changes will make them
easier to access for people struggling with problem debt.
A DRO is a formal debt solution – a legally-binding process with
legal rules and restrictions which can help write-off debts and
help people make a fresh start. They are suitable for people who
have little spare income to pay-off their debts and who have
low-value assets.
Andrew said:
We understand how difficult things can be for people who are
struggling with bills. That's why the government is making it
easier for people with debts they can't pay back to access the
help they need.
It's difficult to know where to turn when dealing with debt, and
we would always encourage people to talk to a regulated
debt adviser as a first step.
If your debt adviser thinks a DRO might be the best solution for
you, the new changes will help make it a more accessible
option.
Until April 6, people had to pay a £90 administration fee to
enter a DRO. But in his Budget speech in March, Chancellor Jeremy
Hunt said that although a Debt Relief Order is the best way to
resolve debts for some people, the £90 fee could deter those who
need them the most.
Andrew says:
The government is removing that £90 fee from April 6, 2024. From
that point, DROs will be a free service that we deliver in
partnership with the debt sector.
We know that the fee was, for some, a barrier to dealing with
their debts. Removing it is a big step forward in helping those
most in need to find a sustainable solution that works for
them.
Other changes to Debt Relief Orders which will come into force in
June include:
- raising the total amount of debt covered by a DRO from
£30,000 to £50,000
- raising the value of the vehicle a person can own when they
enter a DRO from £2,000 to £4,000
Andrew said:
Some people need a car for work, mobility or family reasons, but
the value of vehicles has risen a lot in recent years. Raising
the value of the car you can own will enable more people to
access a DRO when they need one.
And those who owe up to £50,000 but don't have the money to make
repayments to creditors will be able to see a way out of
overwhelming debt.
The changes reflect challenges that people are facing now and
will make sure DROs are available to people who really need that
help.
The removal of the £90 fee comes into operation on April 6, 2024.
The rises in the debt threshold and the value of a vehicle come
into force on June 28, 2024.
People struggling with debts may also be able to get support
through the government's free Breathing Space debt respite
scheme. The scheme offers a 60-day break from the build-up of
interest and other fees and puts a pause on contact and
enforcement action by creditors. Breathing Space is accessed
through a regulated debt adviser.
Further Information
