In Focus Consumer Credit
Ten years of debt-relief orders
The debt-relief mechanism has reached a key landmark amidst significant numbers on take-up
Liz Thomas Head of debt-relief orders, the Insolvency Service
Last month saw the tenth anniversary of the introduction of the debt-relief order (DRO) – a type of insolvency that is available to people who do not own their own home, have less than £20,000 of debt, and have very little left to spend at the end of each month.
Eligibility While eligibility for them is tightly drawn, DROs are simpler and cheaper for those who can use them than either individual voluntary arrangements or bankruptcy. They have proved to have a very valuable
place in the suite of possible debt solutions for people with few assets, and without a realistic prospect of clearing their debt in other ways. In total, 40,823 StepChange clients have
used the DRO scheme since its inception on their journey to becoming debt-free. Around 5% of the recommendations the charity makes to people about solutions that would be suitable for them are for DROs. DROs were introduced on 6 April 2009,
and by the end of that year 11,831 had been set up – 999 of them by StepChange, then known as the Consumer Credit Counselling Service. By 2018, the total annual number was 27,683 – of which 6,262 were arranged through StepChange.
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Minority of people Paula Hogarth, who manages the StepChange DRO team in Birmingham, says: “While they are only suitable for a minority of people, and it is important that people go through debt advice to work out what is best for their own particular circumstances, DROs have firmly taken their place as a valuable option among possible debt solutions. “DROs suit people with low income, low
assets, and less than £20,000 of debt. They have proved their worth for over 40,000 of our clients. “We have found the Insolvency Service
While eligibility for them is tightly drawn, DROs are simpler and cheaper for those who can use them than either individual voluntary arrangements or bankruptcy. They have proved to have a very valuable place in the suite of possible debt solutions for people with few assets, and without a realistic prospect of clearing their debt in other ways
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to be helpful and receptive over the past decade, including introducing slicker application processes and also taking a pragmatic and proportionate approach, if the given client circumstances change unexpectedly.”
Conclusion DROs have helped a substantial amount of people with small levels of assets and little surplus income deal with their debts. Reaching the ten-year anniversary is a
significant landmark and we would not have been able to successfully issue more than a quarter of a million DROs without working with our colleagues in the debt advice sector. CCR
May 2019
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