Debt Relief Orders or DROs were brought in two years ago to provide a route out of debt for the poorest people in financial trouble.
The process costs just £90, much cheaper for the debtor than bankruptcy, and is only open to those with less than £300 in assets as well as a low value car.
While bankruptcies have fallen sharply as families batten down the hatches and cut spending, the numbers at the bottom of the pile seeking protection from creditors is on the rise.
Mark Sands, from insolvency experts, RSM Tenon, said, "It shows how many people are so desperately short of money that they qualify for DROs."
The total figure for individual insolvencies was down 11 per cent compared with the thrid quarter of 2010.
But with financial pressures building, the Consumer Credit Counselling Service (CCCS) fears there will be a surge in insolvencies next year.
I don't think the surge in DRO's was much to do with a rise in people who are "desperately short of money". I think it was much more to do with the fact that the DRO rules changed in April. Before then people with a personal pension worth more than £300 could not have a DRO. Now they can. That removed a big disincentive to choose this particular form of bankruptcy-lite.
ReplyDeleteThere is still a problem with DROs. You can only have one if your disposable income is £50 or less a month. If your disposable income rises to £51 your DRO is stopped and you go back to exactly the same position you were in before you had it. None of your debt is written off.
So, there is absolutely no incentive for anyone in a DRO to improve their financial position. And, i imagine, there's lots of fear that if things were to get better, a person in a DRO could find themselves significantly worse off.
this is an excellent website and i like it very much.
ReplyDeleteDebt Relief Order
Debt Relief Restrictions Order
Well said Andrew, DROs can be a problem if the debtor's circumstances were to change.
ReplyDeleteIn my view one of the main reasons why consumer bankruptcy has fallen is the high cost of £700 needed to petition.
I am pleased to say that The Insolvency Service is now looking into this plus the good news that there are new proposals to remove the need for the consumer to go court to file for bankruptcy.
I am happy to provide a link for this if Simon agrees.
Mike Thomas 'aka' DebtWizard
Simon, the link below is for an article and to read my letter to the PM re the high cost of the petition fee.
ReplyDeletehttp://www.debtwizard.com/news/consumer-issues/842-government-to-review-bankruptcy-fees