In a bid to lessen the financial burden on struggling Brits, significant changes have been made to Debt Relief Orders (DRO). These alterations, including the removal of the £90 administration fee and adjustments to eligibility thresholds, mark a pivotal moment in debt management in the UK. We have looked at the changes and how they can positively impact those grappling with debt.
The Elimination of the DRO Fee: One of the most notable adjustments is the abolishment of the £90 administration fee associated with obtaining a Debt Relief Order. This fee, previously a barrier for many, has now been removed as of April 6th. The decision to remove this fee has been met with positivity from debt charities and campaigners who argued that it had been preventing some of the most vulnerable individuals from seeking the help they urgently require.
Expanding Debt Coverage: In addition to scrapping the fee, the threshold for the maximum debt covered by a DRO has been increased from £30,000 to £50,000. This expansion ensures that more individuals burdened by substantial debt can benefit from the relief provided by a DRO. Furthermore, the maximum value of a vehicle that can be retained under a DRO has been raised from £2,000 to £4,000, offering further flexibility and assistance to those in need. However, it’s important to note that these adjustments will not come into effect until June 28th.
Understanding Debt Relief Orders: A Debt Relief Order provides individuals with a viable solution to manage their debts. Lasting for 12 months, a DRO has the power to freeze some or all of an individual’s debts during this period. If their circumstances remain unchanged after the 12-month period, their debts may be completely written off. However, it’s crucial to acknowledge that a DRO can be revoked if circumstances alter within the active period.
Eligibility Criteria and Application Process: To qualify for a DRO, individuals must meet specific criteria outlined by organisations like Citizens Advice. These criteria include having qualifying debts of less than £30,000 (£50,000 from June 28th), minimal assets or savings exceeding £2,000 (£4,000 for vehicle value from June 28th), and having £75 or less in disposable income after meeting essential expenses. Additionally, applicants must have lived or worked in England and Wales within the last three years.
Qualifying Debts: Debt Relief Orders encompass various types of debts, known as qualifying debts. These include arrears with rent, utility bills, telephone bills, council tax, income tax, outstanding borrowing on credit cards, loans, overdrafts, as well as business debts and money owed to friends and family.
The recent changes to Debt Relief Orders represent a significant stride towards supporting individuals struggling with debt in the UK. By eliminating the administration fee and expanding the scope of debt coverage, more people can access the relief and assistance they desperately need. However, it’s essential for individuals to carefully assess their eligibility and consult with debt advice agencies before pursuing a DRO. With these changes, there’s renewed hope for those navigating financial hardships, paving the way for a more secure and stable future.