Debt Relief Orders

In general terms, debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth. A Debt Relief Order is a specific means to help certain people who are unable to repay their debts. A Debt Relief Order is a much cheaper alternative to bankruptcy that is approved directly by the government’s Insolvency Service.

The Debt Relief Order costs £90 (which can be paid over 6 months in certain cases) lasts for up to one year, and during its period provides debt relief by protecting you against legal action from your creditors. Once the Debt Relief Order is finished, all of your outstanding debts that were covered by the order will be written off, leaving you debt free.

Who Can Apply For a Debt Relief Order?

There are certain conditions that must be met in order to apply for a Debt Relief Order.

To qualify for a Debt Relief Order you must:

• Have unsecured debts of less than £15,000
• Have assets and savings of less than £300
• Have a disposable income (after living expenses are removed from your income) of less than £50 a month
• Have been resident in, owned property or run a business in England or Wales during the last 3 years

There are a number of conditions that will make you ineligible for a Debt Relief Order.

For example, you cannot apply for a Debt Relief Order if you have been declared bankrupt, if you have, or are applying for, an IVA (Individual Voluntary Arrangement) or if you have had a previous Debt Relief Order in the past 6 years.

What Debts Are Covered by a Debt Relief Order?

Only certain types of debt can be covered by Debt Relief Orders, these being known as qualifying debts.

The list of qualifying debts includes:

• Loans, overdrafts and credit cards
• Rent, council tax, telephone and utility bills
• Hire purchase agreements
• Benefit overpayments

During the period of your Debt Relief Order you will not be required to make any payments to any of the debts that are listed in the order.

The creditors covered by the order will also be prevented from taking any action against you. Although your arrears can be covered, you will, however, be required to continue making your regular ongoing commitments and household payments on expenses such as rent, council tax and utility bills. Any debts that were not listed by the Debt Relief Order will also need to be paid.

You are not allowed to add new debts to the Debt Relief Order once it has been established and any new debts you incur during the period must be reported to the Official Receiver. You must also report any change in your circumstances to the Official Receiver during the period of the Order.

Your Debt Relief Order will appear on your credit file and remain there for six years. This may well make it more difficult for you to gain credit in the future and may also present problems when trying to open any type of credit bank account.

For more information on Debt Relief Orders call us on 0800 228 9655 now.