DEBT RELIEF ORDERS
(Amended November 2011)
Following public consultation [note 1] examining the accessibility of debt relief, it was established that there is a significant proportion of debtors who are unable to access debt relief though existing forms of formal debt relief (such as bankruptcy or individual voluntary arrangements) due to the costs involved.
To meet this need, Debt Relief Orders (DRO) were introduced by the Tribunals, Courts and Enforcement Act 2007 and came into force on 6 April 2009. They are designed to provide a more accessible form of debt relief for debtors who have relatively low level of debt, minimal assets and insufficient disposable income to access alternative debt solutions.
For example, a debtor’s bankruptcy petition costs £525 for the petition and £175 for the court fee, whereas the application fee for a Debt Relief Order (DRO) is £90.
This Chapter will examine the circumstances under which a debtor might apply for a DRO, the process for application and the involvement of the Insolvency Service through the DRO Unit.
A DRO, once granted, provides the debtor with relief from action by his/her creditors (up to a maximum level of £15,000 – see Part 1) for, usually, one year (the moratorium period – see paragraph 46.68), after which the debts are discharged. The procedure is aimed at debtors who have, in effect, no realisable assets (debtors with material levels of assets will not be eligible – Part 1) and, therefore, there is no vesting of the estate in a trustee as with bankruptcy.
(Amended March 2013)
The legislation [note 2] requires that an application for a DRO is assessed by an official receiver. This process has been centralised at the DRO Unit which is based at the Official Receiver’s Office in Plymouth and DROs will have little impact on other official receivers.
The chapter is divided into the following parts:
Part 1 – Debt relief orders – eligibility (paragraphs 46.4 to 46.35)
Part 2 – Application for a DRO (paragraphs 46.36 to 46.42)
Part 3 – Considering the debtor’s application and the making of a DRO (paragraphs 46.43 to 46.57).
Part 4 – Investigation into the debtor’s affairs and the revocation and amendment of a DRO (paragraphs 46.58 to 46.73).
Part 5 – Effect of a DRO (paragraphs 46.74 to 46.94).
Part 6 – Competent authorities and approved intermediaries (paragraphs 46.95 to 46.106).
Part 7 - Restrictions imposed on debtors subject to a Debt Relief Order, Debt Relief Restrictions Order, Interim Debt Relief Restrictions Order or Debt Relief Restrictions Undertakings (paragraphs 46.107 – 46.152)
The chapter contains the following annex:
Annex A – List of currently authorised competent authorities.
Annex B – Effects of a debt relief restriction (schedule issued by Enforcement Section March 2010).
Annex C - Bodies where membership is impacted by being subject to a DRO, DRRO/IDRRO or DRRU.
The following abbreviations are used in the chapter:
DRO – Debt Relief Order
BRO – Bankruptcy Restrictions Order
CFS – Common Financial Statement
CSA – Child Support Agency
CVA – Company Voluntary Arrangement
DRRO – Debt Relief Restrictions Order
DRRR – Debt Relief Restrictions Register
DRRU – Debt Relief Restrictions Undertaking
IIR – Individual Insolvency Register
IVA – Individual Voluntary Arrangement
UNCITRAL – United Nations Commission on International Trade Law
[On to Part 1 – Debt relief orders – eligibility]