Debt Relief Order Consultation

Posted by amandaireland - May 14, 2021 10:41 am Debt Relief Order Consultation and the Government’s proposed changes to legislation

On the 10 May, the Government announced proposals, which they intend to turn into changes in legislation following the end of their Debt Relief Order (‘DRO’) Consultation.

These proposals include:

  • Doubling the threshold on the value of assets that a debtor can hold and still be eligible to enter into a DRO to £2,000.
  • Doubling the value of a motor vehicle that can be disregarded from the total value assets to £2,000. 
  • Raising the amount of surplus income that can be retained by the debtor to £75 per month, and;
  • Increasing the total debt allowance for a DRO from the current rate of £20,000 to £30,000.

Further responses received as part of the consultation have also recommended other changes to the personal insolvency framework.  The Government will issue a Call for Evidence at a later date as part of a fuller review.

What are DRO’s?

DROs came into force on the 6th April 2009 and are aimed at debtors with relatively low levels of debt, minimal assets and minimal surplus income. 

Why reform Debt Relief Orders?

The Office for Budget Responsibility (OBR) have stated that the economic outlook caused by the COVID-19 pandemic currently remains highly uncertain and dependent upon many factors. Therefore, it is anticipated that there may be a greater need for people in financial distress to have access to an appropriate debt solution.

To tackle this the Government will be introducing a new breathing space scheme in 2021 which will provide people in debt with a 60 day pause on creditor enforcement action. .  For more details of this read our blog.

In addition to the breathing space the Government are looking at other areas of personal insolvency, and have started with the need to review the current DRO limits.

What happens now?

The proposals will now go through Parliament before they can become legislation. 

For details of the current Debt Relief Order amounts please click here.