Debt Relief Orders Not Taking Off?
Despite the early optimism about DROs, and the fact that they could help many thousands of people stuck in the debt trap, Accountancy Age is reporting that only between 50 and 70 have actually been granted by the Official Receiver.
Early predictions of 150,000+ by the end of the year look to be missed by a massive margin.
With the Official Receiver granting so few, many Insolvency Practitioners may have to refuse help to people who need it. There is a good side to this - the creditors are starting to allow longer periods to pay back outstanding debts, and are being more understanding about things. After all, it’s better for them to get the debt repayed, even if at a slower rate, than not at all.
But experts in the field suggest that the real reason might be pensions.
As we mentioned back in April, Pensions and Debt Relief Orders don’t mix too well.
Unlike regular bankruptcy and IVAs, DROs include the value of a pension in the calculation of assets. And as the upper limit of assets to qualify for a DRO is only £300, the existence of any pension at all is going to ensure that the DRO application fails.
It remains to be seen whether the rules for a DRO will be changed to match the other forms of debt help available, but now is the time to do it, as now is the time that debt is starting to bite the very people that DROs were intended to help.