Recent research has revealed that the demand for debt advice could increase by up to 60% by the end of 2021 and around 3 million more people than before the pandemic will need support with debt problems by the end of 2021. That is why the government has published a range of new proposals that aim to further extend debt solutions.
More specifically, the proposals look at increasing the financial eligibility criteria for Debt Relief Orders (DROs), enabling more people with financial difficulties to get a fresh start.
What is a DRO?
A DRO is a Debt Relief Order, which is a means of dealing with debts aimed at those with minimal assets and low income. DROs allow claimants to make payments over a specified period of time (usually 12 months) after which any remaining debts will be written off.
How is it changing?
The government is currently consulting on changing the eligibility criteria to enter a Debt Relief Order, in hopes to:
- Increase the total amount of debt allowable from £20,000 to £30,000
- Increase the value of assets owned by the individual from £1,000 to £2,000
- Increase the level of surplus income from £50 to £100 per month.
The consultation will run for 6 weeks and, subject to the consultation, any changes made are expected to be put in place in Spring 2021.
How can it help?
Debts that can go into a DRO are called ’qualifying debts’. During the DRO period, creditors can’t ask you for payments – if they do, you don’t have to pay them. Qualifying debts include:
- Credit cards, overdrafts and loans
- Arrears with rent, utility bills, telephone bills, council tax and income tax
- Benefits overpayments
- Hire purchase or conditional sale agreements
- Buy now – pay later agreements
- Bills for services like vets or solicitors
- Debts you owe to friends and family
- Business debts
How to apply
Those who currently meet the conditions can apply for a DRO through authorised organisations such as Citizens Advice and StepChange who submit applications online to the Official Receiver on their client’s behalf. Applications for DROs must be made using an authorised debt adviser.
For more information on this proposal, or alternative assistance with debt issues, please get in touch via our website or give us a call on +44(0)203 8001 8300!