Debt Relief Order (DRO) rules may be changed
25/02/2010
The rules about Debt Relief Orders (DROs) may be relaxed, the BBC reports, allowing more people to clear `modest` debts through this new form of insolvency.
Introduced in April last year, DROs were designed to help people in England or Wales who have few assets, limited income and relatively low debts (less than £15,000). To qualify for a DRO, borrowers` assets must not be worth more than £300 in total (although they can own a car worth up to £1,000).
However, that `total` includes any pension pot they may have, and this has stopped many people using a form of insolvency that would otherwise be a suitable way of clearing their debts.
Sue Edwards, Head of Consumer Policy at Citizens Advice, said that: "We have been very concerned in the past that people who fulfil most of the criteria for a DRO were having their applications rejected because of very small pension funds.
"In a new survey," she continued, "we found that 96.3% of the people we spoke to were excluded from the DRO only because of their pension, and 78% of these people had a pension fund of less than £5,000."
Now, the Department for Business is considering making changes to the way DROs work to stop this from happening. As Business Minister Ian Lucas said: "Following representations from independent money advisers, I`m proposing a common sense change to ensure that vulnerable people with a very small pension pot are treated fairly."
Since they were introduced, we`ve seen 11,831 people enter a DRO to clear their debts. In the same time, 54,224 people in England and Wales have entered bankruptcy, and 37,834 have entered an IVA (Individual Voluntary Arrangement).
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