The government have announced that some changes to the eligibility criteria of a Debt Relief Order (DRO) are coming into effect on 29th June 2021, for residents of England and Wales.
What is a DRO?
A DRO is a formal debt solution designed to help people on a lower income with little or no assets, who cannot afford to repay their debts. It is sometimes referred to as a form of ‘mini-bankruptcy’, with the advantage that the costs involved are significantly lower than Bankruptcy. The fee is £90, which can be paid in instalments before the DRO application is made.
A DRO lasts for one year and whenever it has successfully completed, your debts are cleared (with certain exceptions).
In order to apply for a Debt Relief Order, you need to first seek advice from a reputable debt advice company who will be able to assess your situation and determine if you qualify. If a DRO is suitable, you can make an application via an approved intermediary, such as The CAB or StepChange.
Up until the 29th June 2021 the rules for successful qualification of a Debt Relief Order application are as follows:
- Your debts must not exceed a level of £20,000
- Your assets must not exceed £1,000 in value
- If you have a car/vehicle it must not exceed £1,000 in value
- Your surplus income must not exceed £50 a month after paying all essential expenses.
What are the new rules?
So, after 29th June 2021 the eligibility rules will change to the following.
- The maximum debt level will increase from £20,000 to £30,000
- Assets allowance will increase from £1,000 to £2,000
- The allowed Car/Vehicle value will increase from £1,000 to £2,000
- Your maximum allowed surplus income of £50 per month will be increased to £75 per month.
The upcoming changes of expanding the eligibility criteria, will help more people qualify for the DRO and in turn, help more people in debt. We look forward to this positive change in the legislation.