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Qualifying for a Debt Relief Order

It is relatively easy to determine if you are eligible to apply for a Debt Relief Order. First of all you must be currently resident in England or Wales or, at any time in the last three years, have been resident or carrying out business in England or Wales.

A Debt Relief Order is an informal insolvency process that has been designed specifically for people who are unable to pay their debts which in total must not exceed £15,000. To apply for a Debt Relief Order there are other conditions you must fulfill.

Debt relief ORder

The first condition is that you have no assets. What this means in practice is that your total gross assets must not exceed £300 apart from a vehicle necessary for travelling to your work or for your domestic needs and which may have a value of up to £1,000. Your surplus income, i.e. what you are left with when you have paid your normal living expenses, must not exceed £50 per month. There must be no other access to debt relief open to you and there must be no prospect of your financial situation improving. A Debt Relief Order is not an appropriate situation for you if you have assets or if there is a possibility of an improvement in your financial circumstances.

If you have already been subject to a Debt Relief Order within the last six years, then you are ineligible to apply for another one.

You are also ineligible to apply for a Debt Relief Order if you currently involved in another formal insolvency procedure such as bankruptcy, an individual voluntary arrangement, a bankruptcy restrictions order or undertaking, a debt relief restrictions order or undertaking or an interim order. You are also ineligible for a Debt Relief Order if you are currently petitioning for bankruptcy (unless the court has referred you to the Debt Relief Order procedure as a more suitable method of debt relief) or if a creditor is currently petitioning for your bankruptcy (unless that creditor has given you permission to apply for a Debt Relief Order.

If you believe you are eligible for a Debt Relief Order, then you must seek advice from a debt advisor, who will help you to apply to The Insolvency Service which together with skilled debt advisers, called approved intermediaries, run the system of Debt Relief Orders. You cannot apply for a Debt Relief Order without the assistance of an approved intermediary. The cost of a Debt Relief Order is £90 which can be paid upfront immediately or if you cannot afford to pay immediately, can be paid over a maximum of a six months period. Once the fee is paid in full, the official receiver will consider your application.

Once the Debt Relief Order is granted, your creditors cannot take any action against you for repayment without the permission of the court. After twelve months, your debts, as listed in the Debt Relief Order, are discharged, leaving you free of those debts forever. While in a Debt Relief Order you are subject to certain restrictions and of course there are certain debts that cannot be entered into a Debt Relief Order. As well as that, details of your Debt Relief Order are put up on the website of The Insolvency Service and are removed three months after your Debt Relief Order has ended.

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You can get free debt advice from the Money Advice Service – an organisation set up by the Government to offer free and impartial advice to those in debt. Click here for more information.