Debt Relief Orders (DROs) A recent announcement.

I recently found out that from the 6th April 2024, anyone applying for a Debt Relief Order (DRO) will no longer have to pay the £90 administration fee attached to it.

A Debt Relief Order is essentially a tool for people who are unable to pay off their debts to have them written off. This is particularly aimed at those with a low income and minimal assets. The order freezes your debt for a year and then writes it off entirely if your financial situation hasn’t improved. To qualify, you must have less than £30,000 in qualifying debts, own less than £2,000 in assets, and have £75 or less spare each month after covering household bills. Notably, from 28 June 2024, the threshold for qualifying debts will rise to £50,000 in England and Wales, and individuals will be able to keep any motor vehicles worth up to £4,000.

DROs were designed to offer a breathing space for those caught in a cycle of debt they can’t escape due to their financial situation. The process for applying for a DRO involves going through an approved intermediary, often found through free debt advice providers like StepChange or The National Debtline.

The benefits of a DRO include halting collection activities from creditors and having debts written off after 12 months, along with the ending of interest and charges on those debts. However, there are also risks and limitations, such as the impact on one’s credit file for six years and restrictions on certain types of debts that can be included in a DRO.

This update is a significant move by the UK government to provide better support for individuals struggling with debt, making it a more viable option for a larger number of people who are in financial distress. It’s important to seek advice from a debt advisor to explore this and other options thoroughly to find the best solution for one’s individual circumstances.

For more detailed information and guidance on DROs, visiting the websites of MoneyHelper and StepChange would be beneficial. They provide comprehensive resources and tools to help individuals understand their options and apply for a DRO if it’s the right solution for them.