Government to change Debt Relief order eligibility

DROs were introduced in 2009 and are aimed at those with relatively low levels of unmanageable debt who have nothing to offer creditors – such as assets or disposable income. For this demographic, bankruptcy would be considered a disproportionate response.

A DRO therefore sees debt repayments and interest frozen, and creditors are forbidden to pursue debtors for a 12-month period, after which the debts are written off.

The changes to DRO eligibility criteria will see the level of debt at which people can apply for a DRO increase from £20,000 to £30,000.

They will also increase the threshold on the value of assets that a debtor can hold and be eligible to enter into a DRO from £1,000 to £2,000. The value of a single motor vehicle that can be discarded from the total value of assets will rise from £1,000 to £2,000. The level of surplus income received by the debtor before payments should be made will increase from £50 to £75 per month.

The new criteria follows a consultation earlier in the year. The changes are due to come into effect on 29 June to coincide with the end of the first 60 days of the Government’s Breathing Space scheme, which began on 4 May 2021.

Lord Callanan, minister for corporate responsibility, said: “Debt Relief Orders help those with problem debt get to grips with their finances, these changes will enable more people experiencing problem debt to get a fresh start.”