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£2.3bn debt relief granted in 10 years of debt relief orders

In the decade since the first debt relief order (DRO) was approved in 2009, £2.3bn of debt relief has been granted, according to the Insolvency Service.

The first debt relief order (DRO) was approved in April 2009, with the aim of assisting people with low levels of assets and little surplus income to deal with their debts.

 

Since then, the Insolvency Service has approved more than 254,000 DROs to people with debts worth an average of £9,400.

 

People apply for a DRO through an authorised debt adviser, such as Citizens Advice, StepChange Debt Charity and PayPlan, who submit applications online to the official receiver on their client’s behalf.

 

DROs are a type of insolvency that is available to people who don’t own their own home, have less than £20,000 of debt and have very little left to spend at the end of each month.

 

While eligibility for them is tightly drawn, DROs are designed to be simpler and cheaper for those who can use them than either individual voluntary arrangements (IVAs) or bankruptcy.

 

According to the Insolvency Service, approximately 99 percent of DROs are approved within 48 hours and 2018 saw the it issue approximately £312m of debt relief – the largest amount for a single year.

 

A DRO normally runs for 12 months after which the debts are written off and between 2009 and 2017, while 64 percent of DROs were granted to women, both genders experienced similar levels of average debt – £9,200 for women compared to £9,100 for men.

 

In the same period, 25 percent of DROs were granted to people aged between 25 and 34. London experienced the lowest rate of DROs in every year since 2009 – 3 per 10,000 adults – compared to both the North East and South West where the average rate of DROs per 10,000 adults was 7.8.

 

Liz Thomas, head of debt relief orders for the Insolvency Service, said: “Reaching the 10-year anniversary since the first DRO was approved is a significant milestone and we are immensely proud of the role we have played in helping a substantial number of people out of debt.

 

“DROs are a partnership with the debt advice sector who we have worked closely with during this past decade to ensure people are provided with every opportunity to lift themselves out of financial difficulties.”

 

Paula Hogarth, DRO service debt advice centre manager for StepChange Debt Charity, said: “DROs are a good solution for people with minimal assets and low income who can’t afford to repay their debts.

 

“While it’s important that people get proper debt advice, as different circumstances lend themselves to different debt solutions, those people who are eligible for DROs definitely benefit from the relative speed, simplicity and low cost of setting up the solution, as well as usually becoming debt-free a year later.”

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