Access to Debt relief order expanded by change in legislation Submitted on 31.10.2011

A change in insolvency legislation has expanded access to the debt relief order (DRO). The change is specific to pensions.

The legislation will mean that anyone with an approved pension will be eligible for a DRO, a change from the old legislation which excluded those with a pension pot worth over £300. These rules have been changed to run alongside the rules concerning bankruptcy.

However the government has agreed to amend this loophole after completing a consultation prompted by debt advice agencies following a large number of cases where DRO applicants met the stringent eligibility criteria, but were denied access because of small pension pots.

DROs were introduced in April 2009 and are delivered in partnership with the professional debt advice sector. Under the current procedure individuals must meet strict eligibility criteria of having assets valued at less than £300, debts of no more than £15,000 and surplus income of less than £50 per month.

Justice Goddard commented, “The change is a loophole that is now fixed and will give access to those most vulnerable and unable to repay their debt through statutory remedies.”

A DRO lasts for 12 months during which time creditors cannot take debt recovery action without court permission. Debtors are freed from the debts listed in the DRO after 12 months if their circumstances have not changed.