How will a debt relief order affect me?


Debt relief orders were brought into law as part of the Tribunals Courts and Enforcement Act 2007, and officially came into being in England and Wales on 6th April 2009. They were designed to offer an alternative to the more formal bankruptcy procedures for residents of England and Wales who cannot pay their debts, but who are also on low incomes and with few assets.
Unlike a bankruptcy petition, which can cost over £600 and must be applied for in court, a debt relief order can be applied for out of court, and for a fee of under £100. 
There are a number of restrictions on who can apply for a debt relief order. To qualify you must have qualifying debts of under £15,000. Qualifying debts include things like credit cards, overdrafts, loans and general household bills.
Debts which do not qualify include court fines, student loans and child maintenance payments. In addition, your gross assets must not exceed £300, meaning that debt relief orders are not suitable if you own your home. 
You can only apply for a debt relief order if your total disposable income, that is your total income minus normal household expenditures, is less than £50 per month. If you believe you satisfy these criteria then you can apply for a debt relief order by contacting your solicitor. They can check that this is the most suitable mechanism for obtaining debt relief given your personal circumstances.
There are some factors which might prevent you from applying, such as if you are currently an undischarged bankrupt, or if you are the subject of an Individual Voluntary Arrangement. 
Debt relief orders last for 12 months. During this time any creditor that you owe money to is prevented from taking any additional action against you. Any contact they wish to have is made to the Official Receiver dealing with your case, not with you directly.
At the end of the 12 month period, any outstanding debts are discharged and you no longer have to pay them. To apply for a debt relief order you should contact your solicitor, who can offer legal advice as to whether you qualify and how to go about completing the application. 
If you would like to obtain legal advice on debt relief orders, Caven can put you in touch with a local specialist solicitor free of charge. So, if you have any questions or would like our help in finding local solicitors please call us on 08001 221 2299 or complete the web-form above.
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