The Insolvency Service in the England and Wales, “administer and investigate the affairs of bankrupts” and works within a statutory framework – “mainly the Insolvency Acts 1986 and 2000.”
Following their publication of the 2010 third quarter insolvency figures, which show a slight drop in insolvencies, this article provides a brief overview of two alternatives to bankruptcy. They are Debt Relief Orders (DROs) and Individual Voluntary Arrangements (IVAs).
Personal insolvencies, in England and Wales include:
- Debt Relief Orders
- Individual Voluntary Arrangements
Debt Relief Order – an Alternative to Bankruptcy
A Debt Relief Order, which can be applied for online with the assistance of an “approved intermediary,” lasts for 12 months.
Approved Intermediaries, who may also provide a debt counselling service include:
- Citizens Advice
- Consumer Credit Counselling Service (CCCS)
- National Debtline
- Christians Against Poverty
There are however some debts that cannot be included in a Debt Relief Order, for example a student loan, court fine and child maintenance. It may also include rent arrears.
A successful DRO application means that the debtor will be protected from any legal action from creditors and they will be free from debt, included in the DRO, after 12 months.
For Debt Relief Orders to be granted:
- You must be unable to fully service your outstanding debts
- The debts must be less than £15,000
- The assets, excluding a car, must be valued at £300 or less and a car must be valued at £1,000 or less
- Disposable income after Income Tax and National Insurance must not be more than £50 per month
- You must have lived in England or Wales at some point during the previous three years
- You must not be involved in another insolvency application
(This list is not exhaustive, more information can be had from the Insolvency Service)
As the law in Scotland is different to that in England and Wales, a Debt Relief Order is not available. Options there include the Debt Arrangement Scheme and Low Income Low Asset Bankruptcy (LILA). The Accountant in Bankruptcy administers both these options.
In Northern Ireland those seeking advice on the personal bankruptcy procedure should contact the Insolvency Service Northern Ireland for information.
Individual Voluntary Arrangement – an Alternative to Bankruptcy
An Individual Voluntary Arrangement, also regarded as a form of insolvency, is for many a viable alternative to bankruptcy. Before an IVA is granted, a number of conditions must be met. They include:
- A minimum of £15,000 unsecured debt
- Have a minimum of £200 per month disposable income available
- Have three or more debts to different organisations
- Have a regular and verifiable income
This article, Avoid Personal Bankruptcy With an IVA, allows a more in depth look at IVAs, including some of the advantages and disadvantages of the process. It also suggests a number of sources of help and further information.
Protected Trust Deed
In Scotland an IVA is not available. The equivalent there is the Protected Trust Deed, which is a legal document in the same way as an IVA and normally lasts a maximum of three years.
This article is compiled using journalistic research and is not intended as financial advice. Anybody considering a Debt Relief Order or an IVA should contact one of the non-profit debt advice agencies.