A report produced in February 2015 by the Citizens Advice Bureau showed that clients had personal debts of £16,971 in 2015, two-thirds higher than in 2007. Whilst serious debts are often dealt with by going bankrupt or pursuing an Individual Voluntary Arrangement (IVA), there weren’t many debt solutions available for more modest financial difficulties. This has led to the introduction of the Debt Relief Order.
What is a Debt Relief Order?
A Debt Relief Order is designed to assist those with personal debts under £15,000. It is primarily aimed at those on low incomes who may have found an Individual Voluntary Arrangement or going bankrupt too costly. Provided the criteria are met, Debt Relief Orders can be commenced for just £100. With the assistance of an intermediary, a person with financial difficulties will be debt-free in just 12 months.
A Debt Relief Order Allows Someone to Become Debt-Free in Just 12 Months
Provided that a debtor meets the stringent requirements of a Debt Relief Order, they will be relieved of all personal debts in just 12 months. Although it is possible for interest and charges to be frozen, a debt management plan requires that all personal debt is repaid in full.
Going Bankrupt is More Complex than a Debt Relief Order
A Debt Relief Order is a simplified alternative to going bankrupt. An intermediary, who is a qualified debt advisor, will help a debtor through the entire process. The intermediary is there to ensure that the debtor meets the criteria of the Debt Relief Order. Provided that this is the case, debtors will receive full assistance in terms of both guidance and associated paperwork.
A Debt Relief Order is a Debt Solution Suitable for Individuals on Low Incomes
A debt management plan requires that a debtor pays a minimum of £100 per month into the arrangement. Due to the fact that a debtor can’t have a monthly disposable income of over £50, a Debt Relief Order means that no monthly contributions are necessary. This would only change in the event of an income increase of a wind-fall payment, such as a lottery win or inheritance.
Debt Relief Orders are a Debt Solution Appropriate for Tenants
Those seeking to avoid the negative publicity of going bankrupt often turn to an Individual Voluntary Arrangement (IVA). However, this isn’t a suitable debt solution for those with personal debts below £15,000. A Debt Relief Order now offers individuals with more modest personal debts the chance to become debt-free.
Creditor Harassment is Prevented by a Debt Relief Order
Once a Debt Relief Order is in place, further creditor harassment is unlawful. This means that those who were struggling with financial difficulties and personal debts will no longer have to put up with phone calls and creditors knocking at their door.
A Debt Relief Order has a number of advantages over other debt solutions. Those that do meet the stringent criteria are likely to find that they can rid themselves of personal debts faster than they would under a debt management plan.
A Debt Relief Order isn’t suitable for everyone. Home owners with personal debt problems may wish to consider an Individual Voluntary Arrangement. Those seeking to write-off debt may be interested in finding out whether they have an illegal credit card or unenforceable loan agreement.