The Insolvency Service reported a rise in personal insolvency, of 6.2% to 35,242 in the three months to September. Although the figures have continued to rise, the rate at which they have risen over 2009 has started to slow. Much of this rise can be explained by the increased take up of the new Debt Relief Orders which are seen as a viable alternative to bankruptcy in England and Wales.
New Form of Personal Insolvency
In response to the new statistics Malcolm Hurlston, Chairman of the Consumer Credit Counseling Service (CCCS) said, “I welcome the slowdown in the rate of insolvencies and the growing number of people who opted for the new Debt Relief Orders… the high number of Debt Relief Orders underlines the need for this new form of insolvency.”
Debt Relief Orders an Alternative to Bankruptcy
The Insolvency Service publish a detailed list of conditions which must be met before a Debt Relief Order is granted, A few, taken from their Guide to Debt Relief Orders, are listed below:
- You are unable to pay your debts
- You owe a maximum of £15,000 only, not including unliquidated or excluded debts
- Your gross assets must not exceed £300
- After tax, national insurance and normal household expenses, disposable income must not exceed £50 per month
- You must not have been subject to a previous Debt Relief Order within the last six years
- The debts listed on the Debt Relief Order will normally be discharged after one year
How do People Apply For a Debt Relief Order?
The Insolvency Service describes the Debt Relief Order as a, partnership between themselves and the advisors from the debt advice agencies who will act as “approved intermediaries” in the process and can apply on a person’s behalf for the Debt Relief Order. The fee which is payable by the debtor is currently £90.
An Official Receiver, who is an officer of the court appointed by the Secretary of State at the Department for Business Innovation & Skills, will consider each Debt Relief Order application.
The Insolvency Service has recognised a number of “competent authorities” who are able to advise people as to who can act as an approved intermediary in the Debt Relief Order process.
The “competent authorities” include:
- The Citizens Advice Bureau
- Institution of Money Advisers
- Consumer Credit Counselling Service (CCCS)