Is a Debt Relief Order The New Bankruptcy?

A Debt Relief Order (DRO) is very similar to a Bankruptcy Order in such that both orders are administered by a registered Insolvency Practitioner. One of the major differences between a Debt Relief Order and Bankruptcy is that a DRO only lasts for 12 months whereas Bankruptcy lasts for six years.

Although a Debt Relief Order is effectively the same as Bankruptcy, a Debt Relief Order does offer some advantages and the main one which will appeal to people the most are the low fee associated with a DRO.

Currently, the fee payable to apply for bankruptcy is £450 whereas a Debt Relief Order only costs £90 – this alone will make a DRO more preferable than applying for bankruptcy. However, there are very strict and tight criteria that you must meet to be able to apply for a Debt Relief Order.

Firstly, your unsecured debts must be more than £15,000 in total but you cannot have assets worth more than £300. Because of the asset value restriction this will mean that if you are a home owner then the value of your house will rule out the possibility of you being able to apply for a Debt Relief Order.

Debt Relief Orders are only available to people living in England and Wales. Scotland has a similar scheme called ‘Low Income Low Asset’ schemes (LILA).

During the 12 months of a Debt Relief Order, any creditor that is named on the DRO will not be able to take any action to recover any monies owed without prior permission of the court. When the DRO ends at the end of the 12 month period you Will be free of any debts that were covered by the Debt Relief Order.

Although a Debt Relief Order seems like a cheaper and faster alternative to Bankruptcy you should still not take a DRO lightly – it is exactly the same as being Bankrupt and the details of your Debt Relief Order will be publicly available on the Insolvency Service website.

Before you enter into any agreement or arrangement make sure you have looked at all of your options which include using your legal rights to repair your credit file.

More information onUK credit repair can be found at http://ukcreditsecrets.co.uk

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