DROs could speed up insolvencies
Some industry officials have expressed concern that the level of insolvencies in the UK could be increased and sped up as a result of a new scheme that has come into play recently.
A DRO or Debt Relief Order provides a fast and cheap alternative to bankruptcy, and some feel that these DROs will result in a sharp rise in insolvency levels in the UK, and that the level of insolvencies could even reach record highs by rising by around 20 percent.
Borrowers that meet the criteria could have their debt written off through these DROs. In order to qualify the borrower will need to have debts of £15,000 or lower, and will have to have assets of no greater than £300 in value, and disposable income of no more than £50 a month after all essential payments have been made. It is thought that much of the rise in insolvencies this year, which many officials have predicted, could be the result of the availability of DROs.
One industry expert said: ‘DROs will bring new people into the insolvency system,’ he said. ‘We are talking about people with very little income, no assets and debts of £15,000 or lower. Until now, they are the sort who would have made token payments on the debt or simply laid low until the six-year limitation on debt enforcement was passed.’
Whilst some people are unable to consider bankruptcy due to the costs involved and other factors, DROs are much cheaper and in some cases could cost nothing, making them a more viable option for many. As part of the process the borrower asks the official receiver to write off their debts, and if all goes well could start afresh in just twelve months.
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