The Office of National Statistics (ONS) recently published their Burden of Household Debt Survey, which reported that 36.6% of people are unable to meet unexpected financial expenses – with 6.9 million households without a rainy day fund.

With Britain in a recession, the prices of products inflating and people feeling like they need to keep up with other households. We are seeing an increase in people taking out loans and credit cards which in some cases is just adding to their financial problems even more.

If you are really struggling financially then a debt relief order may be more appropriate for you then having to go bankrupt.

Debt Relief Order

Debt Relief Orders were introduced in England and Wales in 2009 and in 2011 for Northern Ireland by the Insolvency Service as an alternative to bankruptcy and are designed to help people on low incomes escape debt in 12 months.

“A Debt Relief Order is a legal solution that provides support and reassurance to people struggling with debt, and providing they qualify for a DRO, they could become free from unsecured debts in 12 months. This offers a great deal of peace of mind to people who do not have the finances available to clear their debts.” the spokesperson concludes.

Who can apply for a debt relief order

You can only apply for a debt relief order if you meet certain conditions. These are when:

• you have qualifying debts of £15,000 or less. These debts must be of a certain type
• you have spare available income of £50 or less a month after paying your normal household expenses
• the things you own (your assets) and any savings are worth £300 or less. However, if you have a motor vehicle, this must be worth £1,000 or less unless it has been specially adapted because you have a physical disability
• in the last 3 years you must have lived, had a property or carried on a business in England or Wales.

What type of debts can be included in a debt relief order

Only certain types of debt can be included in a debt relief order. These are called qualifying debts and are debts such as:

• credit cards, overdrafts, loans
• rent, utilities, telephone, council tax
• benefit overpayments, unless the benefit was obtained by fraud
• hire purchase or conditional sale agreements
• buy now - pay later agreements.
• If you have a hire purchase or conditional agreement you may have to return the goods bought with these loans, unless someone else can pay the instalments. You will not be able to carry on paying for the goods once you have a debt relief order.

Who can't get a debt relief order

• you're currently bankrupt
• you have an Individual Voluntary Arrangement (IVA) or are applying for an IVA
• your creditors have applied to make you bankrupt but the hearing hasn't yet taken place. But you might still be able to apply for a debt relief order if your creditors agree
• you have been given a Bankruptcy Restrictions Order or Undertaking
• you have petitioned for bankruptcy but your petition has not yet been dealt with.
• However, this doesn’t apply if you’ve petitioned for bankruptcy and the judge has referred you for a debt relief order instead
• you have had a debt relief order in the last 6 years
• you have been given a Debt Relief Restriction Order or Undertaking.

How to apply for a debt relief order

Debt relief orders are administered by the Official Receiver through the Insolvency Service.

You can only apply for a debt relief order online through an approved third party, or intermediary. An intermediary is usually a skilled debt adviser who has been given permission to complete the forms and give advice on debt relief orders.

You can find intermediaries at your local Citizens Advice Bureau. To search for details of your nearest CAB, click on nearest CAB. You can also find intermediaries by contacting any of the competent authorities listed on the Insolvency Service website at www.bis.gov.uk/insolvency.