Many people all across the world faced unprecedented health, financial, and career challenges in the wake of the COVID-19 pandemic and the various regulations and measures enacted as a response. Certain demographic groups were subjected to severe financial pressure that left them in a precarious position when it comes to paying the bills and covering their current outstanding debt.
The prices of natural gas increased significantly, pushing electricity costs upwards with them. People now have to deal with rapidly increasing inflation as well – countries are reporting or projecting to reach double-digit inflation. The Bank of England expects inflation in the UK to reach a peak of 13%. What this means in practical terms is that people have to figure out how to pay the growing prices for goods and services with the same salaries.
It is not surprising that under these dire circumstances, many businesses feel trapped in a difficult situation. This is exactly why turning to professional financial consultants or insolvency practitioners for a debt solution, such as the experts at Hudson Weir, could prove to be invaluable for confidential debt advice. The experts could offer appropriate solutions that could help individuals and companies deal with their debt, receive financial aid, and manage to overcome their current issues. One such option in the UK that could otherwise be overlooked is getting a debt relief order (DRO).
What Are Debt Relief Orders (DRO)?
A debt relief order is a method to deal with outstanding debt that can no longer be repaid as an alternative to a formal insolvency procedure. Thanks to a successfully received DRO, individuals would be granted a set period of time, usually 12 months, during which they will no longer be required to make payments for various outstanding debts. Keep in mind that eligible persons must meet a set of strict requirements. Furthermore, they cannot apply for a DRO themselves. Instead, an authorized debt advisor known in this process as an approved intermediary must submit the application.
Which Debts Are Included in a DRO?
The various debts included in the DRO are called ‘qualifying debts.’ During the period of the DRO, the creditors associated with these debts cannot ask for payments. Even if they try to, the recipient of the DRO doesn’t have to comply with their demands. The ‘qualifying debts’ cover a wide range of payments – credit cards, overdrafts, loans, utility bills, phone bills, council tax, income tax, business debts, debts to family and friends, and many others.
It is important to keep in mind that landlords could still try to evict tenants who are behind on their rent payments, even in cases where the rent arrears are part of the DRO. To avoid such outcomes, it is recommended to continue making these payments regardless of a successful DRO application. Other debts that are not covered include child support, student loans, social fund loans, court fines, and others.
Who Is Eligible For a DRO?
Whether a DRO is granted or not is determined by an officer of the bankruptcy court known as an official receiver. Their decision is based on the information provided by the approved intermediary, which is the representative of the applicant. However, to be eligible for a DRO, applicants must also meet several important criteria.
First, they must have lived or worked in England or Wales for at least the past 3 years. In addition, they must owe a total debt of £30,000 or less, have assets with a total worth of less than £2,000, and have less than £75 in spendable funds each month after covering their taxes, national insurance, and any typical household expenses. Vehicles worth less than £2,000 or ones that have been adapted to accommodate a certain disability are not counted towards the assets. Only 1 vehicle can be excluded this way, and it must not be used solely for work purposes.
A DRO may be a great option to deal with debt that can no longer be maintained. After the debt relief order is over, any debts covered by it will be written off, allowing for the recipients to start with a more or less clean slate. The process of obtaining a DRO is rather complex, and turning to an authorized debt adviser is not only recommended but mandatory.