Debt Relief Orders to receive "common sense" change

Future Debt Relief Orders (DROs) could be changed so that pensions are not considered an asset, according to the Insolvency Service.

A consultation was launched today by business minister, Ian Lucas, to change DROs to increase the take up of the repayment option aimed at those on lower incomes and levels of debt who cannot afford either a bankruptcy or Individual Voluntary Arrangement (IVA).

DROs are aimed at people with debts of no more than £15,000 and assets of less than £300 and a surplus income of less than £50 per month. Currently anyone with a pension of more than £300 is ineligible to apply for a DRO as this is considered an asset.

Pensions are not included as assets in either a bankruptcy or IVA.

"Debt Relief Orders are a low cost and effective way of avoiding bankruptcy and since they’ve been introduced they have already helped some of the most vulnerable people in debt sort out their finances. Today we are consulting on a common sense change to make these orders more accessible to the people they were designed to help,” said Lucas.

Last year there were many critics towards the decision to include pensions as assets with Begbies Traynor personal insolvency partner, Joanne Wright calling it a "real oversight".

"One in eight of our clients are denied access to DROs, often due to a small pension fund which is unlikely to be realised for many years," said Malcolm Hurlston, chairman Consumer Credit Counselling Service.

Last year there were more than 11,000 DROs were approved since its introduction in April 2009.

Further reading:

Take up of new debt relief orders disappointing, say IPs

Fourth quarter insolvency statistics