Overworked insolvency practitioners had thought that the new legal mechanism for handling personal bankruptcy ­ debt relief orders (DROs) ­ would ease their workload in these difficult times.

But it turns out that few DROs have been granted by the Official Receiver ­ between 50 and 70, practitioners believe ­ leaving vast volumes of small debts remaining to be resolved and prompting fears that the new system will fail to help.

DROs are aimed at people with debts of no more than £15,000 and with assets of less than £300. Last year it was revealed some IPs were turning away individual voluntary arrangements (or repayments plans in place of formal bankruptcy) of less than £20,000 due to a cap in fees introduced by the Insolvency Service.

DROs had been seen as the way forward for dealing with the huge number of small debts that have emerged in the recession. But the news so few have been approved means IPs will have to work on reduced fess or refuse help to debtors.

Mark Sands, personal insolvency director at KPMG, expected the number of insolvencies to increase dramatically with DROs. But now he has changed his mind.

He says: ‘Our prediction of 150,000 insolvencies by the end of 2009 is likely to be woefully undershot until the system and policies can meet the needs of the over indebted.’

Indeed the Insolvency Service anticipated such high demand for DROs that it set aside a special ‘airport hangar-sized space’ in which to process the applications.

But why are DROs not happening? One explanation is that creditors are not as aggressive as they once were and are giving people more time and more generous payment plans for their debts.

However, experts believe the deeper answer lays in pensions. In order to apply for a DRO an individual must have assets of less than £300. But pensions are included as assets.

An Insolvency Service spokesman said: ‘If an individual has assets of value ­ such as a pension they can access ­ this could take them over the threshold.’

Oddly, pension assets are ignored for the purposes of formal bankruptcies and IVAs.

Begbies Traynor personal insolvency partner Joanne Wright believes this inconsistency is simply a ‘real oversight’ that the Insolvency Service needs to address quickly.

She says: ‘They need to sort it out now. This is when people are struggling. It’s now that they need it.’