Due to the long-term problems of bankruptcy filing, which go beyond the mere consideration of a ruined credit record, many will seek one of the alternatives to bankruptcy. One key way to avoid bankruptcy is to consider applying for a debt relief order.
Avoid Bankruptcy: What are Debt Relief Orders?
Debt relief orders came into effect in the UK in April 2009 as an alternative to bankruptcy. A debt relief order is designed to help those who can not pay off their debts seek refuge from creditors and restore financial health within a 12-month period.
Should a court decide to issue a debt relief order, then the individual is protected from further actions from the listed creditors for the period of the debt relief order, which usually lasts for 12 months. Further more, at the end of the period all those debts which have been listed in the debt relief order will be written off.
Despite the benefits of a debt relief order, during the period of the debt relief order the individual will still have to make payments to any creditors which have not been listed on the debt relief order. In addition, at the end of the debt relief order any debts which where not listed will still have to be paid off in full.
Bankruptcy Solutions: Who Can Apply for a Debt Relief Order?
One can apply for a debt relief order as an alterative to bankruptcy if the following circumstances exist:
Level of Debt – The level of debt should not exceed £15,000. These debts must be considered as “qualifying debts”. Qualifying debts are usually unsecured forms of debt including rents, credit card debts, overdrafts and other unsecured personal loans.
Disposable Income – In order to apply for debt relief orders one must have a disposable income of less than £150 per month.
Personal Assets – To apply for a debt relief order an individual must not have assets greater than £300. This excludes motor vehicles; here an individual can only qualify for relief if they own a motor vehicle worth less than £1,000.
Residence – To apply for a debt relief order one must have resided, worked or owned a property within England or Wales for the last three years.
In summary, if one has personal unsecured debts less than £15,000, seeking a debt relief order may be a cheaper and less stressful option than going bankrupt. However, whilst debt relief orders offer a credible alterative to bankruptcy solutions, a debt relief order may not be suitable for everyone, especially where significantly large levels of debt have been amassed.