Debt relief and bankruptcy rules to change

15 January 2015

Financially vulnerable people will find it easier to access debt relief under plans announced by the government today.

Business minister Jo Swinson has revealed that the maximum amount of debt that can be covered by a Debt Relief Order (DRO) will rise from £15,000 to £20,000 on 1 October 2015. A DRO is a low-cost alternative to bankruptcy for people with very low income and debts that they are unlikely to repay.

It is thought the increase will see around 3,600 more people a year access a DRO, giving them the opportunity to sort their finances out when faced with debts they cannot manage.

In a further reform, the government has announced it is also increasing the minimum level of debt for which someone owed money can force a person into bankruptcy – from £750 to £5,000. The limit was last revised in 1986.

Swinson said: "Struggling with unresolvable debt can cause immense stress for families. These changes will ensure that our debt relief schemes are updated so that they still meet their original goal of providing access to those who need them. They also ensure that bankruptcy, which has the most significant consequences, is reserved for those with sizeable debts."

Welcome step

The move has been welcomed by debt advisory services. Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: "We are pleased that these new changes will enable us to help more people who are struggling with problem debt.

"Increases in the debt and asset thresholds for Debt Relief Orders are a welcome step in the right direction, and we are particularly pleased to see more protection from bankruptcy for people with smaller debts.

"This announcement also gives us a good opportunity to raise the profile of Debt Relief Orders and to encourage more people who are struggling to cope with debt to seek the free advice they need."

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