Push to extend debt relief order eligibility post-Covid
13 Jan 2021
Financial difficulties caused by Covid are driving plans to increase the financial eligibility criteria for debt relief orders (DROs), in a bid to help more vulnerable people get a fresh start
13 Jan 2021
Research from the Money and Pensions Service suggests that the demand for debt advice could increase by up to 60% by the end of 2021, while it is estimated around three million more people than before the pandemic will need support with problem debt by the end of the year.
The proposals out for discussion would update the eligibility criteria to enter a DRO, which were last revised in 2015.
The changes would increase the total amount of debt allowable to £30,000 (from £20,000), doubling the value of assets owned by the individual (from £1,000 to £2,000), and increasing the level of surplus income to £100, up from £50 per month.
The rules around the assets allowable will not change, which means essential household items such as bedding, and furniture are excluded as are tools or other equipment that are essential for work. In addition, one domestic vehicle worth no more than £1,000 is excluded from the asset criteria.
Phil Andrew, CEO of StepChange Debt Charity, said: ‘Lower income households with few assets are among those most deeply affected by debt during the pandemic.
‘Extending eligibility for debt relief orders will help to give more people a chance to avoid the long-term misery of being trapped by debt that they cannot afford to repay over a reasonable period.’
DROs were developed and introduced in April 2009 and are intended to help those in long term debt difficulty who had nothing to offer their creditors, such as assets or disposable income, and for whom bankruptcy would be a disproportionate response.
By increasing the asset, income and debt thresholds as proposed the government estimates around 15,500 more people could be eligible for a DRO, representing a 58% increase on the number of individuals who obtained one in 2019/20.
The consultation closes on 26 February and any changes are anticipated to be put in place in Spring 2021.