Personal insolvencies in the United Kingdom have been on the rise in recent years, and a significant portion of this increase can be attributed to the introduction of Debt Relief Orders (DROs). DROs are a type of insolvency procedure that is available to individuals with low incomes and limited assets who are struggling to repay their debts.
What is a Debt Relief Order?
A DRO is a formal insolvency procedure that allows individuals to write off their unsecured debts. To be eligible for a DRO, individuals must meet certain criteria, including:
- Having debts of less than £20,000
- Having assets of less than £1,000
- Having a low income
- Not having any other insolvency procedures in place
Benefits of a Debt Relief Order
DROs can provide a number of benefits to individuals who are struggling with debt, including:
- The opportunity to write off their unsecured debts
- Protection from creditors
- The chance to start over financially
Drawbacks of a Debt Relief Order
There are also some drawbacks to DROs that individuals should be aware of before applying, including:
- DROs can affect an individual’s credit rating
- DROs can make it difficult to obtain credit in the future
- DROs can affect an individual’s ability to travel
The Impact of Debt Relief Orders on Personal Insolvencies
Since their introduction in 2009, DROs have become increasingly popular. In 2020, over 100,000 DROs were issued in the UK, representing a significant increase from the previous year. This increase in DROs has been a major factor in the rise in personal insolvencies.
Conclusion
DROs are a valuable tool for individuals who are struggling with debt and who meet the eligibility criteria. However, it is important to be aware of the potential drawbacks of DROs before applying. Individuals who are considering applying for a DRO should seek professional advice to ensure that they understand the implications of doing so.
Kind regards
G. Porter
