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New rules for DROs?

The rules for people thinking about entering a DRO (Debt Relief Order) may be changed, to make this new form of insolvency available to more people who need help with their debts.

DROs are only available to people little disposable income (£50 or less per month), little debt (£15,000 or less) and few assets.

The part about `few assets` is the one that`s attracting attention right now. Under the DRO rules, the only people who are eligible are those whose assets are worth a total of £300 or less.

Since that figure includes the value of any pension fund, it means a lot of people have been unable to enter a DRO purely because they`ve built up quite a small pension pot.

That`s something which many people disagree with, and the Department for Business is currently looking at changes to DROs. As the BBC reports: `The government is consulting on how large someone`s pension pot should be before they are excluded from using a DRO`.

"Following representations from independent money advisers," said Business Minister Ian Lucas, "I`m proposing a common sense change to ensure that vulnerable people with a very small pension pot are treated fairly."

"Unlike bankruptcy or IVAs," said a spokesperson for the IVA Advisory Centre, "the rules for DROs provide concrete figures for income, debt and assets. Of course, wherever you draw the line, this does mean that one person will be eligible for a DRO, while someone else in a very similar situation will not be.

"It`s good to see that the Government is aware of the issue with DROs and pensions and looking at whether or not those rules need to change."

In the last quarter of 2009, there were 5,348 DROs in England and Wales, compared with 13,219 IVAs and 17,007 bankruptcies.

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The IVA Advisory Centre are a licensed Insolvency Practice, offering free debt advice as well as IVAs and a comprehensive range of other debt solutions. If you are in debt and would like to explore your options, contact one of our advisers today.