A debt relief order, sometimes known as a mini bankruptcy, is a debt solution for individuals whose debts are under £30,000. It is intended to help those who have little or no assets and have very little disposable income at the end of each month so therefore cannot afford to make themselves bankrupt.
A debt relief order acts in much the same way as bankruptcy in that you will be released from the debt you owe once the agreed time period is over. However, it is a serious procedure and a decision that should not be taken lightly. If you think that a debt relief order is the right solution for you, read on to find out how it works and how to apply for a debt relief order.
Is a debt relief order right for me?
A debt relief order might be the most appropriate solution for you if you owe less than £30,000 in unsecured debt. In order to be suitable for a debt relief order, you must not own any property or have assets totalling more than £2,000. In addition, to be eligible for a debt relief order, you must also be able to prove that you are left with less than £75 of disposable income each month after your normal household expenses have been paid.
How to apply for a debt relief order
If you decide to apply for a debt relief order, you will need to apply through a specialist DRO adviser or registered insolvency practitioner who will be able to check your eligibility. They’ll also get to know you and look at whether or not it’s the right solution for you – and if it is, they will fill in your application for the order.
There are a number of advantages to a debt relief order, such as:
- It legally releases you from your debt to your creditors
- It is inexpensive, with fees currently at just £90
- The process lasts just 12 months and is completed sooner than an IVA
However, as with all personal insolvency procedures, there are a number of disadvantages to debt relief orders that must be carefully weighed up too, including:
- It’s a serious and legally binding undertaking
- It may seriously affect your ability to obtain credit in the future
- Not all debts are covered by debt relief orders
- If your circumstances change whilst you are subject to a debt relief order, you may still have to repay your creditors
How much will I have to repay?
Most people who are subject to a debt relief order effectively have the slate wiped clean and do not have to repay any more of their debt. However, it is worth noting that debt relief orders do not cover all types of debt, so debts such as court fines, child maintenance payments, and student loans will still need to be repaid.
How McAlister & Co can help
If you are struggling with your debt and are considering a debt relief order, contact McAlister & Co today to find out more about how to apply for a debt relief order. Our team of advisors are friendly and understanding and will help you to decide on the right debt solution for your individual situation.