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What is a debt relief order?

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Do you have debts and wondering what is a debt relief order? A debt relief order is a way of clearing your debts if you meet certain criteria. These include having total qualifying debts of under £15,000 and being on a low income. Once the order has finished, you’ll be debt free and your creditors can take no further action against you.

Who qualifies for a debt relief order?

In order to be eligible for a debt relief order, your debts must be less than £15,000 and you need to have under £50 a month left after you’ve paid all your bills and essential expenses. You can’t have any assets over £300, which includes savings, shares and property (even if you still have an outstanding mortgage on it). You are allowed to own a vehicle, but it must be worth less than £1,000. You need to have lived, had a property or operated a business in England or Wales within the previous three years.What is a debt relief order?

Certain people will not qualify for a debt relief order. These include bankrupts or where creditors have applied or you have petitioned for bankruptcy; people with an IVA or who have had a debt relief order in the last six years; and anyone who’s the subject of a Bankruptcy or Debt Relief Restrictions Order or undertaking.

What debts can be covered?

The debts that qualify for a debt relief order are:

–          Credit cards, overdrafts and loans

–          Rent, utilities, telephone and council tax

–          Benefit overpayments

–          Hire Purchase or Conditional Sale Agreements

–          Buy Now – Pay Later Agreements

Debts that can’t be included are:

–          Court fines and confiscation orders

–          Child maintenance

–          Student loans

–          Social fund loans

What’s the process of a debt relief order?

To apply for an order you must go through an approved third party or intermediary who will check you meet the criteria. They’ll then apply to the Official Receiver for the order. The cost of this is £90, which can be paid over six months. However, the order won’t be dealt with until the full fee has been paid.

Once the order is approved you don’t make any payments to creditors covered by it. They also can’t take any further action against you. However, you must keep up with your monthly bills and any debts not included in the order. A debt relief order generally lasts for a year and after this period you’ll be free of the qualifying debts. A note will appear on your credit file for the next six years.What is a debt relief order?

Are there any restrictions?

While the debt relief order applies you must inform the Official Receiver of any changes in your circumstances or if you take on any new debts. You must also tell a lender about the order if your loan is for more than £500.

Whilst the order is in place you have to tell any business associates if the name that appears on the order differs from the one you use to run a business. You are also prohibited from becoming a company director or being involved in the management of a limited company without the authority of the courts.

A debt relief order can be an effective means of clearing your debts if you meet the criteria. However, before deciding if it’s the right action for you, you should seek independent financial advice and look at all your options.

 

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About Catherine Stern

About Catherine Stern

Catherine Stern is a freelance writer with a background in marketing and PR. She currently writes web content on a range of subjects, from finance and business to travel and home improvements. As a working single mum of two young boys she understands the pressures that today’s working parents face and the topics they want to read about.

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