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Debt Relief Orders

Volume 518: debated on Tuesday 9 November 2010

We are today announcing plans to amend the eligibility criteria relating to Debt Relief Orders (DROs) in order to allow access to those people who are currently excluded because they have certain pension rights that they cannot draw down for some years.

DROs were introduced in April 2009 following research that identified that there were people in long-term debt difficulties who had nothing to offer their creditors and who could not afford to make themselves bankrupt. Delivered in partnership with the professional debt advice sector, DROs provide low-cost easy access to debt relief for those overwhelmed by relatively low levels of unmanageable debt. They are designed to provide a fresh start for the most vulnerable people trapped in debt.

There are strict eligibility criteria of assets less than £300, debts no more than £15,000 and surplus income of less than £50 per month. Because a pension is treated as an asset, some people who would otherwise qualify find themselves unable to apply for a DRO because they have pension rights, even where the pension is of low value and not receivable for many years. The Insolvency Service issued a consultation asking whether changes should be made to make the system fairer for these people.

After considering the consultation responses, I propose to allow those with HMRC-approved pension schemes to have access to a DRO. This brings DROs into line with bankruptcy where debtors are able to keep their approved pensions, and will provide welcome assistance to many of the most vulnerable. I intend to lay a Statutory Instrument which, subject to parliamentary approval, would bring these changes into effect from April 2011.

I am placing copies of the summary of consultation responses in the Libraries of both Houses.