Tuesday, 10 May 2011

Bankruptcy & Debt Relief Order (DRO)

Bankruptcy is the oldest debt solution and is considered the last resort when facing financial worries. In this article we will discuss a case which led to bankruptcy and how it was dealt with.

Miss G has run up debts of over £20,000. She lives with her parents and does not have any assets that she could sell. She has one child and has had her income slashed as she has had to go part time.

After all avenues were explored the solution for Miss G was Bankruptcy. After paying the fee of £450 for the insolvency service for the Official Receiver. As her income decreased she did not have to pay court fee due low wages.

Bankruptcy was then granted. Miss G did not have to pay any money every month as her income is low. Miss G will be discharged from her Bankruptcy after 1 year. Miss G is aware of the impact on her credit file but there was no other solution available to her.

Criteria For Bankruptcy

- You cannot realistically meet any other debt solution
- Your unsecured debt must be above £750 to enter bankruptcy
- You will need to complete forms provided by The Insolvency Service

Benefits Of Bankruptcy

- You will no longer have to deal with your creditors
- Once your bankruptcy is completed you will be able to start again financially without any debt
- You stop making any payments to your creditors

Negatives Of Bankruptcy

-Your credit rating is likely to be severely affected
-You cannot credit of £500 or more without disclosing you are bankrupt
-You cannot be a director of a limited company
-You may lose your home and car
-There has been some new routes to bankruptcy added over the years, these include;

Debt Relief Order(DRO)- This is only available in England, Wales and Northern Ireland but gives people in severe financial trouble the option of declaring themselves bankrupt without the same cost or hassle. The criteria for a debt relief order is;

Not have unsecured debt exceeding £15,000
- Not have any assets exceeding £300
- Not own your property (i.e. Own a home with a mortgage)
- Not have available disposable Income after normal household expenditure exceeding £50
- Be domiciled in England or Wales, or in the last 3 years have been resident or carrying on business in England or Wales
- Not have been subject to a DRO within the last 6 years

Also, you cannot apply for a DRO if you are currently Bankrupt, in an IVA or have a current Bankruptcy Restrictions Order or Undertakings or have current Debt Relief Restrictions or undertakings.


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