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Government to review DRO process and bankruptcy threshold 6 August 2014

The government has announced a review into the Debt Relief Order (DRO) process, five years after its introduction in England and Wales.

Spearheaded by business minister Jo Swinson and the Insolvency Service, the review will seek to establish the effectiveness of the DRO process, how it can be improved, and the process’ existing limits set for assets, liabilities and income.

Currently the limits on assets, liabilities and income stand at maximums of £300, £15,000 and a surplus of £50 per month respectively.

Introducing the review, Swinson said: “In the five years since Debt Relief Orders were introduced, over 140,000 people have received debt relief.

“Now, it is time to review the effect Debt Relief Orders had had on people’s lives, that of their families, as well as those they owed money to, and to assess whether any changes could be made to improve how they work.

Last week, official statistics from the Insolvency Service revealed there were 7,008 DROs issued during the second quarter of 2014, bringing the annual total to 13,555 (26,750 in total during the 12 month period).

The review will also consider the case for increasing the creditor petition in bankruptcy, which is currently set at £750 – a level that has remained unchanged for 28 years.

Swinson said: “Set in 1986 at £750, a person or business with an unpaid debt above this amount is able to petition the court for an individual’s bankruptcy. I’m asking whether £750 is still an appropriate figure to be able to trigger this strongest of debt recovery tools.”

Giles Frampton, president of insolvency trade body R3, has welcomed the review.

He said: “Although Debt Relief Orders are only a relatively new part of our personal insolvency landscape, personal debt issues move on so quickly that it is already time to look at them again.”

“An effective personal insolvency regime must strike the right balance between helping those struggling financially to get back on their feet, and protecting creditors from individuals accumulating and dumping high debts. The current regime has the right building blocks to achieve this balance, but improvements can be made.”

“Too many people are currently unable to access an insolvency option that is right for their circumstances. R3 believes that revising Debt Relief Order thresholds and limits would help address this issue.”

“We are particularly pleased that the creditors’ bankruptcy petition threshold is being looked at. This was last set in 1986 and an upwards revision is long overdue. £750 is far too low an amount of debt for somebody to be made bankrupt: were the threshold to have risen in line with inflation, it would be worth almost £2,000 now.”

The review will be open until 9 October.

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