Government announces changes to DRO eligibility

The Government has today responded to its consultation regarding the monetary eligibility limits for Debt Relief Orders.

Over 140 responses were submitted in addition to our own, which had the support of 180 front-line advisers. The vast majority of responses appear to have called for more significant increases to the overall debt limit and monthly disposable income limits than Government originally proposed.

However, creditor lobbying appears to have persuaded Government to take an ultra-cautious approach. The final package announced today, and which will come into effect at the end of June, comprises:

• The total debt level will be increased from £20,000 to just £30,000, as originally proposed.

• The value of assets allowed to be owned by the debtor will increase from £1,000 to £2,000, again as originally proposed.

• The monthly surplus income will be increased from £50 to just £75, which is less than the £100 originally proposed.

• However, the value of a single motor car that can be disregarded from the total value of assets will be increased from £1,000 to £2,000.

There is also some potentially more positive news, with Government stating that “most responses recommended that DROs should not be looked at in isolation and consideration should be given as to whether changes are needed to the wider personal insolvency framework. The response document therefore highlights that the Government will be looking to issue a Call for Evidence on the whole personal insolvency landscape, in due course.”

We welcome this, although the heavy influence of creditors, and potentially IVA firms, in the current consultation does not bode well for the outcomes from any future systemic review.