Political Facts and Tips

Uptake on the UK governments new Debt Release Orders has been much lower than was expected by the major debt management providers. A number of reasons have been suggested for this, and one of the most popular amongst industry insiders has been pensions.

A Debt Release Order is a debt management product which became available in April 2009, created for people with lower debt levels and available income than those who are eligible for IVA’s . To qualify for a Debt Relief Order someone needs have debt of less than 15,000, be unable to meet their debt payments and own assets of less than 300.

Pensions became an issue because with DRO’s as unlike other forms of debt management, pensions are seen as asset. Virtually all pensions have a value far in excess of 300, therefore any kind of viable pension will disqualify a person from applying for a Debt relief Order.

Many in debt industry see this oversight on behalf of the government, as both IVA’s and bankruptcy do not usually involve pensions in any way shape or form. Many industry professionals are blaming the inclusion of pensions as a major reason why DROs have been so unpopular.

Reasons which have been suggested for the poor performance of debt relief orders include the low charges which companies are allowed to charge for Debt Relief Orders, and the limited number of organisations and commercial companies which have be allowed to process Debt relief orders. Also with current economic troubles, creditors are considerably more likely to agree an informal solution to people debt problems.

Whatever the truth of the matter, the poor performance on DRO against industry predictions has been notable. Mark Sands of KPMG stated that they had predicted that the uptake of Debt Relief Orders to come nowhere near their initial estimate of 150,000 before the end of the year.