WIREDGOV

Insolvency Service Moves To Help Vulnerable People Trapped In Debt

News Release issued by the COI News Distribution Service on 23 March 2010

DROs opened to those with small pensions

Independent money advisers have welcomed the formal publication on 23 rd March of a new Insolvency Service consultation aimed at opening Debt Relief Orders (DROs) to people who have a small pension.

The consultation was launched by Business Minister, Ian Lucas who attended Citizens Advice Bureau in Hackney on Tuesday, where he heard first hand the problems that those in debt are facing. He said:

“Debt Relief Orders (DRO) are a low cost and effective way of avoiding bankruptcy and since they’ve been introduced they have already helped some of the most vulnerable people in debt sort out their finances. Today we are consulting on a common sense change to make these orders more accessible to the people they were designed to help.”

The proposed changes are in response to concerns expressed by debt advice agencies that vulnerable people with small amounts of debt are still struggling because they are unable to obtain a DRO because of the present “asset” value of their future pension.

Sue Edwards, Head of Consumer Policy at Citizens Advice said:

"We are really pleased the government has acted quickly on this. Being ineligible for a Debt Relief Order because of a small amount of money in a pension has been a major issue for some of our most vulnerable debt clients who could otherwise benefit from the fresh start a DRO could offer"

Malcolm Hurlston, chairman Consumer Credit Counselling Service said:

“One in eight of our clients are denied access to DROs, often due to a small pension fund which is unlikely to be realised for many years. Action taken quickly to change the eligibility rules in favour of these clients will benefit many vulnerable people desperately trying to get back onto a sound financial footing.”

Steve Johnson, Chief Executive of AdviceUK, said:

“Our advisors have seen growing number of clients who are prevented from applying for a Debt Relief Order because of the way in which pension funds are treated. Change is urgently needed to ensure that these vulnerable consumers can benefit from the relief from unmanageable debt that a DRO affords.”

Sallie Johnson, Professional Development Manager for the Institute of Money Advisers said:

“The IMA joined other partners within the ‘free to the client’ debt advice sector to carry out a joint piece of research which showed that the vast majority of people who were excluded had very small pension funds and had a considerable number of years before they could be accessed. We very much welcome this consultation and hope that the outcome will allow a fairer access to this debt relief measure.”

Debt Relief Orders 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, they 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. Currently, if someone has a pension that is over £300, they are not eligible to apply.

Full details of the consultation document may be found here:
http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/con_doc_register/DROconsultationComplete.pdf


Ins/Coms/86

Notes to Editors

1. The Insolvency Service administers the insolvency regime investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver, to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice.

2. Further information about the work of The Insolvency Service is available from www.insolvency.gov.uk

3. Media enquiries should be directed to: Denise Rawls, Press Office Manager, Telephone: 020 7674 6910 or Ade Daramy, Press Officer, Telephone 02 7596 6187 Insolvency Service, 21 Bloomsbury Street, London WC1B 3QW

Contacts:

Ade Daramy
Phone: 020 7596 6187
ade.daramy@insolvency.gsi.gov.uk

Lynne Nasti
Phone: 020 7674 6910
lynne.nasti@insolvency.gsi.gov.uk